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Regular Session, 2013
SENATE BILL NO. 165
BY SENATOR MARTINY
TAX/TAXATION. Requires a qualified cost report prior to issuance of a motion picture
investor tax credit. (8/1/13)
AN ACT1
To amend and reenact R.S. 47:6007(B)(10), (11), (12), (13), (14), the introductory paragraph2
of R.S. 47:6007(D)(2)(a) and (D)(2)(c) and (d) and to enact R.S. 47:6007(B)(15) and3
(16), (G) and 6007.1, relative to the motion picture investor tax credit; to provide for4
submission of a qualified cost report prior to being certified as a state-certified5
production for application for the credit; to provide for a qualified cost report; and6
to provide for related matters.7
Be it enacted by the Legislature of Louisiana:8
Section 1. R.S. 47:6007(B)(10), (11), (12), (13), (14), the introductory paragraph of9
R.S. 47:6007(D)(2)(a) and (D)(2)(c) and (d) are hereby amended and reenacted and R.S.10
47:6007(B)(15) and (16), (G) and 6007.1 are hereby enacted to read as follows:11
§6007. Motion picture investor tax credit12
B. Definitions. For the purposes of this Section:13
* * *14
(10) "Qualified accountant" means an independent certified public15
accountant licensed in this state who has sufficient knowledge of accounting16
principles and practices generally recognized in the film and television industry.17 SB NO. 165
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(11) "Qualified cost report" is a report of the production expenditures1
produced by a qualified accountant who is unrelated to the motion picture2
production company and which report is subject to an agreed-upon procedures3
engagement by a certified public accountant in accordance with Statement on4
Standards for Attestation Engagements established by the American Institute5
of Certified Public Accountants. The qualified cost report shall be addressed to6
the party which has engaged the qualified accountant; contain the qualified7
accountant's name, address, telephone number; be dated as of the date of8
completion of the qualified accountant's filed work; and contain a statement of9
acknowledgment by the qualified account that the state is relying on the10
qualified cost report in the issuance of the tax credits under the provisions of11
this Section. The qualified cost report shall be performed pursuant to the12
qualified sampling and verification procedures provided in R.S. 47:6007.1.13
(10) (12) "Resident" or "resident of Louisiana" means a natural person14
domiciled in the state. A person who maintains a permanent place of abode within15
the state and spends in the aggregate more than six months of each year within the16
state shall be presumed to be domiciled in the state.17
(11) (13) "Secretary" means the secretary of the Department of Economic18
Development.19
(12) (14) "Source within the state" means a physical facility in Louisiana,20
operating with posted business hours and employing at least one full-time equivalent21
employee.22
(13) (15) "State" means the state of Louisiana.23
(14) (16) "State-certified production" shall mean a production approved by24
the office and the secretary which is produced by a motion picture production25
company domiciled and headquartered in Louisiana and which has a viable multi-26
market commercial distribution plan.27
* * *28
D. Certification and administration.29 SB NO. 165
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* * *1
(2)(a) Application. An applicant for the motion picture investor credit shall2
submit an application for initial certification to the office and the secretary of the3
Department of Economic Development that includes a qualified cost report and the4
following information:5
* * *6
(c) The office and the secretary shall submit their initial certification of a7
project as a state-certified production to investors and to the secretary of the8
Department of Revenue indicating the total base investment which shall be expended9
in the state on the state-certified production within thirty days of their receipt of10
all required information. The initial certification shall include a unique identifying11
number for each state-certified production.12
(d)(i) Prior to any final certification of the state-certified production, the13
motion picture production company shall submit to the office and the secretary an14
audit of the production expenditures certified by an independent certified public15
accountant as determined by rule a qualified cost report. The office and the16
secretary shall review the audit, the production expense details, the qualified cost17
report and may require additional information needed to make a determination.18
Upon approval of the audit Within sixty days of the receipt of the qualified cost19
report, the office and the secretary shall issue a final tax credit certification letter20
indicating the amount of tax credits certified for the state-certified production to the21
investors for all amounts that are uncontested. If there remains a contested22
amount, the office and secretary shall diligently work to resolve the outstanding23
issues in a timely manner and the office and secretary may subsequently issue24
a supplemental tax credit certification at the time of such resolution, if so25
warranted.26
(ii) The department may request an additional qualified cost report of27
