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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)(9), (10), (11), (12), (13), (14), the introductory2
paragraph of R.S. 47:6007(D)(2)(a) and (D)(2)(c) and (d) and to enact R.S.3
47:6007(B)(15) and (16), (G) and 6007.1, relative to the motion picture investor tax4
credit; to provide for definitions; to provide for production audit reports and5
requirements; to provide for submission of a production audit report prior to being6
certified as a state-certified production for application for the credit; to provide for7
a production audit report; and to provide for related matters.8
Be it enacted by the Legislature of Louisiana:9
Section 1. R.S. 47:6007(B)(9), (10), (11), (12), (13), (14), the introductory paragraph10
of R.S. 47:6007(D)(2)(a) and (D)(2)(c) and (d) are hereby amended and reenacted and R.S.11
47:6007(B)(15) and (16), (G) and 6007.1 are hereby enacted to read as follows:12
§6007. Motion picture investor tax credit13
B. Definitions. For the purposes of this Section:14
* * *15
(9) "Production audit report" means an audit report issued by a16
qualified accountant who is unrelated to the motion picture production17 SB NO. 165
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company and that is a report of the qualified accountant’s audit of the motion1
picture production’s cost report of production expenditures. The production2
audit report shall contain an opinion from the qualified accountant stating that3
the production’s cost report of production expenditures presents fairly, in all4
material aspects, the production expenditures expended in Louisiana pursuant5
to the provisions of this Subsection. The production audit shall be performed6
pursuant to the qualified sampling and verification procedures provided in R.S.7
47:6007.1 and shall require:8
(a) The production audit report to be performed in accordance with the9
auditing standards generally accepted in the United States of America.10
(b) The production audit report to be addressed to the party which has11
engaged the qualified accountant.12
(c) The production audit report to contain the qualified accountant's13
name, address, and telephone number.14
(d) The production audit report to be dated as of the date of completion15
of the qualified accountant's field work.16
(e) The production audit report to contain a statement of17
acknowledgment by the qualified accountant that the state is relying on the18
qualified cost report in the issuance of the tax credits under the provisions of19
this Section.20
(10) "Production expenditures" means preproduction, production, and21
postproduction expenditures in this state directly relating to a state-certified22
production, including without limitation the following: set construction and23
operation; wardrobes, makeup, accessories, and related services; costs associated24
with photography and sound synchronization, lighting, and related services and25
materials; editing and related services; rental of facilities and equipment; leasing of26
vehicles; costs of food and lodging; digital or tape editing, film processing, transfer27
of film to tape or digital format, sound mixing, special and visual effects; and28
payroll. This term shall not include expenditures for marketing and distribution, non-29 SB NO. 165
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production related overhead, amounts reimbursed by the state or any other1
governmental entity, costs related to the transfer of tax credits, amounts that are paid2
to persons or entities as a result of their participation in profits from the exploitation3
of the production, the application fee, or state or local taxes.4
(11) "Qualified accountant" means an independent certified public5
accountant authorized to practice in this state who has sufficient knowledge of6
accounting principles and practices generally recognized in the film and7
television industry.8
(10) (12) "Resident" or "resident of Louisiana" means a natural person9
domiciled in the state. A person who maintains a permanent place of abode within10
the state and spends in the aggregate more than six months of each year within the11
state shall be presumed to be domiciled in the state.12
(11) (13) "Secretary" means the secretary of the Department of Economic13
Development.14
(12) (14) "Source within the state" means a physical facility in Louisiana,15
operating with posted business hours and employing at least one full-time equivalent16
employee.17
(13) (15) "State" means the state of Louisiana.18
(14) (16) "State-certified production" shall mean a production approved by19
the office and the secretary which is produced by a motion picture production20
company domiciled and headquartered in Louisiana and which has a viable multi-21
market commercial distribution plan.22
* * *23
D. Certification and administration.24
* * *25
(2)(a) Application. An applicant for the motion picture investor credit shall26
submit an application for initial certification to the office and the secretary of the27
Department of Economic Development that includes the following information:28
* * *29 SB NO. 165
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(c) The office and the secretary shall submit their initial certification of a1
project as a state-certified production to investors and to the secretary of the2
Department of Revenue indicating the total base investment which shall be expended3
in the state on the state-certified production within thirty days of their receipt of4
all required information. The initial certification shall include a unique identifying5
number for each state-certified production.6
(d)(i) Prior to any final certification of the state-certified production, the7
motion picture production company shall submit to the office and the secretary an8
audit of the production expenditures certified by an independent certified public9
accountant as determined by rule a production audit report. The office and the10
secretary shall review the audit, the production expense details, the production11
audit report and may require additional information needed to make a12
determination. Upon approval of the audit Within sixty days of the receipt of the13
production audit report, the office and the secretary shall issue a final tax credit14
certification letter indicating the amount of tax credits certified for the state-certified15
production to the investors for all amounts that are uncontested. If there remains16
