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Regular Session, 2012
SENATE BILL NO. 743
BY SENATOR MARTINY
ECONOMIC DEVELOPMENT. Provides relative to standards and procedures for audits
by the Department of Economic Development or the Louisiana Film Office of motion
picture productions. (8/1/12)
AN ACT1
To enact R.S. 51:940.1, relative to standards and procedures for audits by the Department2
of Economic Development or the Louisiana Film Office of motion picture3
productions; and to provide for related matters.4
Be it enacted by the Legislature of Louisiana:5
Section 1. R.S. 51:940.1 is hereby enacted to read as follows:6
ยง940.1 Motion picture investor tax audits7
A. Purpose. The purpose of this Section is to provide heightened8
standards and procedures for any audits by the Department of Economic9
Development or the Louisiana Film Office of motion picture productions.10
B. Definitions. For the purposes of this Section:11
(1) "Office" means the Louisiana Film Office.12
(2) "Qualified accountant" means an independent certified public13
accountant licensed in the state of Louisiana who has sufficient knowledge of14
accounting principles and practices generally recognized in the film and15
television industry and who has been approved by the office as having met such16
criteria.17 SB NO. 743
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(3) "Qualified cost report" means a report of production expenditures1
that is subject to an agreed-upon procedures engagement conducted by a2
certified public accountant in accordance with Statement on Standards for3
Attestation Engagements established by the American Institute of Certified4
Public Accountants. A qualified cost report must comply with all of the5
following:6
(a) Be performed by a qualified accountant that is unrelated to the7
motion picture production company associated with the application.8
(b) Be addressed to the party which has engaged the qualified accountant9
(e.g., a motion picture production company representative).10
(c) Contain a statement of acknowledgment by the qualified accountant11
that the state is relying on the qualified cost report in its issuance of the tax12
credits.13
(d) Be dated as of the completion of the qualified accountant's filed14
work.15
(e) Contain the qualified accountant's name, address and telephone16
number.17
(f) Be performed in accordance with the sampling and verification18
procedures contained in this Section.19
(4) "Resident" or "resident of Louisiana" means a natural person20
domiciled in this state. A person who maintains a permanent place of abode21
within the state and spends in the aggregate more than six months of each year22
within the state shall be presumed to be domiciled in the state.23
(5) "Secretary" means the secretary of the Department of Economic24
Development.25
(6) "Source within the state" means a physical facility in the state,26
operating with posted business hours and employing at least one full-time27
equivalent employee.28
(7) "State" means the state of Louisiana.29 SB NO. 743
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(8) "State-certified production" shall mean a production approved by1
the office and the secretary which is produced by a motion picture production2
company domiciled and headquartered in this state and which has a viable3
multi-market commercial distribution plan.4
C. The qualified accountant shall perform the following sampling5
procedures:6
(1) Obtain the cost report of all production expenditures for the7
production of the motion picture production company and verify the8
mathematical accuracy of such report.9
(2) Obtain the bank statements from the motion picture production10
company relevant to the applicable production for the period covered by the11
cost report of production expenditures.12
(3) Obtain the detailed payroll registers applicable to the production.13
This report should indicate the names, address, taxpayer identification number,14
permanent address, the amount of compensation, and the employee's state of15
residence.16
(4) Foot the payroll registers mentioned in Paragraph (3) of this17
Subsection for mathematical accuracy and agree the total to the cost report of18
production expenditures mentioned in Paragraph (1) of this Subsection.19
(5) Obtain the detailed listing of non-payroll expenditures for20
production of the motion picture production company. This report should21
indicate the payee, the date of payment, the date that the payment cleared the22
bank, and amount of the payment.23
(6) Foot the detailed listing of non-payroll expenditures mentioned in24
Paragraph (5) of this Subsection for mathematical accuracy and agree the total25
to the cost report of production expenditures mentioned in Paragraph (1) of this26
Subsection.27
D. The qualified accountant shall perform the following verification28
procedures:29 SB NO. 743
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(1) From the detailed payroll registers referenced in Paragraph(C)(3)1
of this Section, segregate the gross payroll for all Louisiana residents and agree2
the total to the Louisiana payroll/salaries indicated on either the cost report of3
production expenditures or the footnotes to the cost report of production4
expenditures.5
(2) From the payroll registers for Louisiana residents referenced in6
Paragraph (1) of this Subsection, select all disbursements to those individuals7
whose gross salaries during the period in question exceeded five percent of the8
total disbursements indicated on the cost report of production expenditures for9
the production referenced in Paragraph (C)(1) of this Section for further10
testing.11
(3) Excluding those individuals already selected for further testing in12
Paragraph (2) of this Subsection, select an additional sample consisting of the13
lesser of sixty individual payroll disbursements or fifty percent of the payroll14
disbursements not already selected in Paragraph (2) of this Subsection from the15
payroll registers for Louisiana residents referenced in Paragraph (1) of this16
Subsection for further testing.17
(4) For each employee selected for testing in Paragraphs (2) and (3) of18
this Subsection, perform all of the following, detailing any exceptions noted:19
(a) If the employee is a salaried employee, verify that the gross salary for20
the selected disbursement is supported by and agrees to an employment21
contract or other form of approved pay documentation.22
(b) If the employee is an hourly employee, verify that the hourly wage23
rate for the selected transaction is supported by and agrees to the approved pay24
rate documentation in the employee's personnel file.25
(c) If the employee is an hourly employee, verify that the hours paid for26
