May 9, 2017 06:59 AM

Effort to reform state's film tax credit program rocked by communications issues

[Editor's Note: This story has been updated from an earlier version and now includes comments from board members and officers of the Louisiana Film and Entertainment Association, as well as LED Secretary Don Pierson.]

In 2016, Gov. John Bel Edwards directed Louisiana Economic Development to study the state's much-maligned film tax credits program and to work with the state's film and entertainment industry to broaden the impact of the tax credits to support the development of a permanent, native creative industry here.

Image courtesy jpmorrell.com

The result was SB235, which was prefiled by New Orleans Sen. J.P. Morrell in the current session. To the dismay of some in Acadiana's film industry, Morrell substituted his own SB254 when the original bill was called up before the Senate Revenue and Fiscal Affairs Committee last week.

When Morrell convinced the Senate to suspend the rules on Monday and then pulled the bill from the Senate Finance Committee and placed it on the Senate calendar without consideration by the committee, it set off alarms for Adam Hensgens, an Acadiana filmmaker and industry worker who feared the new bill would eliminate some of the hard won gains included in the original bill.

"SB254 abandons the parts of SB235 that were designed to help grow this industry in our state," Hensgens asserted in a Monday evening phone conversation. "Sen. Morrell's substitute bill still goes after blockbusters while restricting access for independent films, and local independent filmmakers."

The Independent contacted Morrell for comment on his bill on Monday. He still has not responded.

A key change Morrell inserted into SB254 included setting a 40 percent maximum credit on each project. The way Hensgens read the bill, that change rendered useless tax credits tied to shooting productions outside of New Orleans and for productions based on scripts by Louisiana-based screenwriters.

Trey Burvant, a Baton Rouge filmmaker and Louisiana Film and Entertainment Association board member, says Hensgens was mistaken. In a Tuesday afternoon phone call from the set of a movie being produced in the state based on a Louisiana screenplay, Burvant says Hensgens did not understand how film tax credits are awarded and counted.

"Louisiana's film tax credits are awarded on base investment," Burvant explains. "So, by definition, the 10 percent credit available based on payroll to Louisiana residents is separate from the 40 percent cap that would apply to each project if SB254 becomes law."

Hensgens' initial understanding was that the 10 percent payroll credit made hitting the 40 percent tax automatic once the base investment 30 percent credit was obtained.

“If you cap the credits at 40 percent but award a 30 percent credit and allow a 10 percent credit for Louisiana residents on the payroll, then the 5 percent for shooting productions outside of New Orleans, the 5 percent credit for using Louisiana screenplays, and the 5 percent credit for using visual effects created by Louisiana companies are pretty much worthless,” Hensgens says.

In Hensgens' view, that skewed the entire program toward big budget movies and worked against the stated objective of LED’s work to restructure the tax credit program to spur growth and development of a local film industry.

Burvant says Hensgens' perception was wrong. He maintains it was the larger players in the state industry who have pushed for the Louisiana screenwriter 5 percent tax credit and who also pushed for the 5 percent credit for production work done outside New Orleans.

“We understand that for our industry to prosper, it has to benefit all parts of the state,” Burvant says. “I worked to get the screenwriter credit established. And our LFEA has worked to get the credit for work outside New Orleans in place.”

Kody Chamberlain is a Lafayette-based writer and artist who worked with LED to create the Louisiana screenwriter credit and has gotten positive feedback on it from representatives from Hollywood-based companies with whom he’s been developing projects.

"The goal of this entire law, as stated in the original text, is to create a sustainable and indigenous industry," Chamberlain writes in an email. "That can't exist without writers. Writers are the entrepreneurs of new ideas."

"The film and television industry are relatively new to Louisiana, but we've always been great storytellers," Chamberlain continues. "It's in our blood. If the state is serious about an indigenous industry, and it appears we are, the screenplay credit should remain intact and untouched. Otherwise, what's the point?"

Burvant and Jason Waggenspack, CEO of St. Bernard Parish-based The Ranch Studios, say the LFEA and its members are extremely sensitive to the need to nurture in-state creative talent in order to build a stronger industry and film economy here.

"We're working to expand the carve-out for support of small Louisiana productions," Waggenspack says. "We're at 10 percent now, which is $15 million of the total cap. We'd like to raise that carve-out to 15 percent, maybe get to 20 percent, but first we need to stabilize the current program."

Burvant admits that there "are some wording issues" in S254 that might have contributed to Hensgens' confusion about the impact of provisions in the bill. He says he and Hensgens spoke during the day Tuesday. Hensgens was in the Capitol Tuesday working legislators on SB254.

"This is a politically dynamic process," Burvant says. "Things sometimes get lost. Our goals remain to stabilize the program, to make it accessible to all parts of Louisiana, and to make it fiscally responsible."

Burvant and Waggenspack say the industry actually produces a $4.32 return on every dollar spent on the film tax credits program, a number disputed by critics.

Burvant says the 2015 reforms led to huge problems for the program because they created uncertainty.

"Payments on the credits were suspended for a time," Burvant explains. "People were reading about the state's fiscal problems and wondering if we were going to make good on the credits. There was uncertainty and uncertainty created fear."

Burvant says the state has nearly worked through the outstanding credits, and the intent of this year's legislative effort is to put the program on solid ground.

LED Secretary Don Pierson says SB254 meets Gov. Edwards' objectives of "creating a streamlined, smarter program that grows the industry building on the infrastructure we've developed over the past 15 years."

Pierson notes that provisions in Morrell's SB254 would position Louisiana to pivot its film tax program to take advantages of changes in the industry driven by a proliferation of content outlets.

"Look at your remote when you get home," Pierson comments in a Tuesday evening phone interview. "There are huge new content opportunities developing, and we believe there are provisions in SB254 that can position Louisiana to take advantage of that."

Pierson says the production cap on episodic series is higher than on movie productions — $25 million for episodic series while the cap on movie projects is $20 million.

"Not everyone gets everything they want in the legislative process," Pierson observes. "But we respect that process, and we expect that there will be changes in SB254 as it moves forward, and we believe it's critical that the industry stand united and be part of that process."

"We believe that the work our department did with stakeholders dating back to July and August of last year has proven our state's commitment to this industry," Pierson says. "That commitment has continued in challenging fiscal times for our state. We believe it's important that the state get a better return on investment from the film tax credits program, but we have 14,000 jobs in this state that are tied to this industry that cannot be overlooked."

Jason Waggenspack describes the industry as "a fragile ecosystem."

"We have large studio partners that bring their work here that allow all parts of our industry to benefit," he says. "We have industry workers from here who were trained by other industry workers. Some of them work in other states now. But, we can't afford to isolate or vilify any sector of the business. We need to make it accessible and that's what we believe Sen. Morrell's SB254 does."

Burvant describes Morrell as a champion of the industry.

"J.P. Morrell is our strongest advocate," he says. "He has defended the industry and insisted that its benefits extend to all parts of the state — not just New Orleans.

For a time on Tuesday, Hensgens was drawing heat from legislators and the industry for his published comments on Morrell’s bill. He said in a followup phone call that he’d finally heard from many of the people he felt had been shutting him and other small independent filmmakers out earlier in the legislative process.

“Hey, if it took an article to get them to talk to me, then it was worth the heat,” he says.

SB254 remains on the Senate Calendar. It is scheduled to be considered after the Senate reconvenes Wednesday at 2 p.m.

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