HLS 13RS-976 REENGROSSED Page 1 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. Regular Session, 2013 HOUSE BILL NO. 483 BY REPRESENTATIVE NANCY LANDRY TAX CREDITS: Extends authority to grant tax credits for certain state-certified musical or theatrical facility infrastructure projects AN ACT1 To amend and reenact R.S. 47:6034(A), (B)(4), (8), (9), (10), and (11), (C)(1)(a)(ii)(aa) and2 (bb), (C)(3), (E)(1)(e) and (F), to enact R.S. 47:6034(B)(12) and (H), and to repeal3 R.S. 47:6034(C)(1)(b), (e), and (f), relative to income tax credits for state-certified4 musical and theatrical productions and state-certified infrastructure projects; to5 extend the time period for granting certain tax credits; to provide with respect to a6 tax credit for state-certified higher education musical or theatrical infrastructure7 projects; to provide relative to certain definitions; to provide for certain requirements8 and limitations; to provide with respect to the application for such tax credits and9 certification of productions and infrastructure projects; to provide for the10 disallowance of credits; to provide for the recovery of credits; and to provide for11 related matters.12 Be it enacted by the Legislature of Louisiana:13 Section 1. R.S. 47:6034(A), (B)(4), (8), (9), (10), and (11), (C)(1)(a)(ii)(aa) and (bb),14 (C)(3), (E)(1)(e) and (F) are hereby amended and reenacted and R.S. 47:6034(B)(12) and (H)15 are hereby enacted to read as follows:16 ยง6034. Musical and theatrical production income tax credit17 A. Purpose. It is the intention of the legislature in creating these five18 different types of tax credits: a credit for qualified production expenditures made19 from investments in a state-certified musical or theatrical production; a credit for the20 construction, repair, or renovation of facilities related to such productions and21 HLS 13RS-976 REENGROSSED HB NO. 483 Page 2 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. performances; a credit for qualified transportation costs for performance-related1 property; a credit for the payroll of Louisiana residents employed in connection with2 a state-certified musical or theatrical production; and a credit for employing college,3 university, and vocational-technical students employed in connection with a state-4 certified musical or theatrical production, to establish and promote Louisiana as one5 of the primary places in the United States in which live performances, from creation6 to presentation, are present and thriving. The live performance industry will enhance7 economic development because it fits well with the state's reputation as a tourist8 destination, will offer numerous and varied employment opportunities, and in9 conjunction with the available federal and state incentives, will be an attraction for10 new and relocating businesses and will provide for the reinventing of countless11 abandoned properties as either performance or rehearsal spaces. The live12 performance industry will also spur educational development: Louisiana colleges,13 universities, and vocational-technical schools will be able to offer talented14 undergraduate and graduate students from this state, other states, and around the15 world a real-world opportunity to participate in degree programs across the state that16 work on the various productions in accounting, law, management, and marketing and17 to fill arts-related positions such as actors, writers, producers, stagehands, and18 directors, as well as technicians working on all aspects of the production such as19 lighting, sound, and actual stage production and operations.20 B. Definitions. For the purposes of this Section:21 * * *22 (4) "Limited state-certified musical or theatrical production" means a23 musical or theatrical production or a series of productions occurring in Louisiana by24 a nonprofit community theater that held a public performance before an audience25 within this state during the 2008 calendar year which has been certified, verified, and26 approved in accordance with the provisions of this Section. "Infrastructure27 expenditures" means expenditures directly related to the state-certified infrastructure28 project or state-certified higher education infrastructure projects including land and29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 3 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. land acquisition costs, construction costs, design fees, furniture, fixtures, and1 equipment purchased subject to a sale agreement or capital lease. Infrastructure2 expenditures shall not include indirect costs such as general administrative costs,3 insurance, or any costs related to the transfer or allocation of tax credits. The4 Department of Economic Development may determine whether expenditures5 submitted as production-related costs of capital costs related to an infrastructure6 facility represent legitimate expenditures for the actual costs of related goods or7 services that have economic substance and a business purpose related to the certified8 production or facility, or such costs constitute constructive dividends, self-dealing,9 inflated prices or similar transactions entered into for the purpose of inflating the10 amount of tax credits earned rather than for the benefit of the production or facility.11 * * *12 (8) "Related party transaction" means a transaction between parties deemed13 to be related by common ownership or control under generally accepted auditing14 principles. Related