BR Business Report on Film "Tax Breaks"

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Louisiana enacted a relatively modest Motion Picture Investor Tax Credit Program in 2002. Lawmakers have since expanded the program into arguably the most generous in the country.

Film incentives are doled out as tax credits; they're not really "tax breaks." Films typically are produced by single-serving limited liability corporations with out-of-state owners that don't have Louisiana tax liability. Producers can sell the credits on the open market or back to the state at 85% of face value (see a more detailed explanation).

So the incentive isn't a "break" from taxes that otherwise would be paid by filmmakers. If a producer spends more than $300,000 making a movie, state government essentially pays him, with your money, almost a third of what he spent.

Government constantly spends money to support the private sector, notes Greg Albrecht, the Louisiana Legislature's chief economist. But if the state builds a road to attract business, the road one day will be finished and state residents will get jobs at businesses that locate there. If government spends money to educate a child, it is with the expectation that the child will grow up and pay taxes.

But with film, the more movies get made, the more we have to pay.

"It's not an investment," Albrecht says. "It's a subsidy."

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How much of a subsidy? Depends on which number you want to look at. In 2012 the total face value of the tax credits certified was about $241 million, according to a report commissioned by Louisiana Economic Development. By Albrecht's count, based on the Department of Revenue's numbers, $1.057 billion worth of credits have been claimed from fiscal year 2006 through fiscal year 2013.

Of course, the movie business spends plenty of money in Louisiana—more than $717 million in 2012 alone. But Louisiana, like other states with similar programs, has found that film tax credits are a net negative for the state's fiscal picture. The state treasury lost $168.2 million on the program in 2012, the LED study says. (See page 23 for a closer look at the ROI.)

And while state government shoulders the cost, film credits are pretty much a free-money windfall for parishes where filming takes place.

"That's why they love the program; they don't have to pay for it," Albrecht says. "I've suggested maybe they should split the costs with us. I don't get very far with that suggestion."

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