Hollywood on the Bayou: An Optimal Tax Approach to Evaluating and Reforming the Louisiana Motion Picture Investor Tax Credit

• Author: Amelia Hurt
• Position: J.D./D.C.L., 2014, Paul M. Hebert Law Center, Louisiana State University
• Pages: 581-611

Hollywood on the Bayou: An Optimal Tax Approach

to Evaluating and Reforming the Louisiana Motion

Picture Investor Tax Credit

INTRODUCTION

As Louisiana experiences record-setting growth in the film

industry, awareness of the Louisiana Motion Picture Investor Tax

Credit (MPITC)1 is more widespread than ever.2 In 1992, Louisiana

was the first state to roll out a major film subsidy program.3 Then in

2002, the Louisiana Legislature set out to “encourage development

in Louisiana of a strong capital and infrastructure base for motion

picture production in order to achieve an independent, self-

supporting industry.”4 Since the advent of the Louisiana MPITC,

Louisiana has steadily gained recognition as a new hub for the film

and television industry.5 In 2011, a record 150 productions applied

for the film tax credits.6 For the productions that qualify, the

incentives are significant: a 30% tax credit for spending at least

$300,000 on productions filmed in Louisiana.7

The MPITC has benefited the State of Louisiana considerably.

Between 2008 and 2010, the annual volume of films produced in

Louisiana increased by 175%.8 In 2010, the Louisiana film industry

Copyright 2014, by AMELIA HURT.

1. For the duration of this Comment, the Louisiana Motion Picture Investor

Tax Credit will be referred to as MPITC.

2. The recent record-setting growth in Louisiana film production was largely

expected in part because of the increase in highly publicized films since the

Legislature’s en actment of filmma king tax incentive s. See Mike Scott, Louisiana

Film Industry Passes Billion-Dollar Mark in Record-Setting 2011, THE TIM ES-

PICAYUN E (Jan. 7, 2012, 5:00 AM), http://www.nola.com/movies/index.ssf

/2012/01/louisiana _film_industry_passes.html (noting that the Louisiana film

industry’s growth should come as no “surprise to anybody who’s been paying

attention over the past decade” because of the consistent increase in major studio

films shot in Louisiana).

3. TIM MATHIS, LOUISIANA FILM TAX CREDITS: COSTLY GIVEAWAY TO

HOLLYWOOD, LOUISIANA BUDGET PROJECT (Aug. 2012), http://www.labudget.org

/lbp/wp-content/uploads/2012/08/LBP-Report.Louisiana-Film-Tax-Credits.pdf.

4. LA. REV. STAT. ANN. § 47:6007 (2009) (amended 2013).

5. Richard A. Webster, Year in Review: Hollywood South Sets New Records,

NEW ORLEANS CITY BUS. (Dec. 30, 2011, 2:51 PM), http://neworleans

citybusiness.com/blog/2011/12/30/year-in-review-hollywood-south-sets-new-

records.

6. Id.

7. § 47:6007(C)(1)(c)(i).

8. CHERYL LOUISE BAXTER, FIS CAL & ECONOMIC IMPACT ANALYSIS OF

LOUISIANA’S ENTERTAINMENT INCENTIVES (2011), available at http://louisiana

entertainment.gov/docs/main/louisiana_entertainment_2011_economic_impact_an

alysis.pdf.

582 LOUISIANA LAW REVIEW [Vol. 74

became a billion-dollar player in the nationwide film market.9

Louisiana is now ranked third in the country in film production

activity, and the industry supports thousands of jobs in Louisiana

that previously did not exist.10 Additionally, motion picture

production companies and their employees spend money that would

not otherwise benefit Louisiana residents and businesses.11

Louisianans also enjoy the notoriety and excitement of living in

“Hollywood South.”12 Some of the most highly publicized films

released in 2012 took advantage of the MPITC. The popular

Twilight Saga: Breaking Dawn, Parts I and II directly contributed

$189.3 million in economic activity in Louisiana while earning

$33.2 million in tax credits.13 This translates to approximately $5.70

in direct economic activity generated for every $1 of state tax credits

awarded.14 Meanwhile, Abraham Lincoln: Vampire Hunter result ed

in $61.5 million in contributed economic activity and earned $19.3

million in tax credits,15 which translates to approximately $3.19 in

direct economic activity for every $1 in state tax credits awarded to

the production.16

Unfortunately, these results do not tell the whole story. An

economic analysis by BaxStarr Consulting Group showed that

motion picture production generated $27 million in state tax revenue

in 2010 while the State certified $196.8 million in tax credits.17 This

figure indicates that the State is paying roughly $7.29 per every $1 it

collects as a result of the MPITC.18 The State of Louisiana is losing

9. Scott, supra note 2.

10. Adriana Lopez, A New Economic Report Surfaces, but It Could Have a

Hollywood South Ending, FORBES (Aug. 10, 2012, 12:58 PM), http://www.forbes

.com/sites/adrianalopez/2012/08/10/a-new-economic-report-surfaces-but-it-could-

have-a-hollywo od-south-ending.

11. John Grand, Mo tion Picture Tax Incentives: There’s No Business Like

Show Business, 39 STATE TAX NOTES 10 (2006), available at http://taxprof

.typepad.com/taxprof_blog/files/2006-2997-1.pdf.

12. Matthew J. Bailey, Hollywood South: Why Film Credits Are Good for

Louisiana, 48 STATE TAX NOTES 715 (2008), available at http://thelouisiana

wavestudio.com/pdfs/Tax_Anal yst_LA_Film_Credits.pdf.

13. Michelle Millhollon, Panel to Review Tax Incentives, THE ADVOCATE

(July 1, 2012) (on file with the Louisiana Law Review). These economic

contributions i nclude payroll, purchases, and other economic activity in Lo uisiana.

1 4. $189.3 million/$33.2 million = $5.70 generated for every $1 of state

investment.

15. Millhollon, supra note 13.

1 6. $61.5 million/$19.3 million = $3.19 generated for every $1 state

investment.

17. BAXTER, supra note 8.

18. $196.8 million/$27 million = $7.29. See also Daryl G. Pupera, Louisiana

Department of Economic Development and Louisiana Department of Revenue

Motion Picture Investor Tax Credit Program, Performance Audit, LA. LEGIS.