party transaction expenditures may be subject to limitations as15 provided for by rules and regulations promulgated by the department.16 (9)(a) "Resident" or "resident of Louisiana" means a natural person and, for17 the purpose of determining eligibility for the tax incentives provided by this Section,18 a person who qualifies for any of the following reasons:19 (i) The person is domiciled in the state of Louisiana.20 (ii) The person maintains a permanent place of abode within the state and21 spends in the aggregate more than six months of each year within the state.22 (iii) The person pays taxes to the state on the amount of money paid to such23 person for which a credit is sought pursuant to this Section.24 (b) A company owned or controlled by such a person and which lends the25 services of such a person for a state-certified musical or theatrical production shall26 also be deemed a resident if such company is organized or authorized to do business27 in the state and such company pays taxes to the state on the amount of money paid28 to such company for such services of such person.29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 4 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. (9)(10) "State-certified higher education musical or theatrical infrastructure1 project" means a new proscenium or black-box theatre infrastructure project situated2 on a parcel of land located on the campus of a higher education institution in this3 state, that is owned by a higher education campus institution or support foundation4 related to the campus primarily operated to benefit and support campus students and5 the higher education facility. The primary purpose of the proposed infrastructure6 facility must be to host live performances, and the facility must have a minimum7 fixed seating capacity of five hundred. Expenditures attributable to areas other than8 where live performances will take place may comprise no more than twenty-five9 percent of total qualifying expenditures. 10 (11)(a) "State-certified musical or theatrical facility infrastructure project"11 or "state-certified infrastructure project", for any project which receives initial12 certification before July 1, 2013, means a capital infrastructure project in the state13 directly related to the production or performance of musical or theatrical productions14 as defined in this Section, and movable and immovable property and equipment15 related thereto, or any other facility that supports and is a necessary component of16 such facility, and any expenditures in the state related to the construction, repair, or17 renovation of such project, which that are certified, verified, and approved as18 provided for in this Section.19 (b) "State-certified musical or theatrical infrastructure project" or "state20 certified infrastructure project", for any project which receives initial certification21 on or after July 1, 2013, means a new or rehabilitated proscenium or black-box22 theatre infrastructure project located in the state and any expenditures in the state23 directly related to the construction, repair, or renovation of such project, which are24 certified, verified, and approved as provided for in this Section. The primary25 purpose of the proposed facility must be to host live performances and the facility26 must have a minimum capacity of five hundred. Expenditures attributable to areas27 other than where live performances will take place may comprise no more than28 twenty-five percent of total qualifying expenditures.29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 5 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. (10)(a)(12)(a) "State-certified musical or theatrical production" means a1 musical or theatrical production performed in this state including but not limited to2 concerts, musical tours, ballet, dance, comedy revue, or live variety entertainment,3 or a series of productions occurring over the course of a twelve-month period, and4 the recording or filming of such production, that originate, are developed, or have5 their initial public performance before an audience within Louisiana, or that have6 their United States debut within Louisiana, and the production expenditures,7 expenditures for the payroll of residents, transportation expenditures, and8 expenditures for employing college and vocational-technical students related to such9 production or productions, that are certified, verified, and approved as provided for10 in this Section. Non-qualifying projects include but are not limited to non-touring11 music and cultural festivals, industry seminars, and trade shows, and any production12 activity taking place outside the state.13 (b) A "state-certified musical or theatrical production" that shall be eligible14 for recertification and the credit provided for in this Section shall include a15 previously certified musical or theatrical production that received a credit pursuant16 to this Section and is otherwise eligible pursuant to this Section, that returns for17 performances within the state after being performed on Broadway.18 (11)(a) "Transportation expenditures" means expenditures for the packaging,19 crating, and transportation both to the state for use in a state-certified musical or20 theatrical production of sets, costumes, or other tangible property constructed or21 manufactured out of state, and/or from the state after use in a state-certified musical22 or theatrical production of sets, costumes, or