the expenditures submitted by the motion picture production company with the28
cost of the additional report paid by the motion picture production company.29 SB NO. 165
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The motion picture production company may submit an amended qualified cost1
report if additional expenditures are incurred or discovered after the approval2
of the initial qualified cost reports issued pursuant to Item (i) of this3
Subparagraph and the office and secretary may issue a supplemental tax credit4
certification if so warranted. The rules required by this Subparagraph shall, at a5
minimum, require that:6
(i) The auditor shall be a certified public accountant licensed in the state of7
Louisiana and shall be an independent third party, not related to the producer.8
(ii) The auditor's opinion shall be addressed to the party which has engaged9
the auditor (e.g., directors of the production company, producer of the production).10
(iii) The auditor's name, address, and telephone number shall be evident on11
the report.12
(iv) The auditor's opinion shall be dated as of the completion of the audit13
fieldwork.14
(v) The audit shall be performed in accordance with auditing standards15
generally accepted in the United States of America and the auditor shall have16
sufficient knowledge of accounting principles and practices generally recognized in17
the film and television industry.18
* * *19
G. Notwithstanding any other law to the contrary, no motion picture20
investor tax credit shall be allowed for fees, interest, or payments of a similar21
nature paid to related parties but shall only be allowed if received by investors22
in the production who own twenty percent or less of the financial rewards based23
on sales, exploitation of the product, or the success in lining up distribution24
agreements, provided no motion picture investor tax credit shall be allowed for25
any percentage of the financial rewards but shall only be allowed for financing26
fees and interest.27
§6007.1. Motion picture investor tax credit; qualified sampling and verification28
procedures29 SB NO. 165
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A. A qualified accountant, as defined in R.S. 47:6007, shall perform the1
following sampling procedures when producing a qualified cost report required2
under the provisions of R.S. 47:6007:3
(1) Obtain the cost report of all production expenditures for the4
production of the motion picture production company and verify the5
mathematical accuracy of the report.6
(2) Obtain the bank statements from the motion picture production7
company relevant to the applicable production for the period covered by the8
cost report of production expenditures.9
(3) Obtain the detailed payroll registers applicable to the production.10
This report should indicate the name, address, taxpayer identification number,11
permanent address, the amount of compensation, and the employee's state of12
residence.13
(4) Foot the payroll registers mentioned in Paragraph (3) of this14
Subsection for mathematical accuracy and agree the total to the cost report of15
production expenditures mentioned in Paragraph (1) of this Subsection.16
(5) Obtain the detailed listing of non-payroll expenditures for production17
of the motion picture production company. This report should indicate the18
payee, the date of payment, the date that the payment cleared the bank, and19
amount of the payment.20
(6) Foot the detailed listing of non-payroll expenditures mentioned in21
Paragraph (5) of this Subsection for mathematical accuracy and agree the total22
to the cost report of production expenditures mentioned in Paragraph (1) of this23
Subsection.24
B. A qualified accountant shall perform the following verification25
procedures when producing a qualified cost report under the provisions of R.S.26
47:6007:27
(1) From the detailed payroll registers referenced in Paragraph (A)(3)28
of this Section, segregate the gross payroll for all Louisiana residents and agree29 SB NO. 165
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the total to the Louisiana payroll and salaries indicated on either the cost report1
of production expenditures or the footnotes to the cost report of production2
expenditures.3
(2) From the payroll registers for Louisiana residents contained in4
Paragraph (1) of this Subsection, select all disbursements to those individuals5
whose gross salaries during the period in question exceeded five percent of the6
total disbursements indicated on the cost report of production expenditures for7
the production for further testing.8
(3) Excluding those individuals already selected for further testing in9
Paragraph (2) of this Subsection, select an additional sample consisting of the10
lesser of sixty individual payroll disbursements or fifty percent of the payroll11
disbursements not already selected in Paragraph (2) of this Subsection from the12
payroll registers for Louisiana residents for further testing.13
(4) For each employee selected for testing in Paragraphs (2) and (3) of14
this Subsection, perform the following analysis, detailing any exceptions noted:15
(a) If the employee is a salaried employee, verify that the gross salary for16
the selected disbursement is supported by and agrees to an employment17
contract or other form of approved pay documentation.18
