After years as a sleeper industry, film production in Louisiana got red-hot after the state began offering attractive incentives to producers and investors. The amount of money spent on film production in Louisiana jumped more than tenfold — from $20 million in 2001 to $220 million in 2005 — and movie sets have become a common sight from New Orleans to Shreveport.
Producing films has become big business in Louisiana. Now we’re trying to do the same for producing recorded music.
In 2005, the State of Louisiana established the Sound Recording Investor Tax Credit — an incentive to record music and build recording studios in the state.
The law took effect on Jan. 1., 2006. To read it, click here It is an experimental program that elapses after two years, unless the state Legislature reauthorizes it.
When we say “sound recordings,” we’re not just talking about albums. We’re basically talking about making new master recordings of music, whether that music will be released on a CD, as a digital download — or as part of the score or soundtrack for a film. TV commercial or videogame.
The State of Louisiana is helping to finance sound recordings by offering a refundable tax credit to the people or companies that invest in the production (that is, those who put up the money). The more money you spend in the state to record music, the more you get back in the form of a tax refund — even if you don’t live in Louisiana or owe any taxes in the state.
If you are based in Louisiana (or otherwise have taxable income in the state), the state will reimburse some of the money you invest in making records here -- lowering any personal or corporate income tax you may owe. If you earn more in credits than you owe in taxes, the state will pay you the balance as a tax refund.
If you aren’t based in Louisiana and/or owe no taxes here, you’ll get a check from the state for the entire value of the tax credit. No brokers, no haggling — just a direct buy-back of your credits from the state. All you have to do is file an income tax return. Here is the form.
Credit Amounts:
Allowable Expenses:
The tax credit program also applies to infrastructure, or building recording studios in the state.
The program works similarly to the program for making records as detailed above.
To see the application, click here.
To earn Sound Recording Investor Tax Credits, you must spend at least $15,000 in a year on recording costs that are approved and verified by the State of Louisiana. How you spend the money is up to you — recording one track, making an entire album or recording several low-budget albums over the course of a year.
You can only earn tax credits on money spent in Louisiana, and of that, only money spent on approved production costs. And you can never earn more in credits than you actually spend.
Step 1: If you’re planning to record music in Louisiana and think you will spend more than $15,000 in production costs in the state over the course of a year, submit an application for Sound Recording Investor Tax Credits to the Louisiana Department of Economic Development by clicking here.
Step 2: With your application, you’ll need to submit a detailed budget showing what you’ll spend the money on and where you’re spending it.
Step 3: The Louisiana Department of Economic Development will review your application and budget. Once the department approves them, you will be issued a letter of provisional certification.
Step 4: After you complete the recording (or at least spending the money), submit proof of expenses to the department.
Step 5: Once the department certifies your expenses, you will be sent proof of final certification and a voucher for your total tax credits.
Step 6: Submit a Louisiana personal or corporate income tax return. Include the voucher and deduct that amount from any taxes you owe. If your credit voucher is worth more than the taxes owed, you will get a check for the balance in the form of a tax refund. If you owe no taxes in Louisiana, file a Louisiana income tax return; enter “0” as the amount of taxes owed and indicate the value of the credits you’ve earned. You’ll be sent a tax “refund” check for the amount of your credits.
Who benefits from the tax credits?
Musicians? Recording studios? Record companies?
A: All of the above. The tax credits are earned by the person or company that puts up the money for the recording project. That can be a record company, music publisher, film or TV production, or even an artist who self-finances a recording.
Recording studios may benefit two ways: by creating infrastructure — that is spending money to build or improve infrastructure; or because they invest directly in sound recording projects. They will have to be able to show that they met the minimum spending requirements. Whether giving free studio time to an artist will qualify as an “in-kind” expense has not yet been determined.
Most studios will benefit by renting services to record companies or others who invest in recording projects.
Musicians may who self-finance recordings will benefit as long as they meet the minimum spending requirements. They may also benefit from additional work as session players.
What if I don’t live in Louisiana?
A: No problem. You still have to file a Louisiana tax return, though. For the form, click here. If you don’t live in Louisiana and/or owe no state income tax, file the return for “zero” earned income and the state will send you a check for the value of your tax credits.
Do the sound recording tax credits apply to equipment or infrastructure?
A: Yes. The cost of purchasing equipment such as microphones or hard drives, or the cost of investing in new infrastructure such as building recording studios, may be eligible for sound recording investor tax credits.
Are the sound recording tax credits for production expenses only,
or can I earn tax credits on money I spend to market the record?
A: The tax credits are for production expenses only. But they can include expenses such as artwork and CD duplication if those services are purchased from a Louisiana vendor. Expenses for advertising and marketing — even if spent in Louisiana — are not included.
Are artist advances included?
A: Only if that money is included in the recording budget and the investor can provide a W-9 and 1099 forms showing that the artist paid Louisiana income tax on that money.
Are fees paid to session musicians, producers or engineers included — even if those people don’t live in Louisiana?
A: As with artist advances, those fees would have to be included in the production budget and the investor would have to prove that the employee paid Louisiana income tax on that money.
If I am making a film, TV show, commercial or video game in Louisiana, can I use the credits if I use Louisiana music?
A: If you are already shooting here and are using the Motion Picture Investor Tax Credit program:
The money you spend in Louisiana for music (whether licensing existing tracks or recording new masters) applies toward your film tax credits. It is also at a higher rate (25 percent) than the sound recording tax credits.
If you are not shooting in Louisiana, neither the film nor the sound recording credits cover money you spend in the state to license existing tracks. But, if you are shooting elsewhere and/or not using the film tax credit program, you can record new masters here and qualify for the sound recording tax credits. For example, if your film or TV commercial is shooting in New York, but you record new music for the score or soundtrack in Louisiana, those new masters would qualify for the sound recording program.
What about making live recordings?
A: It’s still a new program and that question has not been officially answered. But, if the investor can prove that met the minimum requirements on production spending, the tax credits should be available.
What about music videos?
A: Unless you are making a new master in Louisiana, and the video is not also using the Motion Picture Investor Tax Credit program, then you probably won’t qualify for the sound recording tax credits.
Need help finding studios or other services?
Contact the Louisiana Music Export Office: info@louisianamusicexport.com.