other tangible property constructed or23 manufactured in this state. Such term shall include the packaging, crating, and24 transporting of property and equipment used for special and visual effects, sound,25 lighting, and staging, costumes, wardrobes, make-up and related accessories and26 materials, as well as any other performance or production-related property and27 equipment; provided that transportation services are purchased through a company28 which has a significant business presence in the state.29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 6 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. (b) "Transportation expenditures" shall not include any costs to transport1 property and equipment to be used only for filming and not in a state-certified2 production, any indirect costs, any expenditures that are later reimbursed by a third3 party, or any amounts that are paid to persons or entities as a result of their4 participation in profits from the exploitation of the production.5 C. Income tax credits for state-certified productions and state-certified6 musical or theatrical facility infrastructure projects:7 (1) There is hereby authorized the following types of credits against the state8 income tax:9 (a)10 * * *11 (ii)(aa) Until For state-certified infrastructure projects that receive initial12 certification on or before January 1, 2014, a base investment credit may be granted13 earned for certified, verified, and approved expenditures made in the state on or14 before January 1, 2014, for the construction, repair, or renovation of a state-certified15 musical or theatrical facility infrastructure project or for investments made by a16 company or a financier in such infrastructure project which are, in turn, expended for17 such construction, repair, or renovation, not to exceed ten million dollars per state-18 certified infrastructure project, under conditions provided for in this Item. No more19 than sixty million dollars in tax credits under this Section shall be granted for20 infrastructure projects per year.21 (bb) If all or a portion of an infrastructure project is a facility which may be22 used for other purposes not directly related to the production or performance of23 musical or theatrical production activities, then the project shall be approved only if24 a determination is made that the multiple-use facility will support and will be25 necessary to secure musical or theatrical production activities for the musical or26 theatrical production or performance facility and the applicant provides sufficient27 contractual assurances that: For state-certified higher education musical or theatrical28 infrastructure projects that receive initial certification on or before January 1, 2018,29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 7 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. a base investment credit may be earned for expenditures made in the state on or1 before January 1, 2022, for the construction, repair, or renovation of a new state-2 certified higher education musical or theatrical facility infrastructure project, or for3 investments made by a company or a financier in such infrastructure project that are,4 in turn, expended for such construction, repair, or renovation. No more than ten5 million dollars in tax credits per project or sixty million dollars total in tax credits6 shall be granted for state-certified higher education musical or theatrical7 infrastructure projects. Twenty-five percent of the total base investment provided8 for in the initial certification letter of a state-certified higher education musical or9 theatrical infrastructure project must be expended on or before January 1, 2020, in10 order for the project to earn credits for the remaining estimated base investment11 provided for in the initial certification letter, as expenditures are made in the state on12 or before January 1, 2022. No credits shall be certified until the state-certified higher13 education musical or theatrical infrastructure project is complete. The initial14 certification letter shall be effective for qualified expenditures made no more than15 six months prior to the date of application. State-certified higher education musical16 or theatrical infrastructure projects shall not be subject to the provisions of Subitem17 (cc) of this Item nor shall such projects be subject to the provisions of Subsection H18 of this Section.19 (I) The facility will be used for the production or performance of musical or20 theatrical production activities, or as a support and component thereof, for the useful21 life of the facility. 22 (II) No tax credits shall be earned on such multiple-use facilities until the23 facility directly used in musical or theatrical productions or performances is24 complete. 25 * * *26 (3) Tax credits associated with a state-certified musical or theatrical27 production or a state-certified musical or theatrical facility infrastructure project shall28 HLS 13RS-976 REENGROSSED HB NO. 483 Page 8 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. never exceed the total base investment in that production or infrastructure project1 and transportation expenditures.2 * * *3 E. Certification and administration:4 (1)5 * * *6 (e) Prior to the final certification of a production or infrastructure project, the7 applicant shall submit to the Department of Economic Development a report an audit8 of the final amount of expenditures qualifying for credits pursuant to this Section,9 which report the Department of Economic Development may require to be prepared10 by an independent certified public accountant. The Department of Economic11 Development shall review the report audit and shall issue a final tax credit12 certification letter, certifying the applicant and indicating the type and amount of tax13 credits for which the applicant or other companies or financiers are eligible pursuant14 to this Section.15 * * *16 F.