- Associated Press - Wednesday, March 4, 2015

BATON ROUGE, La. (AP) - Two New Orleans-area state lawmakers offered ideas Wednesday for scaling back Louisiana’s generous tax-credit program for filmmakers as concerns mount about the increasing costs of the tax breaks.

Draft proposals from Sen. J.P. Morrell and Rep. Julie Stokes, presented to a state entertainment industry advisory commission, would cap the program’s costs, reduce covered expenses and tweak rules to combat fraud.

Since 2002, tax credits for film and television productions have helped cultivate a new industry in Louisiana that supporters say has created thousands of jobs. But the program costs are significant to Louisiana’s treasury, returning only pennies on every dollar spent.

With Louisiana struggling to close a $1.6 billion budget gap, lawmakers question if the spending on “Hollywood South” is too much. Bills to make changes to the tax breaks are expected to be filed for consideration in the legislative session that begins April 13.

State law provides two kinds of tax breaks: an income tax credit for 30 percent of production expenses and an income tax credit for 5 percent of payroll costs related to Louisiana workers employed on the movie or TV production.

Morrell, D-New Orleans, proposed a $300 million cap on the program’s annual cost.

That cap is well above what the state currently spends each year on the tax breaks, between $200 million and $250 million, so it wouldn’t shrink the program’s costs. But Morrell said the cap would ensure the state knows its maximum liability each year, while providing a cushion for the industry. Unused credit under the cap would be added to the next year’s limit.

“One of the big issues I’ve heard from my legislative colleagues is there is a lack of predictability as far as this program’s concerned and what it can cost taxpayers in any given year,” Morrell said.

Lawmakers suggest they expect heavy debate about whether the cap should be lower. Meanwhile, industry representatives pushed back on the idea of putting any cap in place.

Jason Waggenspack, CEO of The Ranch Studios in Chalmette, said limiting the tax credits could stifle production activity. “We want to grow,” he said.

Will French, president of the Louisiana Film Entertainment Association, said he’s not “fundamentally opposed” to regulated growth through a cap, but then listed concerns about competing against other state programs without such limits.

Another Morrell proposal would cap the amount of “above the line” services Louisiana’s tax credit program would be allowed to subsidize.

Those services include salaries for producers, actors, directors and other big-ticket jobs held by people flown in for the production. Critics have questioned whether Louisiana should cover 30 percent of an actor’s multimillion-dollar salary.

Chris Stelly, who oversees the entertainment division for Louisiana’s Department of Economic Development, said the cap in Morrell’s draft proposal “would have little impact.” He suggested the limit be set lower.

Morrell and Stokes said all of their proposals were starting points for discussions with industry representatives and lawmakers. Other ideas would limit the transferability of film tax credits and bolster auditing and verification of expenses claimed toward the tax credit.

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