(b) If the employee is an hourly employee, verify that the hourly wage19
rate for the selected transaction is supported by and agrees to the approved pay20
rate documentation in the employee's personnel file.21
(c) If the employee is an hourly employee, verify that the hours paid for22
the selected transaction is supported by approved timesheets.23
(d) Verify that the disbursement of such funds is a qualifying24
expenditure given the operations of the motion picture production company.25
(e) Verify that the payroll expenditures were actually made by the26
motion picture production company as evidenced by deductions in the bank27
account statements maintained by the motion picture production company and28
that the disbursement cleared the bank during the period in question.29 SB NO. 165
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(f) Review employee's personnel file, verifying that the individual is a1
natural person domiciled in or who maintains a permanent place of abode2
within this state and spends in the aggregate more than six months of each year3
within this state.4
(5) From the detailed payroll registers referenced in Paragraph (A)(3)5
of this Section, segregate the gross payroll for all non-Louisiana residents and6
agree the total to the non-Louisiana payroll indicated on either the cost report7
of production expenditures or the footnotes to the cost report of production8
expenditures.9
(6) From the payroll registers for non-Louisiana residents, select all10
disbursements to those individuals whose gross salaries during the period in11
question exceeded five percent of the total disbursements indicated on the cost12
report of production expenditures for the period in question for further testing.13
(7) Excluding those individuals already selected for further testing in14
Paragraph (6) of this Subsection, select an additional sample consisting of the15
lesser of sixty individual payroll disbursements or fifty percent of the payroll16
disbursements not already selected in Paragraph (6) of this Subsection from the17
payroll registers for non-Louisiana residents, for further testing.18
(8) For each employee selected for testing in Paragraphs (6) and (7) of19
this Subsection, perform the following procedures, detailing any exceptions20
noted:21
(a) If the employee is a salaried employee, verify that the gross salary for22
the selected disbursement is supported by and agrees to an employment23
contract or other form of approved pay documentation.24
(b) If the employee is an hourly employee, verify that the hourly wage25
rate for the selected transaction is supported by and agrees to the approved pay26
rate documentation in the employee's personnel file.27
(c) If the employee is an hourly employee, verify that hours paid for the28
selected transaction is supported by approved timesheets.29 SB NO. 165
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(d) Verify that the disbursement of such funds is a qualifying1
expenditure given the operations of the motion picture production company.2
(e) Verify that the payroll expenditures were actually made by the3
motion picture production company as evidenced by deductions in the bank4
account statements maintained by the motion picture production company and5
that the disbursement cleared the bank during the period in question.6
(9) From the detailed listing of non-payroll expenditures referenced in7
Paragraph (A)(5) of this Section, select all disbursements for a particular8
contract of purchase that exceeded five percent of the total disbursements9
indicated on the cost report of production expenditures for the period in10
question for further testing.11
(10) Excluding those expenditures already selected for further testing in12
Paragraph (9) of this Subsection, select an additional sample consisting of the13
lesser of sixty individual disbursements or fifty percent of the non-payroll14
disbursements not already selected in Paragraph (9) of this Subsection from the15
detailed listing of non-payroll expenditures for further testing.16
(11) For each disbursement selected for testing in Paragraphs (9) and17
(10) of this Subsection, perform the following procedures, detailing any18
exceptions noted:19
(a) Verify that the transaction is supported by an original invoice or20
receipt and that the amounts are in agreement.21
(b) Verify that the expense category to which the disbursement was22
coded appears reasonable based on the invoice documentation.23
(c) Verify that the disbursement of such funds is a qualifying expenditure24
given the operations of the motion picture production company.25
(d) Verify that the expenditures were actually made by the motion26
picture production company as evidenced by deductions in the bank account27
statements maintained by the motion picture production company and that the28
disbursement cleared the bank during the period in question.29 SB NO. 165
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C. Before submission of the qualified cost report, the qualified1
accountant shall ensure that these steps have been taken:2
(1) Redact all but the last four digits of any employee's social security3
number.4
(2) Separate expenditures by calendar year, as well as the aggregate5
project totals.6
(3) Submit detailed list of all expenditures as a spreadsheet. 7
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Thomas L. Tyler.