the selected transaction is supported by approved timesheets.27
(d) Verify that the disbursement of such funds is a qualifying28
expenditure given the operations of the motion picture production company.29 SB NO. 743
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(e) Verify that the payroll expenditures were actually made by the1
motion picture production company as evidenced by deductions in the bank2
account statements maintained by the motion picture production company and3
that the disbursement cleared the bank during the period in question.4
(f) Review employee's personnel file, verifying that the individual meets5
the definition of "resident" or "resident of Louisiana" as defined by the6
amendments made to R.S. 47:6022 in the 2009 Regular Session of the Louisiana7
Legislature: "resident" or "resident of Louisiana" means a natural person and8
any person domiciled in the state of Louisiana and any other person who9
maintains a permanent place of abode within the state and spends in the10
aggregate more than six months of each year within the state.11
(5) From the detailed payroll registers referenced in Paragraph (C)(3)12
of this Section, segregate the gross payroll for all non-Louisiana residents and13
agree the total to the non-Louisiana payroll indicated on either the cost report14
of production expenditures or the footnotes to the cost report of production15
expenditures.16
(6) From the payroll registers for non-Louisiana residents referenced in17
Paragraph (5) of this Subsection, select all disbursements to those individuals18
whose gross salaries during the period in question exceeded five percent of the19
total disbursements indicated on the cost report of production expenditures for20
the period in question referenced in Paragraph (C)(1) of this Section for further21
testing.22
(7) Excluding those individuals already selected for further testing in23
Paragraph (6) of this Subsection, select an additional sample consisting of the24
lesser of sixty individual payroll disbursements or fifty percent of the payroll25
disbursements not already selected in Paragraph (6) of this Subsection from the26
payroll registers for non-Louisiana residents referenced in Paragraph (5) of this27
Section for further testing.28
(8) For each employee selected for testing in Paragraphs (6) and (7) of29 SB NO. 743
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this Subsection, perform all of the following procedures, detailing any1
exceptions noted:2
(a) If the employee is a salaried employee, verify that the gross salary for3
the selected disbursement is supported by and agrees to an employment4
contract or other form of approved pay documentation.5
(b) If the employee is an hourly employee, verify that the hourly wage6
rate for the selected transaction is supported by and agrees to the approved pay7
rate documentation in the employee's personnel file.8
(c) If the employee is an hourly employee, verify that hours paid for the9
selected transaction is supported by approved timesheets.10
(d) Verify that the disbursement of such funds is a qualifying11
expenditure given the operations of the motion picture production company.12
(e) Verify that the payroll expenditures were actually made by the13
motion picture production company as evidenced by deductions in the bank14
account statements maintained by the motion picture production company and15
that the disbursement cleared the bank during the period in question.16
(9) From the detailed listing of non-payroll expenditures referenced in17
Paragraph (C)(5) of this Section, select all disbursements for a particular18
contract of purchase that exceeded five percent of the total disbursements19
indicated on the cost report of production expenditures for the period in20
question referenced in Paragraph (C)(1) of this Section for further testing.21
(10) Excluding those expenditures already selected for further testing22
in Paragraph (9) of this Subsection, select an additional sample consisting of the23
lesser of sixty individual disbursements or fifty percent of the non-payroll24
disbursements not already selected in Paragraph (9) of this Subsection from the25
detailed listing of non-payroll expenditures referenced in Paragraph (9) of this26
Subsection, for further testing.27
(11) For each disbursement selected for testing in Paragraphs (9) and28
(10), perform all of the following procedures, detailing any exceptions noted:29 SB NO. 743
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(a) Verify that the transaction is supported by an original invoice /1
receipt and that the amounts are in agreement.2
(b) Verify that the expense category to which the disbursement was3
coded appears reasonable based on the invoice documentation.4
(c) Verify that the disbursement of such funds is a qualifying5
expenditure given the operations of the motion picture production company.6
(d) Verify that the expenditures were actually made by the motion7
picture production company as evidenced by deductions in the bank account8
statements maintained by the motion picture production company and that the9
disbursement cleared the bank during the period in question.10
(e) Before submission of the qualified cost report, the qualified11
accountant shall ensure that all of the following steps have been taken:12
(i) Redact all but the last four digits of any employee's social security13
number.14
(ii) Separate expenditures by calendar year, as well as the aggregate15
project totals.16
(iii) Submit detailed list of all expenditures as spreadsheet.17
D. Certification and administration.18
(1) Prior to any final certification of the state-certified production, the19
motion picture production company shall submit to the office and the secretary20
a qualified cost report. The office shall review the qualified cost report and may21
require additional information needed to make a determination. Within sixty22
days of the receipt of a qualified cost report, the office and the secretary shall23
issue a final tax credit certification letter indicating the amount of tax credits24
certified for the state-certified production to the investors.25
(2) The Department of Economic Development may request an26
additional qualified cost report of the expenditures submitted by the motion27
picture production company at the cost of the motion picture production28
company. The motion picture production company, at its cost, may submit an29 SB NO. 743
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amended qualified cost report if additional expenditures are incurred or1
discovered for audit by the office of such report and approval of the additional2
credits.3
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Jerry J. Guillot.
