The film industry voiced little opposition, but had a handful of suggestions Wednesday after getting its first public look at a packet of proposals to tighten the lucrative tax credits given to the film industry.
About a dozen bills, none of which have been written yet, address several of the missteps that have developed in the incentives that allow moviemakers to skip paying $200 million to $250 million in state taxes every year.
State Sen. J.P. Morrell, D-New Orleans, said the testimony gathered from the public and the industry at the Entertainment Industry Development Advisory Commission hearing informed how the actual bills will be written. He and state Rep. Julie Stokes, R-Kenner, expect to file the legislation by March 13 for consideration during the upcoming session of the Louisiana Legislature, which begins April 13.
A handful of the measures would help law enforcement go after the kind of fraudulent behavior that while criminal still requires the state, in some cases, to honor credits. Other proposals would put a cap on how much the state would spend on the tax waivers each year; limit when and how the tax credits could be sold by producers and studios to taxpayers to cover their tax liabilities; and come up with some way to give the state billing at the beginning the show, rather than at the end of the trailer of closing credits.
One of the proposals would designate a state agency to vet the applications for the tax credits. Morrell said the state Department of Economic Development doesn’t have the staff to go out and verify how many employees are actually Louisiana residents.
Another legislative idea was to require the applicants to sign a statement that no false statements are contained in the application and reports, which would give the state the ability to yank the credits and collect any monies already paid out.
“This is the area that needs to be the most tightened up,” Morrell said.
Inspector General Steven Street said his office has uncovered three main types of wrongdoing: false statements that inflate expense reports, related parties moving money back and forth and calling it expenses; and defrauding unsuspecting investors who buy the tax credits.
Street said he liked the affidavit idea because it gives the state greater power to pursue a criminal prosecution.
He also suggested that the Legislature consider some sort of process to ensure that those found to have committed fraud can lose their contracts and keep them from applying for future credits.
Morrell said given the problems with the state’s budget this year, much of it caused by exemptions and credits with runaway costs, some sort of cap would set a $300 million limit on the program’s annual cost, with any unused dollars being added to the next year’s allotment.
“There has to be a predictability aspect,” Morrell said, “Knowing what’s the worst case scenario helps draft budgets.”
Morrell said that for the highest year on record, state taxpayers covered $251 million in tax credits. He would recommend setting the limit at $300 million in order to limit surprises for budget drafters if, as has been the case with some exemptions, the state is on the hook for far more than anticipated. The idea would be that if the exemptions exceed $300 million, then the moviemakers could hold on to their credit certificates for another year.
Jack Nealy, of the Cinematographer Guild, said a “reclamation cap” would be “devastating financially” for the smaller, Louisiana filmmakers. “The indigenous producers need the money to go on. The big studios can wait,” Nealy said.
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