La. Legislature’s special session target: Film tax credits
6th June 2016 · 0 Comments
By Christopher Tidmore
Contributing Writer
As soon as Gov. John Bel Edwards formally issued his call for a special session to begin at 6:30 pm on June 6, 2016—a half hour after sine die of this year’s Regular Session, commentators began to parse what the Governor’s call for the removal of “tax credits” and “business deductions” in the tax code might mean.
The local film industry quickly concluded that it might again be a target of rural legislators seeking to plug the $600 million deficit without impacting their own constituents. Just one year ago, the legislature established a $180 million tax credit cap on film production, which according to Ben Matheny, head of the “Keep Film in Louisiana” lobbying effort, has had a catastrophic effect on production.
“Certainly since those caps were placed, there has been a significant downturn in business. Depending on whom you talk to as much as a 70% downturn,” he explained to The Louisiana Weekly. The reason is not the cap, but the ill-thought year-by-year limit. While $180 million was the max La. film production in a single year, he said, “Any year we exceeded that was because tax credits from previous fiscal years were being claimed- which the newest legislation now prevents.”
“For instance, from the fiscal year that began July 1st to now, there is $77 million still left to be claimed…So, productions moved away not because the cap is so restrictive, but because these changes created financial uncertainty for the studios making these choices.”
The danger of further changes to the credits in a 2nd Special Session has created even more uncertainly, as legislative fiscal officers argue the tax credits cost more tax revenue than they create.
Matheny observed that in recent hearings in the Senate Finance Committee, “Senators Riser and Luneau were preoccupied with the program’s return on investment or ROI, but that’s a tragically narrow criterion for determining the efficacy of this program. At the core of an ‘incentive’ program is giving companies a tax break in order to ‘incentivize’ those companies to do business in your state. So it’s not completely surprising that they didn’t break even on tax revenue. With these productions doing business here, however, a tremendous degree of economic stimulus comes our way—both to the Louisiana workforce and to Louisiana businesses. “
The main threat in the June Special Session comes because few legislators truly understand the credits’ positive economic impact. “According to an LED study released last year, the Louisiana film industry employed 13,000 people and generated close to 1.2 billion in business sales in 2014. At the hearing, Chris Stelly stated the industry’s impact to household earnings was $717,000,000. These are big numbers, but here’s an anecdote from that same hearing that I think says a lot.”
Matheny recounted the testimony of Sidney Torres, co-founder of the St. Bernard’s Ranch Studios. His studio has hosted big budget projects Terminator: Genysis and Deepwater Horizon, leading Torres to comment, “During the course of the filming of these movies, at any given time I could observe 900 people working… that’s more people than the refineries of St. Bernard (employ) combined. I could observe local businesses doing business.”
Considering Gov. Edwards’ call for a Special Session premature, Matheny echoed the President of the Louisiana Association of Business and Industry (LABI), pleading to postpone until autumn, when legislators might enjoy a better fiscal picture, thanks to recent rising oil prices and higher tax collections. “Absolutely- and that’s at the earliest. It’s egregiously premature for the legislature to consider cutting the tax credits. The changes passed with HB829/Act 134 have not even been fully promulgated- so how could the full impact of those changes be analyzed?”
“Cutting or further limiting the film tax credit program at this point could create genuine economic instability for the myriad film workers and businesses already feeling the impact of the downturn. The bill has a natural sunset built in for 2017 — the most responsible move would be to wait for this point to reassess the program.”
Finally, answering those who frame the argument as a choice between the film tax credits and fully funding TOPS, Matheny said, “While there’s no doubt these are challenging times for our state, Louisiana has a number of programs—other tax credit programs among them—that are costing the state without as much significant positive impact as film. So framing the argument in this manner is utterly specious.”
“We have found ourselves in this budget crisis perhaps in part because we didn’t think broadly enough, didn’t diversify our industrial portfolio enough or in the right ways. Television and motion pictures are a ‘recession-proof’ industry and one of America’s great exports. Our state has the opportunity to anchor a sustainable, independent industry here with tremendous potential.”
Matheny’s advocacy of the movie tax credits result from his own experiences as a local working in the industry, “Since graduating from film school at the University of New Orleans in 2011 I’ve had the opportunity to work steadily in the film industry, both as an actor on such shows as “American Horror Story,” “Scream Queens” and “Zoo,” and on the crew in a diverse array of projects—from episodics like “True Detectives” to unscripted projects like “America’s Got Talent,” to commercials like ‘Popeye’s’.”
“The fact that I was able to find work right out of school, and stay in state to do so, is a terrific break for Louisiana graduates like me. It provides incomparable opportunities for those wanting to build the foundation of their careers. And again, without the incentive program, the industry would never have come here. Without them, it won’t be able to stay here.”
“It also provides the infrastructure for independent filmmakers to produce their projects. Late this year, I will be co-producing and starring in a feature film from two Louisiana-based company’s – mine, which is EFI productions, and our sister company, Worklight Pictures. It has been through the development process for this movie, Easy Does It, and through conversations with other Indie producers that I first became aware of the true potential for the indigenous tax credits in this state. We could build a completely self-sufficient, independent from the Hollywood studios, vertically integrated film industry here. The indigenous tax credits anchor these efforts just as the film tax credit system as a whole anchors industry projects.”
Answering critics who call the incentive program “Hollywood Corporate Welfare,” Matheny noted that Louisiana locals had led the fight for the survival of the film tax credits. “The ‘Keep Film in Louisiana’ campaign exists because of the passion of a team of independent filmmakers, namely Victoria Greene of Greene Bayou Films and Lizzie Guitreau and Sarah Smith of Worklight Pictures. Additionally, filming the PSA involved countless hours volunteered by the crew members both of EFI, and of Worklight, not to mention all of the industry professionals who took the time to be a part.”
He concluded, “If you support the positive impact film has had on Louisiana, then please…Follow us at Facebook.com/keepfilminlouisi-ana to stay up to date, and use the hashtag #keepfilminlouisiana to become a part of the conversation on social media.”
This article originally published in the June 6, 2016 print edition of The Louisiana Weekly newspaper.
