BATON ROUGE – Mar 25, 2013 – Louisiana’s tax credit and rebate programs resulted in a tax revenue loss of more than $6.13 billion in revenue in the last seven years, according to a study of the programs released Monday by Legislative Auditor Daryl Purpera’s office.
The performance audit looked at 44 of the credits that each resulted in a tax revenue loss of at least $1 million for at least one year between the calendar years 2006 and 2011. Auditors said the credits from those 44 programs – 52 percent of the 85 tax credit programs on the books — totaled a revenue reduction of approximately $5.4 billion, with 2011 tax data still incomplete as of October 2012.
The five most expensive tax credits accounted for almost $3.7 billion of the $5.4 billion total for the period studied, or 67 percent of the total revenue loss. The five are:
· The inventory/property tax exemption for businesses — $1.5 billion.
· The insurance company premium tax credit — $1.1 billion.
· The motion picture investor tax credit — $512 million.
· The credit granted on net income taxes paid to other states — $402 million.
· The credit for assessments paid to Louisiana Citizens Property Insurance Corp. — $212 million.
While media sources are generally focusing on the $512 million figure noted above [emphasis added] regarding the “Motion Picture Investor Tax Credit,” it is actually one of three separate components of the film tax credit program listed among the 44 “loss leaders” noted in Appendix C of this report:
· The Motion Picture Investor Tax Credit: $511,613,716 (ranked #3 of 44)
· The Motion Picture Infrastructure Tax Credit: $29,561,287 (ranked #20 of 44)
· The Louisiana Motion Picture Incentive Program : $10,561,744 (ranked #29 of 44)
That’s a cumulative total of $551,736,747 over a period of 72 months’ time (or an average of $7,663,010 per month) that is reportedly lost through the program as a whole.
This $551,736,747 figure accounts for nine percent (9%) of the reported total lost of $6.13 billion during the six-year time frame examined in the report — or roughly $1 out of every $11 lost.
(Note, too, that those numbers do not include the much-touted year of 2012 with its 61 projects filmed in New Orleans… I predict that those numbers will reflect even greater losses as hundreds of millions more in uncapped credits and rebates are likely to be reflected in the statistics. If the program continues to operate in this unlimited manner, the notion of a “turning point” from subsidizing Hollywood to Louisiana’s realization of a genuine profit becomes increasingly unlikely.)
The three credits/programs noted in the report are described as follows:
Motion Picture Investor Tax Credit: Louisiana taxpayers that invest in state-certified motion-picture productions can earn a tax credit at the time expenditures are made by a motion picture production company. (This credit in particular features a rebate component, which the report defines as “A rebate is money directly reimbursed by the state to an entity or individual, independent of the tax return process or tax liability.”)
Motion Picture Infrastructure Tax Credit: To provide a credit against corporate income tax for an approved state-certified infrastructure project for a film, video, television, or digital production or postproduction facility. This credit applied to infrastructure projects between July 1, 2005 and December 31, 2008. (While this credit appears to time-bounded/no longer be active, it still earned a spot on the loss list.)
Louisiana Motion Picture Incentive Program: To provide a financial incentive to the film industry in order that the state might compete with other states for filming locations.
It seems that the only guaranteed way to make the big money in “Hollywood South” is to be a so-called “motion picture investor,” given that the tax dollar hemorrhage from that program is a staggering 48 times greater than the losses experienced by the so-called “Louisiana Motion Picture Incentive Program” itself.
And, oh, the hand-wringing that occurred when Governor Jindal proposed the implementation of a $1 million limit on the amount that could be claimed for each actor’s salary by production companies as qualifying expenses when applying for Louisiana film tax credits! (Never mind that this precise limitation already applies to “payroll spent on Louisiana residents,” apparently whether or not they’re in front of the camera.) The governor only wanted to trim one specific part of the program… however, with media coverage regarding this report currently on the rise, I suspect that future proposed cuts may go even deeper.
As noted in this WWL TV story originally broadcast on 3/25/13, Mayor Landrieu’s office has been at work, creating the spin:
“We asked Mayor Mitch Landrieu’s administration whether the film tax credit program is providing a tangible benefit to the New Orleans economy.
“His adviser on the Cultural Economy said in a statement, ‘The state’s tax incentive program for film has helped New Orleans grow a new industry. We estimate that since 2007, New Orleans has seen more than $2 billion in direct spending from tax credit film projects – money that is spent in and remains in the local economy, as the program intended. Our local film industry is now nationally known, and it supports more than 1,000 full-and part-time jobs. Production companies want to film here because of the tax incentives and numerous related businesses have launched or relocated to New Orleans because of the opportunities that have been created.'”
Unlike the numbers noted in the Louisiana Legislative Auditor’s report, the figure of “$2 billion in direct spending” (which is not to be confused with $2 billion in tax revenue generated) is unsubstantiated.
The estimated “1,000 full- and part-time jobs” may not be as statistically significant as the Mayor’s adviser’s statement would like to imply if one considers that the city’s current estimated population is ~370,000, nor is it confirmed if all of these jobs in fact consistently pay a year-round living wage.
While the auditor’s report includes fairly “hard” numbers (verifiable, with the exception of the noted not-yet-complete figures for calendar year 2011), the best we see from proponents of the film tax credit program are nothing more than “soft” or estimated figures that are inherently difficult to verify.
As the WWL story notes, “And without a requirement that the tax credit programs track the return on the investments, the legislative auditor said it’s tough to tell if they’re worth it.”