(1) Recapture of credits. If the Department of Economic Development, or17 the Department of Revenue find that funds for which a taxpayer received credits18 according to this Section were not expended for expenditures qualifying for a credit19 as provided in this Section, then the taxpayer's state income tax for such taxable20 period shall be increased by such amount necessary for the recapture of credit21 provided by this Section.22 (2)(a) Recovery of credits by Department of Revenue. Credits granted to a23 taxpayer, but later disallowed, may be recovered by the secretary of the Department24 of Revenue through any collection remedy authorized by R.S. 47:1561 and initiated25 within three years from December thirty-first of the year in which the credit was26 taken.27 (b) The only interest that may be assessed and collected on recovered credits28 is interest at a rate three percentage points above the rate provided in R.S.29 HLS 13RS-976 REENGROSSED HB NO. 483 Page 9 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. 9:3500(B)(1), which shall be computed from the original date of the return on which1 the credit was taken.2 (3) The provisions of this Subsection are in addition to and shall not limit the3 authority of the secretary of the Department of Revenue to assess or to collect under4 any other provision of law. Disallowance of credits by the Department of Economic5 Development. Tax credits shall be subject to disallowance in whole or in part, if the6 Department of Economic Development finds that a taxpayer has obtained a tax credit7 in violation of the provisions of this Section, including but not limited to fraud or8 misrepresentation, as further provided by rule.9 * * *10 H. Recovery of credits by the Department of Revenue:11 (1) Credits previously granted to a taxpayer but later disallowed by the12 Department of Economic Development may be recovered by the secretary of the13 Department of Revenue through any collection remedy authorized by R.S. 47:156114 and initiated within three years from December thirty-first of the year in which the15 credit was taken.16 (2) The only interest that may be assessed and collected on recovered credits17 is interest at a rate three percentage points above the rate provided for in R.S.18 9:3500(B)(1), which shall be computed from the original date of the return on which19 the credit was taken.20 (3) The provisions of this Subsection are in addition to and shall not limit the21 authority of the secretary of the Department of Revenue to assess or to collect under22 any other provision of law.23 * * *24 Section 2. R.S. 47:6034(C)(1)(b), (e), and (f) are hereby repealed in their entirety.25 Section 3. This Act shall become effective July 1, 2013.26 HLS 13RS-976 REENGROSSED HB NO. 483 Page 10 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. DIGEST The digest printed below was prepared by House Legislative Services. It constitutes no part of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)] Nancy Landry HB No. 483 Abstract: Extends the time period for granting income tax credits related to the construction, repair, or renovation of facilities related to musical and theatrical productions and performances and limits credits for projects after Jan. 1, 2014, to those located on the campus of a higher education institution. Present law establishes five different types of tax credits related to musical and theatrical productions. Proposed law repeals two credits: the credit for qualified transportation costs for performance-related property, and the credit for projects for nonprofit community theaters. One of the five credits authorized in present law is a credit for the construction, repair, or renovation of a state-certified musical or theatrical facility infrastructure project. Present law further provides that the amount of the base investment credit given for investment in such projects cannot exceed $10,000,000 per project. Further provides that no more than $60,000,000 in tax credits under present law may be granted for these projects per year. Proposed law retains present law with respect to the limitations on the amount of credits per project as well as the annual overall program limit. Present law sunsets the authority to grant credits on Dec. 31, 2013. Proposed law changes the termination date for the authority to grant tax credits from Dec. 31, 2013, to Dec. 31, 2022. Present law defines "infrastructure project" as a capital infrastructure project in La. directly related to the production or performance of musical or theatrical productions, property and equipment related thereto, any other facility which supports and is a necessary component of such facility, and any expenditures in the state related to the construction, repair, or renovation of such project. Proposed law retains present law definition of "infrastructure project" for those projects which receive initial certification before July 1, 2013. Proposed law revises the definition of "infrastructure project" for