RÉSUMÉ DIGEST
ACT 129 (HB 748) 2015 Regular Session Stokes
Existing law authorizes a tax credit against state income tax based on certain production
expenditures for state-certified productions. A "state-certified production" is a motion
picture production that has applied for and received the approval of the office of
entertainment industry development within the Dept. of Economic Development ("DED")
for initial certification of its production expenditures ("initial certification"). The amount
of the tax credit is 30% of a production's total expenditures that receive final certification by
DED ("certified production expenditures"). There is an additional tax credit equal to 5% of
the production expenditures for payroll for La. residents employed in connection with a state-
certified production.
New law makes a variety of changes with some provisions effective July 1, 2015, and others
Jan. 1, 2016, as follows.
New law effective July 1, 2015
Motion Picture Production Investor Tax Credit
Prior law established procedures and timing regarding the recapture of tax credits by DED
in the case of an ineligible expense that had been certified for a tax credit, known as a
"disallowed credit".
Prior law authorized the secretary of the Dept. of Revenue ("DOR") to recover a tax credit
which had been disallowed, using any remedy provided by existing law. The prescriptive
period for DOR's authority to recover a credit was three years from Dec. 31
st
of the year in
which the 24 month period in which production expenditures could be eligible for final
certification had ended.
New law repeals prior law and establishes various new provisions governing recapture and
recovery of disallowed tax credits.
New law prohibits the claim for or transfer of tax credits by a "bad faith holder", who is
defined as a person who participated in material misrepresentation or fraudulent acts in
connection with the certification of tax credits, or who prior to or at the time of certification
of such tax credits knew or reasonably should have known of such material misrepresentation
or fraudulent acts, or is a legal entity owned or controlled by such a person. Upon a
determination of bad faith by DOR, tax credits shall be deemed disallowed as to the bad faith
holder.
New law provides that if a disallowed tax credit is claimed by a person who received the
credits through a transfer from a bad faith holder, the DOR shall have the right of recourse
against a bad faith holder.
New law establishes the following provisions regarding the prescription of authority to
recover a disallowed tax credit. Recovery shall be initiated within the later of any of the
following:
(1)Two years from Dec. 31st of the year in which the tax credit is paid in accordance
with new law.
(2)Three years from Dec. 31st of the year in which the taxes for the filing period are
due, or in which the final tax credit certification letter is issued.
(3)The time period for which prescription is extended, as provided in existing law.
New law effective July 1, 2015
Motion Picture Infrastructure Investor Tax Credit
New law adds requirements regarding submission and consideration of audit reports for final
certification of state-certified expenditures for the motion picture infrastructure investor tax
credits. New law requires the submission of all requests and required documentation for final
certification of motion picture infrastructure investor tax credits by Dec. 31, 2015, after
which time all claims for such credits shall be deemed waived.
New law provides that tax credits shall not be considered to be entitlements, and requires the
taxpayer to bear the burden of clearly and unequivocally establishing eligibility for tax
credits.
New law requires DED to issue a denial or a tax credit certification within 365 days of
receipt of an audit report, or before Dec. 31, 2016, whichever comes first. In the event of a
denial, the applicant may appeal the decision in accordance with program rules. The
certification of tax credits is prohibited after July 1, 2017.
New law effective Jan. 1, 2016
Motion Picture Production Investor Tax Credit
New law makes a variety of programmatic, procedural, and timing changes and changes
definitions, with certain provisions effective for purposes of productions granted initial
certification for specific time periods.
Prior law defined "motion picture" as a nationally or internationally distributed feature-length
film, video, television pilot, television series, television movie of the week, animated feature
film, animated television series, or commercial made in La., for theatrical or television
viewing.
New law revises the definition of "motion picture" to include material made for viewing on
any digital online platform, which may be further defined by DED through the promulgation
of administrative rule.
Prior law defined "production expenditure", which definition specified various types of
expenses customarily associated with motion picture productions, specifically excluding
marketing expenses.
