A series of bills aimed at stamping out perceived abuses in Louisiana’s film tax credit program won approval from a House committee Tuesday and are now close to winning final approval from the state Legislature.
State Sen. J.P. Morrell, D-New Orleans, is the sponsor of all seven measures, which were approved after some debate by the Ways and Means Committee without any objections.
“We’re trying to eliminate fraud, improve the predictability of the credits and improve the return on investment to the state,” Morrell said in an interview afterward. “As long as the return on investment is as bad as it is, the program is in jeopardy.”
Numerous lawmakers have called on scaling back the program, which is steadily costing taxpayers more and more money at a time when they are scrambling to find enough money for the state’s public hospitals and colleges and universities. Some have even sought to end the program, which has also suffered from several high-profile incidents of fraud.
Lawmakers seem willing to keep the film tax credit program, but with the proviso that it not cost the state more than $200 million per year, under a separate measure, House Bill 829. That measure has passed the House and is now before the Senate Finance Committee.
The program cost the state $226 million last year by having the state cover 30 to 35 percent of a filmmaker’s costs, which is among the most generous tax subsidies in the country.
Independent analysts have said the state gets about 20 cents in tax revenue for every dollar it awards in tax credits — the low return on investment noted by Morrell. They have called for curbing the program to make it less attractive to Hollywood.
The bills would restrict the number of expenses eligible for tax write-offs and make it easier for state officials to recoup money from individuals or entities that collected tax credits but were later found to have done so fraudulently.
How to do that without also causing unintended consequences has stymied Morrell on SB105 and SB106. Under the program, companies buy the tax credits for around 85-90 cents on the dollar that they use to reduce their state tax liabilities.
Ernest Nix, of Will-Drill Resources, told the Ways and Means Committee members that a partnership, which owns his Shreveport-based oil company, bought tax credits that the state had certified as being legal only to learn later that state officials had decertified them. The state Department of Revenue then said the partnership was on the hook for the $2 million in tax payments it had been seeking to offset.
He said that Morrell’s bill could harm his company’s legal case. Several committee members expressed sympathy for Nix’s position. Morrell said he would modify the bill before it is heard on the House floor to target those who commit the fraud and not to include those who buy the tax credits.
“It’s a tightrope we have to walk,” Morrell said in the interview. “You want to make sure that the bills are robust to have an impact, but you also want to protect the good faith purchasers. Without the good purchasers, the program won’t be as effective.”
Ways and Means also narrowly approved House Bill 798, which would allow producers to qualify for 5 percent of certain film tax credits if they film at least 40 miles outside of New Orleans. Rep. Erich Ponti, R-Baton Rouge, noted a recent study showed that two-thirds of all tax credits awarded are for movies filmed in metro New Orleans.
The bills now head to the full House for consideration.
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politics blog/.