The film industry envisions a litany of lawsuits now that Gov. Bobby Jindal has signed into law limits on the lucrative tax credits that helped turn Louisiana into Hollywood South.
Jindal on Friday signed House Bill 829, a contentious proposal passed in the last minutes of the recent legislative session that caps the amount the state pays for film tax credits for the next three years at $180 million annually. That’s about $77 million less than the state was otherwise expected to spend in the fiscal year that begins July 1 and $70 million less for each of the two following years.
Will French, the head of the industry’s association, said Saturday that HB829 will subject the state to lawsuits by impacted taxpayers and will result in the loss of a large number of production jobs. The changes will violate existing contractual arrangements and will cause uncertainty that could lead companies to film elsewhere, he said.
In the coming weeks, the Louisiana Film and Entertainment Association will present a new plan to fix the damage and properly control program costs in light of the current budget situation, French added in an email.
“We will also be filing a challenge to the constitutionality of the new law in the appropriate forum,” he said.
The LFEA says the tax credits are responsible for attracting film projects — large and small — to Louisiana, accounting for more than 33,000 direct and indirect jobs. In 2014, Louisiana film industry employees earned on average $61,000 a year. The U.S. Census Bureau lists the average annual earnings in Louisiana as $41,000, the industry pointed out.
But the program has been criticized because independent studies show that for every dollar given to producers, the state treasury receives only about 20 cents in return. The tax credit also has led to several high-profile convictions of people who abused the program.
The Legislative Fiscal Office, in calculating the value of the cap, relied on Louisiana Economic Development reports that $284 million was certified for the current fiscal year that ends June 30.
“With annual variation, the average for the last four years has been $271 million; well above the $180 million cap provided by the bill, and LED indicates a current high pace of certifications that will eventually become realizations,” the Fiscal Office reported.
The Fiscal Office estimated at least $250 million of claims would be filed for fiscal year 2016. That would allow the state to keep $70 million.
Industry participants receive a transferable tax credit. Many holders of the credits are everyday taxpayers who purchased them from an industry participant. HB829 still allows them to use the credits, but for the next three years, the state will accept only $180 million of the credits each year.
The LFEA contends that the purchasers bought the credits without those restrictions and that with this new law, the state has retroactively — and unconstitutionally — changed the value of the credit.
House Ways and Means Committee Chairman Joel Robideaux, the Lafayette Republican who sponsored the legislation, wrote in a June 17 email to legislators and key legislative financial committee staffers that HB829 does not apply retroactively.
First off, he wrote, law forbids new laws to apply retroactively unless the Legislature specifically says so, which it did not.
“Generally, when we want provisions of a bill to apply retroactively, we usually add a specific section in the bill declaring the Act or portions of the Act to have retroactive application,” Robideaux wrote.
Opponents of Robideaux’s bill put on an intense campaign last week to persuade Jindal to veto it.
The industry presented a petition with 13,700 signatures. French said the signers “are very disappointed that our governor let us down.”
Three New Orleans legislators wrote Jindal, urging his veto. State Sen. J.P. Morrell, House Speaker Pro Tem Walt Leger III and state Rep. Helena Moreno warned Jindal that the cap and other bill provisions would kill the local industry and add more costs to the state.
Morrell opposed the passage of the legislation and said so from the Senate floor minutes after the session ended.
“I had some problems with Mr. Robideaux’s bill, serious problems. And I thought I’d have the opportunity to share those problems, but that time has passed,” he said.
Willie Robertson, the star of a popular cable television program following the lives of his West Monroe family, told the Monroe News-Star last week, before Jindal signed the bill, the tax credit program was one of the reasons “Duck Dynasty” was produced.
“And it’s one of the reasons production companies are looking for other interesting stories in Louisiana,” he said.
But many legislators and fiscal officials raised concerns about where to find the money for the budget that would have become unavailable with a veto. They also feared that without a limit on how many of the tax credits could be turned in, the holders would rush to turn in the outstanding notes, which could have required the state to pay out up to half a billion dollars.
Calling HB829 “the most poorly drafted bill of the 2015 session,” French noted in an email that after months of debate, a handful of lawmakers rewrote legislation behind closed doors and then presented it on the House floor about 10 minutes before the session adjourned on June 11.
“In our opinion, the process failed and produced an ill-conceived piece of legislation in order to create the semblance of a balanced budget,” French said.
French is not really exaggerating about the last-minute way the measure passed.
Robideaux spent much of the last day negotiating. He texted throughout the going-away speech of House Speaker Chuck Kleckley, R-Lake Charles.
He said about 45 minutes before the session had to adjourn, he decided to “pull the plug” and agreed to the “back end” cap as a way to ensure money for the budget. The state will continue to issue tax credits for qualified projects, the front end, but for each of the next three fiscal years, it will only pay out $180 million of the credits submitted, the “back end.” Outstanding credits after the limit is reached still can be submitted next year or the year after or the year after that.
Though he is aware of talk of lawsuits and the possibility of a downturn in production, Robideaux said he prefers explaining why higher education and health care needs the money more than the movie industry.
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