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Drawdown aids in creating sensible film tax credit

That giant sucking sound you heard came from film industry locusts extracting money from Louisiana’s taxpayers. But after that happened, a model for the future of the state’s Motion Picture Investor Film Credit had its debut recently in Shreveport.

In less than a month from the Jul. 1 reinstitution of the state’s buying back of these tax credits, the amount eligible, $239 million, got vacuumed up by largely nonresidents. Program reforms put a moratorium on the state’s repurchase, 85 cents on the buck, for the previous fiscal year. Relatively low demand for this break’s use against state income taxes meant only $121 million got applied against each fiscal year’s $180 million cap, so that amount left over rolled into this year’s.

This starkly reveals the program’s past use: as a tool to siphon taxpayer dollars into financing the making of movies in a one-off fashion, contrary to policy-makers’ intent that it serve as an incentive to develop a homegrown filmmaking infrastructure. Otherwise, more use against taxes and less as transfer payments would occur.

The dollar limit represents one reform to shift the focus away from the program acting as a source of corporate welfare, enacted last year along with others such as caps on certain expenditures and more encouragement to use Louisiana resources in production. The cap on redemptions – not certifications, which remain unlimited – and the moratorium flushed all but about $100 million unredeemed dollars. Theoretically, if all $100 million came in next year plus another $19 million that went over the cap this year that will roll into next, then $61 million in new claims could go out the door. That typically a project may recapture 30 percent of qualifying expenditures and the state reported around $422 million in film-related costs for FY 2016 means some dollars still may end up left over from FY 2018 without room for any new production redemptions.

It usually takes awhile from completing a film to submitting documentation to allow collecting the credits, so possibly the FY 2018 cap will suffice without any backlog. That might end up the strategy of some hoping still to cash in big, because the cap goes away after then and potentially returns the state’s payout to the $300+ million totals earlier this decade, although the tightening of the program’s expense qualifications that went along with the cap imposition may pare that somewhat. In fact, those rules changes provide guidance in the direction of helping out the kinds of films such as the recent debutant “Cut to the Chase.”

Northwest Louisiana filmmaker Blayne Weaver, having left the area years ago to pursue a career in film, returned in the last decade to play several roles in creating this and two previous films. With his current effort, most of the staff came, both in front and behind the camera, from Louisiana and almost all production, including shooting and editing, occurred in Louisiana, for about $100,000.

That’s the kind of product the credits should encourage – not the state dropping $35 million in taxpayer dollars on a $100+ million flop where almost every penny went to wealthy out-of-state actors, directors, editors, and producers. By contrast, for the next couple of years each North Carolina will allow a cap of only $30 million total for its film incentives.

This model Louisiana should follow if it must have such a program, geared to the local artist like Weaver. If indigenous industry springs up that entices Hollywood to come in because of lower production costs, this should need no subsidy. However, the little guy who cannot experience the same economy of scale could use the help that also supports the resources that can attract the big names.

Gov. John Bel Edwards recently appointed a panel to review the program in anticipation of more changes germinating for legislative action in 2017. As it seems the accrued excess has come off the program, for FY 2019 an annual cap at North Carolina’s level should be imposed. Further, only films that have a high proportion of expenses in Louisiana – using resident production resources and residents of at least a year – should receive any kind of reimbursement, with some limitation on the total amount of payback for those expenses occurring out of state and on non-state residents. This means some big-budget efforts can get a little back while encouraging indigenous talent that proportionally can receive much more. Concentrating on the latter subsidizes the infrastructure to make it competitive to attract the former.

An unwinding of the excess that inefficiently used taxpayer resources finally seems underway in Louisiana. Policy-makers must avoid making the same mistake that made the program such a wasteful drain when they continue reforming it next year.

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