DIGEST
Proposed law has purpose of providing heightened standards and procedures for any audits
by the Department of Economic Development or the Louisiana Film Office of motion
picture productions.
Defines "qualified accountant" means an independent certified public accountant licensed
in the state of Louisiana who has sufficient knowledge of accounting principles and practices
generally recognized in the film and television industry and who has been approved by the
office as having met such criteria.
Defines "qualified cost report" means a report of production expenditures that is subject to
an agreed-upon procedures engagement conducted by a certified public accountant in
accordance with Statement on Standards for Attestation Engagements established by the
American Institute of Certified Public Accountants. Requires that a qualified cost report
comply with all of the following:
1. Be performed by a qualified accountant that is unrelated to the motion picture
production company associated with the application.
2. Be addressed to the party which has engaged the qualified accountant.
3. Contain a statement of acknowledgment by the qualified accountant that the state is
relying on the qualified cost report in its issuance of the tax credits.
4. Be dated as of the completion of the qualified accountant's filed work.
5. Contain the qualified accountant's name, address and telephone number.
6. Be performed in accordance with the sampling and verification procedures contained
in proposed law.
Defines "resident" or "resident of Louisiana" as a natural person domiciled in this state. A
person who maintains a permanent place of abode within the state and spends in the
aggregate more than six months of each year within the state shall be presumed to be
domiciled in the state.
Defines "source within the state" as a physical facility in the state, operating with posted
business hours and employing at least one full-time equivalent employee.
Defines "state-certified production" as a production approved by the office and the secretary
of the department which is produced by a motion picture production company domiciled and
headquartered in this state and which has a viable multi-market commercial distribution
plan.
Requires that the qualified accountant perform the following sampling procedures:
1. Obtain the cost report of all production expenditures for the production of the motion SB NO. 743
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picture production company and verify the mathematical accuracy of such report.
2. Obtain the bank statements from the motion picture production company relevant to
the applicable production for the period covered by the cost report of production
expenditures.
3. Obtain the detailed payroll registers applicable to the production. This report should
indicate the names, address, taxpayer identification number, permanent address, the
amount of compensation, and the employee's state of residence.
4. Foot the payroll registers for mathematical accuracy and agree the total to the cost
report of production expenditures.
5. Obtain the detailed listing of non-payroll expenditures for production of the motion
picture production company. This report should indicate the payee, the date of
payment, the date that the payment cleared the bank, and amount of the payment.
6. Foot the detailed listing of non-payroll expenditures for mathematical accuracy and
agree the total to the cost report of production expenditures.
Requires that the qualified accountant perform the following verification procedures:
1. From the detailed payroll registers, segregate the gross payroll for all Louisiana
residents and agree the total to the Louisiana payroll/salaries indicated on either the
cost report of production expenditures or the footnotes to the cost report of
production expenditures.
2. From the payroll registers for Louisiana residents, select all disbursements to those
individuals whose gross salaries during the period in question exceeded five percent
of the total disbursements indicated on the cost report of production expenditures for
the production for further testing.
3. Excluding those individuals already selected for further testing, select an additional
sample consisting of the lesser of 60 individual payroll disbursements or 50% of the
payroll disbursements not already selected from the payroll registers for Louisiana
residents for further testing.