DIGEST
Present law provides for motion picture investor tax credits for certain state-certified
productions by a motion picture production company.
Proposed law defines a "qualified cost report" as a report of the production expenditures
produced by a qualified accountant who is unrelated to the motion picture production
company and which report is subject to an agreed-upon procedures engagement 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 the report be addressed to the party which has engaged the qualified
accountant; that it contain the qualified accountant's name, address, telephone number; that
it be dated as of the date of completion of the qualified accountant's filed work; and that it
contain a statement of acknowledgment by the qualified account that the state is relying on
the qualified cost report in issuing the tax credit.
Present law requires the office of entertainment industry development and the secretary of
the Department of Economic Development (DED) submit their initial certification of a
project as a state-certified production to investors and to the secretary of the Department of
Revenue indicating the total base investment which is to be expended in the state on the
state-certified production. Proposed law retains these provisions but requires that the initial
certification be submitted within 30 days of receipt of all required information.
Present law requires that prior to any final certification of the state-certified production, the
motion picture production company submit to the office of entertainment industry
development and the secretary of DED an audit of the production expenditures certified by
an independent certified public accountant. Requires that the office and the secretary review
the audit, the production expense details, and may require additional information needed to
make a determination.
Proposed law requires a qualified cost report by a qualified accountant.
Present law requires that upon approval of the audit, that a final tax credit certification letter
be sent to the investors indicating the amount of tax credits certified for the state-certified
production. Proposed law requires that this letter be issued within 60 days after receipt of
the qualified cost report and that it indicate the credits certified which are uncontested and
if there is a contested amount, then the office and the secretary of DED are required to
diligently work to resolve the outstanding issues in a timely manner.
Proposed law provides DED to request an additional qualified cost report of the expenditures SB NO. 165
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submitted by the motion picture production company with the cost of the additional report
paid by the motion picture production company. Authorizes the motion picture production
company to submit an amended qualified cost report if additional expenditures are incurred
or discovered after the approval of the initial qualified cost report.
Proposed law provides that no motion picture investor tax credit be allowed for fees, interest,
or payments of a similar nature paid to related parties and that it only be allowed if received
by investors in the production who own 20% or less of the financial rewards based on sales,
exploitation of the product, or the success in lining up distribution agreements. Further
provides that no motion picture investor tax credit shall be allowed for any percentage of the
financial awards but shall only be allowed for actually paid financing fees and interest.
Proposed law requires that when producing the qualified cost report, the qualified accountant
perform certain sampling and verification procedures enumerated in proposed law.
Effective August 1, 2013.
(Amends R.S. 47:6007(B)(10), (11), (12), (13), (14), (D)(2)(a)(intro para) and (D)(2)(c) and
(d); adds R.S. 47:6007(B)(15) and (16), (G) and 6007.1)