General
The State of Louisiana is serious about growing its film industry. As a result, the state is offering an aggressive tax credit aimed at growing the local production infrastructure. Those who invest in approved infrastructure projects can receive these credits.
Amounts
The new law provides that "[F]or state-certified infrastructure projects approved . . . on or after July 1, 2005 . . . [i]f the total base investment is greater than three hundred thousand dollars, each investor shall be allowed a tax credit of twenty-five percent of the base investment" In addition, the new law also states "each taxpayer shall be allowed a credit of fifteen percent of the base investment made by that taxpayer that is expended in this state on a state-certified infrastructure project." The Louisiana Legislature confirmed that both the 25% and 15% credits apply to infrastructure projects, so that the total infrastructure credit is 40%. {See La. Acts 2005, No. 456 and HCR 35, 1st Ex. Session, 2005.} Furthermore, the Louisiana Attorney General has issued an opinion confirming the 40% interpretation of the infrastructure tax credits. {See La. AG Opinion No. 06-0216.} However, the 15% portion sunsets as of January 1, 2008.
Time Credit Earned
The infrastructure tax credit is earned at the time the investment is made in a state-certified infrastructure project, i.e., at the beginning of the project when the construction funds are deposited into the local account.
Time Credit Certified
Until the invested funds have been spent legitimately in connection with the infrastructure project, the investor tax credits can be recaptured. Once evidence of valid expenditure has been filed with, and reviewed by, the State the infrastructure credits become certified, and therefore not subject to recapture.
Use/Transfer of the Credit
The infrastructure tax credits offset Louisiana income tax. However, at least in the first few years of operating a production-related facility, the operator is unlikely to owe any Louisiana income tax. The credits are therefore freely transferable. Throughout the year, Louisiana Production Capital purchases tax credits from infrastructure investors in bulk, usually acquiring all tax credits in one simple and easy transaction. We then resell the tax credits to Louisiana taxpayers during tax season in smaller increments.
Corporate Structure
The infrastructure tax credits must be earned by a Louisiana taxpayer. Therefore, it is necessary for out-of-state investors to form a Louisiana subsidiary. Such subsidiary then forms a second Louisiana subsidiary. Funds from the investor are channeled through the first subsidiary to the second, and it is the first subsidiary that is deemed to have earned the infrastructure credits.
Cap
There is no cap.
Incentive Expiration
The 15% portion of the infrastructure tax credit is only available until January 1, 2008.
