 In 2002, the Louisiana Legislature enacted the Louisiana Motion Picture Tax Incentive Act (the "Act") in order to induce production companies to base their film and video productions (i.e., movies, television shows, commercials, music videos, etc.) in Louisiana. The Act provides a tax credit incentive for qualified, Louisiana-based productions. The credits offset certain state tax liabilities on a dollar-for-dollar basis. Up until January 1, 2006, the tax credits earned were divided into two types: Employment Tax Credits ("ETCs") and Investor Tax Credits ("ITCs"). Both ITCs and ETCs are transferable. However, the transfer mechanisms are slightly different. ITCs can be used to offset state income tax, while ETCs offset both income and franchise tax.
With the revision of the Act in 2005 which became effective January 1, 2006, the ETCs can no longer be earned. Under the current law, all tax credits earned, including the employment bonus, are ITCs which can be used to offset only state income tax liability.
Most out-of-state production companies have no state tax liability. Thus, the credits only serve as incentives if they can be traded by production companies in exchange for cash. However, producers are only here for a short while, and they do not generally have contacts with Louisiana taxpayers. Likewise, taxpayers rarely know how to get in touch with producers in order to acquire tax credits. That's where Louisiana Production Capital, L.L.C. ("LPC"), comes in. We act as a clearing house for the tax credits. Producers need only to find LPC in order to sell their credits, and taxpayers need only to find LPC in order to purchase them.
The rates LPC pays for tax credits are affected by many variables, the most significant of which is the relationship of supply to demand. If, at any given time, demand among Louisiana taxpayers is high, rates paid to producers move up accordingly.
Rates are also affected by timing considerations. For example, taxpayers only buy tax credits close to tax time. This, coupled with the fact that credits earned in one year can't be carried back to offset prior years' tax liability, means that credits must sometimes be warehoused for long periods of time. Rates for credits that must be held in inventory for long periods are generally lower because of the interest carry incurred by LPC in connection therewith.
In general, studios will receive higher rates than independents, as repeat business with studios is more likely and risks are lower.
LPC will sometimes pay a higher rate per tax credit if the producer grants screen credits and other forms of non-monetary consideration.
To obtain a free rate quote, or for more information about the Louisiana Motion Picture Incentive Act, email info@filmproductioncapital.com or call (866)454-9205.
You can also visit www.filmproductioncapital.com.
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