a contested amount, the office and secretary shall diligently work to resolve the17
outstanding issues in a timely manner and the office and secretary may18
subsequently issue a supplemental tax credit certification at the time of such19
resolution, if so warranted.20
(ii) The department may request an additional production audit report21
of the expenditures submitted by the motion picture production company with22
the cost of the additional report paid by the motion picture production23
company. The motion picture production company may submit an amended24
production audit report if additional expenditures are incurred or discovered25
after the approval of the initial production audit reports issued pursuant to26
Item (i) of this Subparagraph and the office and secretary may issue a27
supplemental tax credit certification if so warranted. The rules required by this28
Subparagraph shall, at a minimum, require that:29 SB NO. 165
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(i) The auditor shall be a certified public accountant licensed in the state of1
Louisiana and shall be an independent third party, not related to the producer.2
(ii) The auditor's opinion shall be addressed to the party which has engaged3
the auditor (e.g., directors of the production company, producer of the production).4
(iii) The auditor's name, address, and telephone number shall be evident on5
the report.6
(iv) The auditor's opinion shall be dated as of the completion of the audit7
fieldwork.8
(v) The audit shall be performed in accordance with auditing standards9
generally accepted in the United States of America and the auditor shall have10
sufficient knowledge of accounting principles and practices generally recognized in11
the film and television industry.12
* * *13
G. Notwithstanding any other law to the contrary, no motion picture14
investor tax credit shall be allowed for financing fees, interest, or payments of15
a similar nature that are paid to related parties. Motion picture investor tax16
credits shall only be allowed for financing fees, interest or payments of a similar17
nature that are made to a party who does not control the production and who18
owns twenty percent or less of the financial rewards of the production based on19
sales, exploitation of the product, or the success in lining up distribution20
agreements. No motion picture investor tax credits shall be allowed for any21
amounts that are paid to persons or entities as a result of a percentage of sales22
or participation in profits from the exploitation of the product or the success in23
lining up distribution agreements.24
§6007.1. Motion picture investor tax credit; qualified sampling and verification25
procedures26
A. A qualified accountant, as defined in R.S. 47:6007, shall perform the27
following sampling procedures when producing a production audit report28
required under the provisions of R.S. 47:6007:29 SB NO. 165
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(1) Obtain the cost report of all production expenditures for the1
production of the motion picture production company and verify the2
mathematical accuracy of the report.3
(2) Obtain the bank statements from the motion picture production4
company relevant to the applicable production for the period covered by the5
cost report of production expenditures.6
(3) Obtain the detailed payroll registers applicable to the production.7
This report should indicate the name, address, taxpayer identification number,8
permanent address, the amount of compensation, and the employee's state of9
residence.10
(4) Foot the payroll registers mentioned in Paragraph (3) of this11
Subsection for mathematical accuracy and agree the total to the cost report of12
production expenditures mentioned in Paragraph (1) of this Subsection.13
(5) Obtain the detailed listing of non-payroll expenditures for production14
of the motion picture production company. This report should indicate the15
payee, the date of payment, the date that the payment cleared the bank, and16
amount of the payment.17
(6) Foot the detailed listing of non-payroll expenditures mentioned in18
Paragraph (5) of this Subsection for mathematical accuracy and agree the total19
to the cost report of production expenditures mentioned in Paragraph (1) of this20
Subsection.21
B. A qualified accountant shall perform the following verification22
procedures when producing a production audit report under the provisions of23
R.S. 47:6007:24
(1) From the detailed payroll registers referenced in Paragraph (A)(3)25
of this Section, segregate the gross payroll for all Louisiana residents and agree26
the total to the Louisiana payroll and salaries indicated on either the cost report27
of production expenditures or the footnotes to the cost report of production28
expenditures.29 SB NO. 165
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(2) From the payroll registers for Louisiana residents contained in1
Paragraph (1) of this Subsection, select all disbursements to those individuals2
whose gross salaries during the period in question exceeded five percent of the3
total disbursements indicated on the cost report of production expenditures for4
the production for further testing.5
(3) Excluding those individuals already selected for further testing in6
Paragraph (2) of this Subsection, select an additional sample consisting of the7
lesser of one-hundred twenty individual payroll disbursements or fifty percent8
of the payroll disbursements not already selected in Paragraph (2) of this9
Subsection from the payroll registers for Louisiana residents for further testing.10
(4) For each employee selected for testing in Paragraphs (2) and (3) of11
this Subsection, perform the following analysis, detailing any exceptions noted:12
(a) If the employee is a salaried employee, verify that the gross salary for13
the selected disbursement is supported by and agrees to an employment14
contract or other form of approved pay documentation.15
(b) If the employee is an hourly employee, verify that the hourly wage16
rate for the selected transaction is supported by and agrees to the approved pay17
rate documentation in the employee's personnel file.18
(c) If the employee is an hourly employee, verify that the hours paid for19
the selected transaction is supported by approved timesheets.20
(d) Verify that the disbursement of such funds is a qualifying21
expenditure given the operations of the motion picture production company.22
(e) Verify that the payroll expenditures were actually made by the23