New law changes the definition of "production expenditure" as follows:
(1)For state-certified productions granted initial certification on or after Jan. 1, 2004,
expenses occurring outside of La. are specifically excluded from the definition.
(2)For state-certified productions granted initial certification on or after Jan. 1, 2016,
marketing expenses are included in the definition.
New law adds definitions for "taxpayer" and "project completion".
Prior law provided that for state-certified productions approved on or after Jan. 1, 2004, but
before July 1, 2009, the initial certification period for qualifying expenditures was 12 months
prior to and 12 months after the date of initial certification, unless the production had
commenced, in which case the initial certification would be valid until the production was
completed.
New law specifies, for purposes of all state-certified productions, that a project's initial
certification shall be effective for qualifying expenditures made within 12 months before and
24 months after the date of initial certification.
Prior law provided that production expenditures could receive final certification no more
than twice over the duration of a state-certified production, unless the motion picture
production company agreed to reimburse DED for the cost of additional certifications.
New law changes provisions governing the timing and frequency of final certifications of
production expenditures. The number of times expenditures may be certified is reduced from
twice to once. The timing of certification is changed from during a production to after
completion of production.
New law provides that if at the time of application for initial certification, the motion picture
production company notifies DED that post-production activities will occur in La., then a supplemental request for final certification of expenditures may be submitted for
consideration by DED, with the cost of any verification of those post-production
expenditures being borne by the company.
Prior law required submission of a production audit report by a motion picture production
company for purposes of DED's final certification of expenditures for tax credits.
New law changes the document used as the basis for DED's final consideration of
expenditures for certification for tax credits from a production audit report to a production
expenditure verification report based on the production company's cost report of production
expenditures. The production expenditure verification report shall be prepared by a qualified
accountant selected by DED.
New law adds a requirement that no later than six months after the expiration of the initial
certification period for the applicable state-certified production, a taxpayer is required to
submit to the office all requests and required documentation for final certification of all tax
credits or the claims to such tax credits shall be deemed waived.
New law provides that tax credits shall not be considered to be entitlements, and requires the
taxpayer to bear the burden of clearly and unequivocally establishing eligibility for tax
credits.
New law authorizes a motional picture production company to name a bank or other lender
as an irrevocable designee at the time of initial certification or thereafter. A designee may
elect to have tax credits issued directly to it.
Prior law authorized the motion picture production company that earned the tax credits to
transfer the credits to DED for 85% of the face value.
New law authorizes the transfer of credits by an irrevocable designee as well as the motion
picture production company, and by changing the agency to which the credits may be
transferred for 85% of face value from DED to DOR.
Prior law authorized a 10 year carryforward period during which time unused tax credits
could be used against future tax liabilities.
New law reduces the authorized carryforward period from 10 to 5 years.
Existing law authorizes the transfer or sale of a tax credit from one person to another, and
establishes a tax credit registry for maintenance of information on transferrable tax credits.
Prior law provided specific requirements for notice to DOR regarding transfers of tax credits.
DOR was required to keep specific records with regard to the transfer. Prior law provisions
were obsolete in light of existing law pursuant to the Louisiana Tax Credit Registry Act.
New law repeals prior law.
New law specifies that the transfer or sale of a tax credit shall be effective upon recordation
of the transaction in the tax credit registry established by existing law.
The Act contains new law which became effective July 1, 2015, as well as new law which
will become effective Jan. 1, 2016, as reflected above.
(Amends R.S. 47:1524(D)(2), 6007(B)(5), (10)-(16), (C)(1)(intro. para.), (a)(iii) and (b)(iii),
(2), and (4)(b) and (f), and (D)(2)(d)(i), (E), and (F); Adds R.S. 47:6007(B)(17) and (18),
(C)(1)(c)(iii) , (D)(1)(d)(iv) and (2)(d)(iii), (G), and (H); Repeals R.S. 47:1524(D)(3))