those projects which receive initial certification on or after July 1, 2013. Proposed law defines "infrastructure project" as a new or rehabilitated proscenium or black-box theatre infrastructure project located in La. and any expenditures in the state directly related to the construction, repair, or renovation of such project. Further, the primary purpose of the proposed facility must be to host live performances and the facility must have a minimum capacity of 500. Expenditures attributable to areas other than where live performances will take place may comprise no more than 25% of total qualifying expenditures. Proposed law also defines "higher education infrastructure project" in the same manner as proposed law for projects receiving initial certification on or after July 1, 2013, except limits projects to those located on the campus of an institution of higher education. Proposed law defines "infrastructure expenses" as those directly related to a state-certified infrastructure project or state-certified higher education infrastructure project including land HLS 13RS-976 REENGROSSED HB NO. 483 Page 11 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. and land acquisition costs, construction costs, design fees, furniture, fixtures, and equipment purchased subject to a sale agreement or capital lease. Proposed law excludes from the definition of "infrastructure expenditures" indirect costs such as general administrative costs, insurance, or any costs related to the transfer or allocation of tax credits. Present law defines "state-certified musical or theatrical production" as a musical or theatrical production or a series of productions occurring over the course of a twelve-month period, and the recording or filming of such production, which originate, are developed, or have their initial public performance before an audience within La., or which have their United States debut within La., and expenditures related thereto. Proposed law retains present law and adds to the definition by including concerts, musical tours, ballet, dance, comedy revue, or live variety entertainment. Proposed law provides that after Jan. 1, 2014, the availability for tax credits shall be limited to those infrastructure projects situated on a parcel of land located on the campus of a higher education institution, which is owned by a higher education campus institution or support foundation related to the campus primarily operated to benefit and support campus students and faculty. Proposed law provides that for higher education musical or theatrical infrastructure projects which receive initial certification on or before Jan. 1, 2018, a base investment credit may be earned for expenditures made in La. on or before Jan. 1, 2022, for the construction, repair, or renovation of a new state-certified higher education musical or theatrical facility infrastructure project, or for investments made by a company or a financier in such infrastructure project which are, in turn, expended for such construction, repair, or renovation. One quarter of the total base investment must be expended on or before Jan. 1, 2020, in order for a project to earn credits for any remaining estimated base investment provided for in its initial certification letter, as expenditures are made on or before Jan. 1, 2022. Proposed law requires that an infrastructure project be complete before any credits are certified. Present law requires that 50% of the total amount of tax credits granted annually shall be reserved for projects located outside of Jefferson and Orleans parishes. Proposed law excludes higher education musical or theatrical infrastructure projects from this requirement. Present law provides for disallowance and recapture of credits. Proposed law rewords provisions of present law regarding disallowance and recapture, but retains the substance of present law. Effective July 1, 2013. (Amends R.S. 47:6034(A), (B)(4), (8), (9), (10), and (11), (C)(1)(a)(ii)(aa) and (bb), (C)(3), (E)(1)(e), and (F); Adds R.S. 47:6034(B)(12) and (H); Repeals R.S. 47:6034(C)(1)(b), (e), and (f)) Summary of Amendments Adopted by House Committee Amendments Proposed by House Committee on Ways and Means to the original bill. 1. Changes program eligibility after Jan. 1, 2014, from a project located anywhere in the state to a project on the campus of a higher education institution. HLS 13RS-976 REENGROSSED HB NO. 483 Page 12 of 12 CODING: Words in struck through type are deletions from existing law; words underscored are additions. 2. Adds requirements for the timing of expenditures for qualification for tax credits. 4. Revises present law regarding disallowance, recapture and recovery of tax credits. 5. Deletes provisions of present law requiring the Dept. of Economic Development to report to the legislature with regard to the tax credit program. 6. Deletes the tax credit authorized under present law for certain investments in nonprofit community theaters. 7. Deletes present law regarding the allowance of transportation costs as certified expenditures. 8. Adds and revises definitions. House Floor Amendments to the engrossed bill. 1. Deletes provisions governing recapture of disallowed tax credits by the Dept. of Revenue. 2. Adds specific definitions of "state-certified musical or theatrical infrastructure project" for projects receiving initial certification both before and after the effective date of proposed law. 3. Adds July 1, 2013 effective date.