4. For each employee selected for testing, perform all of the following, detailing any
exceptions noted:
(a)If the employee is a salaried employee, verify that the gross salary for the
selected disbursement is supported by and agrees to an employment contract
or other form of approved pay documentation.
(b)If the employee is an hourly employee, verify that the hourly wage rate for
the selected transaction is supported by and agrees to the approved pay rate
documentation in the employee's personnel file.
(c)If the employee is an hourly employee, verify that the hours paid for the
selected transaction is supported by approved timesheets.
(d)Verify that the disbursement of such funds is a qualifying expenditure given
the operations of the motion picture production company.
(e)Verify that the payroll expenditures were actually made by the motion
picture production company as evidenced by deductions in the bank account
statements maintained by the motion picture production company and that
the disbursement cleared the bank during the period in question. SB NO. 743
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words in boldface type and underscored are additions.
(f)Review employee's personnel file, verifying that the individual meets the
definition of "resident" or "resident of Louisiana" as defined by the
amendments made to R.S. 47:6022 in the 2009 R.S.: "resident" or "resident
of Louisiana" means a natural person and any person domiciled in this state
and any other person who maintains a permanent place of abode within the
state and spends in the aggregate more than six months of each year within
the state.
5. From the detailed payroll registers, segregate the gross payroll for all non-Louisiana
residents and agree the total to the non-Louisiana payroll indicated on either the cost
report of production expenditures or the footnotes to the cost report of production
expenditures.
6. From the payroll registers for non-Louisiana residents, select all disbursements to
those individuals whose gross salaries during the period in question exceeded five
percent of the total disbursements indicated on the cost report of production
expenditures for the period in question for further testing.
7. Excluding those individuals already selected for further testing, select an additional
sample consisting of the lesser of 60 individual payroll disbursements or 50% per
cent of the payroll disbursements not already selected from the payroll registers for
non-Louisiana residents for further testing.
8. For each employee selected for testing, perform all of the following procedures,
detailing any exceptions noted:
(a)If the employee is a salaried employee, verify that the gross salary for the
selected disbursement is supported by and agrees to an employment contract
or other form of approved pay documentation.
(b)If the employee is an hourly employee, verify that the hourly wage rate for
the selected transaction is supported by and agrees to the approved pay rate
documentation in the employee's personnel file.
(c)If the employee is an hourly employee, verify that hours paid for the selected
transaction is supported by approved timesheets.
(d)Verify that the disbursement of such funds is a qualifying expenditure given
the operations of the motion picture production company.
(e) Verify that the payroll expenditures were actually made by the motion
picture production company as evidenced by deductions in the bank account
statements maintained by the motion picture production company and that
the disbursement cleared the bank during the period in question.
9. From the detailed listing of non-payroll expenditures, select all disbursements for a
particular contract of purchase that exceeded five percent of the total disbursements
indicated on the cost report of production expenditures for the period in question for
further testing.
10. Excluding those expenditures already selected for further testing, select an additional
sample consisting of the lesser of 60 individual disbursements or 50% of the
non-payroll disbursements not already selected from the detailed listing of
non-payroll expenditures, for further testing.
11.For each disbursement selected for testing, perform all of the following procedures,
detailing any exceptions noted: SB NO. 743
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(a)Verify that the transaction is supported by an original invoice receipt and that
the amounts are in agreement.
(b)Verify that the expense category to which the disbursement was coded
appears reasonable based on the invoice documentation.
(c)Verify that the disbursement of such funds is a qualifying expenditure given
the operations of the motion picture production company.
(d) Verify that the expenditures were actually made by the motion picture
production company as evidenced by deductions in the bank account
statements maintained by the motion picture production company and that
the disbursement cleared the bank during the period in question.
(e)Before submission of the qualified cost report, the qualified accountant shall
ensure that all of the following steps have been taken:
(i) Redact all but the last four digits of any employee's social security
number.
(ii)Separate expenditures by calendar year, as well as the aggregate
project totals.
(iii)Submit detailed list of all expenditures as spreadsheet.
Provides that prior to any final certification of the state-certified production, the motion
picture production company shall submit to the office and the secretary a qualified cost
report. The office shall review the qualified cost report and may require additional
information needed to make a determination. Within 60 days of the receipt of a qualified
cost report, the office and the secretary shall issue a final tax credit certification letter
indicating the amount of tax credits certified for the state-certified production to the
investors.
Provides that the department may request an additional qualified cost report of the
expenditures submitted by the motion picture production company at the cost of the motion
picture production company. The motion picture production company, at its cost, may
submit an amended qualified cost report if additional expenditures are incurred or discovered
for audit by the office of such report and approval of the additional credits.
Becomes effective August 1, 2012.
(Adds R.S. 51:940.1)