LOUISIANA FILM INCENTIVES

CURRENT INCENTIVES (FOR PROJECTS CERTIFIED AFTER DECEMBER 31, 2005)


I. INVESTOR TAX CREDIT (25% OF LOUISIANA SPEND)

Amounts

If the total Louisiana expenditure is greater than $300,000 in one year, the producer shall be allowed a tax credit of 25% of the Louisiana spend. For purposes of this calculation, local payroll is not included, as it forms the basis of the local employment bonus, described below.

Definition of Louisiana Spend

The "Louisiana spend" includes more than just the dollars that are actually expended in Louisiana. In a legislative compromise, Louisiana spend was defined to include payroll to non-residents as long as such income is "sourced or apportioned" to Louisiana, which means that the recipient must pay La. income tax on such funds. Also qualifying, are expenditures for airfare, as long as it is purchased through a Louisiana travel agency, and insurance/bonding, as long as it is acquired through a Louisiana insurance agency. Finally, music licensing costs are considered part of the local spend if the music was "performed, composed or recorded by a Louisiana musician, or released or published by a Louisiana-domiciled and headquartered company."

Local Employment Bonus

In addition to the investor tax credit described above, the producer shall earn a tax credit of 35% of the total aggregate payroll for Louisiana residents.
Note: The term "total aggregate payroll" does not include the salary of any employee whose salary is equal to or greater than $1 million. Payroll is deemed to include payments to La. residents who receive from the production company either a W-2 or Form 1099. Therefore, payments to independent contractors earn local employment bonus tax credits as well.

Time Credit Earned

The investor tax credit is earned at the time expenditures are made by a motion picture production company in a state-certified production. The local employment bonus tax credits are earned when payments are made to Louisiana residents.

Time Credit Certified

Until the invested funds have been spent legitimately in connection with the production, the investor tax credits can be recaptured. Once evidence of valid expenditure has been filed with, and reviewed by, the State the investor and employment credits become certified, and therefore not subject to recapture. For state-certified productions, expenditures can be certified twice without payment of fees; subsequent certifications are subject to nominal certification fees.

Use/Transfer of the Credit

The investor tax credits offset Louisiana income tax. However, most out-of-state production companies owe no Louisiana income taxes. The credits are therefore freely transferable. However, the credits cannot be applied against a tax or transferred until the expenditures are certified by the GOFT and the LDED. Throughout the year, Louisiana Production Capital purchases tax credits from production companies 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 investor tax credits must be earned by a Louisiana taxpayer. Therefore, it is necessary for out-of-state production companies to form a Louisiana subsidiary. Such subsidiary then forms a second Louisiana subsidiary. Funds from the production company are channeled through the first subsidiary to the second, and it is the first subsidiary that is deemed to have earned the investor and employment tax credits.

Cap

There is no cap.

Phase Down

The investor tax credit program is permanent. However, the rates will phase down through 2012, as follows. For projects that receive initial certification on or after January 1, 2010, the investor credit rate drops to 20% and the local employment rate drops to 30%. After January 1, 2012, the investor tax credit rate drops to 15%, and the local employment bonus rate drops to 25%.