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Louisiana Movie, TV Industry Fears Slowdown After Limits Placed on Tax Credits

As Gov. Bobby Jindal (R-La.) kicked off his presidential campaign on Wednesday, he’s taking some heat from the film and TV industry in his home state for signing legislation that puts new limits on production tax credits.

Last week, Jindal signed legislation that caps the amount of credits the state will redeem at $180 million each year. Industry groups fought the legislation, with some arguing that the restrictions will cause studios to look elsewhere.

In fact, Louisiana’s lieutenant governor, Jay Dardenne, who is running for governor, issued a statement saying that the legislation “creates unnecessary instability and uncertainty in the industry.”

Dardenne, who authored tax credit legislation when he was state senator, also said in his statement that “it pains (him) to learn that Disney/ABC has placed a moratorium on sending new projects to Louisiana until this is resolved.”

But a spokesman for Disney/ABC Television Group denied that was the case.

“To set the record straight, we have not imposed a moratorium on film and television projects in Louisiana, and we hope to produce more in the future,” he said. “Louisiana’s film incentives program has played an important role in our decision to produce content there and, with respect to future projects, we will assess the effect of the recent legislative changes on a case-by-case basis.”

Studios have taken advantage of the credit for recent movies like “Fantastic Four,” “Jurassic World” and “The Magnificent Seven,” enough to raise hopes that the state is becoming one of the country’s production centers along with California, New York and Georgia.

But as the state faced a severe budget shortfall this year, lawmakers have criticized the program, questioning its return on investment. The state’s Department of Economic Development conducted a study that showed that the tax credit program supported 12,107 jobs last year, but the state was getting back just 23 cents on the dollar.

The MPAA and the Louisiana Film and Entertainment Assn. challenged the methodology, and presented their own report showing that the program breaks even.

Patrick Mulhearn, executive director of Celtic Studios in Baton Rouge, said that the tax credit program became a target as lawmakers struggled to fill a budget gap, exacerbated by Jindal’s pledge not to raise taxes. “They started looking at all business incentives to see where they could cut,” he said.

Particularly problematic, Mulhearn said, is that at the last minute in the legislative session, a proposed cap on the amount of credits issued each year was instead switched to a cap on the amount of credits redeemed.

Critics of the legislation say that it means that recipients of tax credits may not be able to redeem them in a year in which the $180 million cap has been reached. Under the legislation, those unable to claim a credit against their tax liability do receive priority in the following fiscal year.

Louisiana allows tax credits to be transferred to another taxpayer, and there also has been concern that the value of existing credits will drop with limits on redemption.

“The film industry loves stability, predictability and bankability,” Mulhearn said. “Most people are shocked by this big change in the way things are done.”

The legislation also suspends the state’s buyback program for one year. That program had allowed tax credits to be cashed in for 85 cents on the dollar, but now that program will be frozen until the middle of next year.

The restrictions also include a $30 million cap on credits for any individual project.

Curiously enough, although the legislation places caps on the program, it also expands it in other ways. For example, the state offers a 30% credit, but the legislation also includes an additional 15% if a Louisiana company owns or options the project copyright for one year, and an additional 15% on Louisiana music.

Mulhearn said that he was “cautiously optimistic” that some of the problems with the legislation will be corrected as administrative agencies write rules on how to implement the program. He added that the state’s newly elected governor later this year could try to champion changes in the next legislative session.

A spokeswoman for the MPAA said, “Of course any changes to one of the most stable and predictable state production incentive programs in the U.S. cause concern. However, we will be working with the governor’s office and the legislature to clarify these changes and how the new provisions will be implemented.”

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