Incentives Watch: Will Louisiana’s Film Industry End Up as a Box Office Flop?

While film tax credits are attractive tax incentive tools for state revenue departments to implement, it is not always clear whether they fulfill their intended purpose of raising state revenue. The economic effectiveness of Louisiana’s motion picture investor tax credit has been in the spotlight lately, NPR’s Kate Richardson reported.

Louisiana offers up to 35 percent of in-state motion picture production costs as a tax credit to movie production companies if their in-state expenditures exceed $300,000. The tax credits may be sold and transferred to Louisiana taxpayers or transferred back to Louisiana for 85 percent of face value.

There are conflicting views regarding whether the film tax credits are a worthwhile investment, but there is no doubt that “Hollywood South” is an appropriate moniker for Louisiana. Over 100 movies and television programs received tax credits for having been filmed in Louisiana throughout the past year, reported The Advocate’s Gordon Russell

Opponents of the film tax credit argue that it is economically unsound from Louisiana’s perspective, as Russell’s blog mentions. The state only receives through taxes a fraction of its $250 million film production credit budget. As a result, the film credit initiative fosters growth of Louisiana’s film industry but not growth of state revenue.

Often times, the credits received by filmmakers are sold to Louisiana taxpayers “who have nothing to do with bringing film activity to Louisiana,” Jan Moller, director of the Louisiana Budget Project, said in the NPR piece. Dow Chemical Co., for instance, purchased $2.5 million worth of film tax credits for $2.2 million, leaving Louisiana profitless.

The flipside is that “the transferable aspect is precisely what makes Louisiana so attractive to big production,” highlighted Richardson in her NPR broadcast. Russell’s blog explains that proponents of Louisiana’s film tax credit argue that the movie and television show industry attracts tourists and draws in ancillary industries, such as catering, construction and trucking companies. Furthermore, Russell’s blog discusses proponents’ argument that New Orleans-based filming has inspired celebrities, such as Brad Pitt and Sandra Bullock, to donate and promote philanthropic endeavors throughout the city.

As illustrated in NPR’s and Russell’s recent reports, Louisiana has been criticized for putting in more money than it receives from its film tax credit program, but the state’s growing popularity as Hollywood South has its appeal to both filmmakers and Louisiana taxpayers alike. However, more people are taking notice of the film tax credit program’s ineffectiveness in increasing state revenue, and this criticism may eventually convince the Louisiana legislature to reform the state’s film tax credit.

By: Sarah Mugmon

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should Louisiana reform its film tax credit to increase state revenue?

Sign up for a free trial of the Bloomberg BNA Premier State Tax Library for more information on state individual income taxes and tax credits.

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