On the heels of the recent legislative session, during which state lawmakers instituted a “back end” cap on movie industry tax credits, Celtic Studios Executive Director Patrick Mulhearn booked a flight to Los Angeles and spent four days last week meeting with executives at five of the six major motion picture studios. He describes it as an amnesty trip and says the message he brought didn’t go over well.
“I think they were shocked,” he says. “To say it went over like a lead balloon would be an overstatement. It went over like the Hindenburg.”
Mulhearn declines to say exactly with whom he met, though he confirms executives at Disney/ABC have placed a moratorium on sending any new projects to Louisiana. That’s significant, Mulhearn says.
“The whole industry is based on stability, certainty and bankability,” he says. “All of that is now thrown into question.”
The controversial legislation, which Gov. Bobby Jindal signed into law last week, caps the state’s movie production tax credits at $180 million annually for the next three years. That’s about $77 million less than the state was otherwise expected to spend in the fiscal year that begins July.
While the tax credit cap is troubling enough to supporters of the program, the bigger problem is that the new law caps tax credits when they are redeemed, not when they’re issued. As a practical matter, that means producers who apply for them won’t be able to bank on getting them.
“People won’t know if the state is going to honor their tax credit,” Mulhearn says. “What will this mean for taxpayers? Can you claim this on your return?”
Other takeaways from meeting with studio execs, says Mulhearn:
- Some don’t think they can trust the Legislature and the next governor to undo the changes. “They need to know the next governor/Legislature will not try to suspend the buyback again,” Mulhearn says.
- Louisiana Economic Development will likely get inundated with requests to get projects initially certified and grandfathered into the old law before July 1.
- Scripted TV series are probably the least affected by the changes, but they don’t necessarily like the new law either.
- LED and the state Department of Revenue will have to quickly issue administrative rules to clarify some of the confusion.
“I’m not sure how you un-bake this cake,” Mulhearn says. “But we can minimize the danger through rulings to make sure taxpayers are protected.”
—Stephanie Riegel