motion picture production company as evidenced by deductions in the bank24
account statements maintained by the motion picture production company and25
that the disbursement cleared the bank during the period in question.26
(f) Review employee's personnel file, verifying that the individual is a27
natural person domiciled in or who maintains a permanent place of abode28 SB NO. 165
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within this state and spends in the aggregate more than six months of each year1
within this state.2
(5) From the detailed payroll registers referenced in Paragraph (A)(3)3
of this Section, segregate the gross payroll for all non-Louisiana residents and4
agree the total to the non-Louisiana payroll indicated on either the cost report5
of production expenditures or the footnotes to the cost report of production6
expenditures.7
(6) From the payroll registers for non-Louisiana residents, select all8
disbursements to those individuals whose gross salaries during the period in9
question exceeded five percent of the total disbursements indicated on the cost10
report of production expenditures for the period in question for further testing.11
(7) Excluding those individuals already selected for further testing in12
Paragraph (6) of this Subsection, select an additional sample consisting of the13
lesser of one-hundred twenty individual payroll disbursements or fifty percent14
of the payroll disbursements not already selected in Paragraph (6) of this15
Subsection from the payroll registers for non-Louisiana residents, for further16
testing.17
(8) For each employee selected for testing in Paragraphs (6) and (7) of18
this Subsection, perform the following procedures, detailing any exceptions19
noted:20
(a) If the employee is a salaried employee, verify that the gross salary for21
the selected disbursement is supported by and agrees to an employment22
contract or other form of approved pay documentation.23
(b) If the employee is an hourly employee, verify that the hourly wage24
rate for the selected transaction is supported by and agrees to the approved pay25
rate documentation in the employee's personnel file.26
(c) If the employee is an hourly employee, verify that hours paid for the27
selected transaction is supported by approved timesheets.28 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 one-hundred twenty individual disbursements or fifty percent of the14
non-payroll disbursements not already selected in Paragraph (9) of this15
Subsection from the detailed listing of non-payroll expenditures for further16
testing.17
(11) For each disbursement selected for testing in Paragraphs (9) and18
(10) of this Subsection, perform the following procedures, detailing any19
exceptions noted:20
(a) Verify that the transaction is supported by an original invoice or21
receipt and that the amounts are in agreement.22
(b) Verify that the expense category to which the disbursement was23
coded appears reasonable based on the invoice documentation.24
(c) Verify that the disbursement of such funds is a qualifying expenditure25
given the operations of the motion picture production company.26
(d) Verify that the expenditures were actually made by the motion27
picture production company as evidenced by deductions in the bank account28 SB NO. 165
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statements maintained by the motion picture production company and that the1
disbursement cleared the bank during the period in question.2
C. Before submission of the production audit report, the qualified3
accountant shall ensure that these steps have been taken:4
(1) Redact all but the last four digits of any employee's social security5
number.6
(2) Separate expenditures by calendar year, as well as the aggregate7
project totals.8
(3) Submit detailed list of all expenditures as a spreadsheet.9
The original instrument was prepared by Thomas L. Tyler. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Danielle Doiron.
DIGEST
Martiny (SB 165)
Present law provides for motion picture investor tax credits for certain state-certified
productions by a motion picture production company.
Proposed law defines a " production audit report" as an audit report issued by a qualified
accountant who is unrelated to the motion picture production company and that is a report
of the qualified accountant’s audit of the motion picture production’s cost report of
production expenditures. The production audit report shall contain an opinion from the
qualified accountant stating that the production’s cost report of production expenditures
presents fairly, the production expenditures expended in Louisiana. The production audit
shall require:
(1)The production audit report be performed in accordance with the auditing standards
generally accepted in the United States of America.
(2)The production audit report is addressed to the party which has engaged the qualified
accountant.
(3)The production audit report contains the qualified accountant's name, address, and
telephone number.
(4)The production audit report be dated as of the date of completion of the qualified
accountant's field work.
(5)The production audit report contains a statement of acknowledgment by the qualified
accountant that the state is relying on the qualified cost report in the issuance of the
tax credits under the provisions of this Section.
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 SB NO. 165
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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 production audit 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 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 production audit report, the qualified
accountant perform certain sampling and verification procedures enumerated in proposed
law.
Effective August 1, 2013.
(Amends R.S. 47:6007(B)(9)(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)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Revenue and Fiscal
Affairs to the original bill
1. Changed "qualified cost report" to "production audit report" and provided for
definition.
2. Removed requirements of qualified cost report and added requirements of
production audit reports.
3. Changed qualifications for a "qualified accountant", requiring the accountant
to be authorized to practice instead of licensed.
4. Changed the number of individual payroll disbursements needed for an
additional sample from the lesser of 60 to the lesser of 120 disbursements,
or 50 percent of the payroll disbursements, not already selected for further
testing.