Could a nonprofit corporate shareholder claim a refundable musical-and-theatrical infrastructure credit, and which project-eligibility questions belonged to Economic Development?

Plain-English summary

The nonprofit corporate sole shareholder could claim certified musical-and-theatrical infrastructure credits and receive excess credit as a refundable overpayment.

The Department of Revenue did not decide when construction expenditures became eligible, whether the project qualified, or whether occasional recorded performances made the venue a multiple-use facility. Those questions belonged to the Louisiana Department of Economic Development.

Project and claimant

The company was building a Louisiana live-performance venue as part of a capital expansion exceeding $10 million. The venue included a bar, café, commercial kitchen, and seating configurations for dinner theater or row seating.

The ruling agreed that the nonprofit company and its nonprofit corporate sole shareholder could fit the statute's broad “company” or “financier” definition. Nonprofit status did not itself prevent earning the credit or claiming excess credit as an overpayment.

Questions Revenue declined to decide

Revenue referred three issues to Economic Development:

• whether eligible expenditures incurred after the statute's July 19, 2007 effective date could accrue before rules and certification;
• whether expenditures after the company's application date could qualify if the first timing theory failed; and
• whether showing recorded performances during nonpeak times made the live venue a multiple-use facility.

Historical refund mechanism

The ruling accepted the proposed overpayment-claim method while Revenue had no special form for nonprofits or nonfilers. The shareholder would provide its federal exemption ruling, the Economic Development credit-allocation certificate, and Form R-20127-L.

Before filing, it was directed to ask Revenue whether a dedicated form had become available.

Common questions

Q: Did Revenue certify that the project expenditures qualified?

A: No. Economic Development was the proper authority.

Q: Did nonprofit status bar the shareholder from the credit or refund?

A: No, under the ruling.

Q: Was Form R-20127-L unconditionally the permanent filing method?

A: No. It was the accepted method only while no specific nonprofit or nonfiler form existed.

Citations and references

• La. R.S. 47:6034 — former musical and theatrical production credit, project definitions, percentages, caps, and refund provisions
• La. R.S. 47:608(5) — nonprofit franchise-tax exemption cited in the request
• Form R-20127-L — historical claim-for-refund form proposed and conditionally accepted
• LAC 61:III.101 — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 09-010

Original ruling text

Private Letter Ruling
Redacted Version
No. 09-010
Corporate Income Tax and Individual Income Tax
Musical and Theatrical Production Tax Credit
February 13, 2009
This is in reply to your request for a private letter ruling concerning whether or not the
Requesting Parties and Project will qualify for the Musical and Theatrical Productions Tax
Credits.
FACTS and STATEMENT OF LAW:
The Company and its parent, the Sole Shareholder, are in the midst of a comprehensive
major capital expansion project, which expansion includes the construction of a live
musical and theatrical performance venue located in Louisiana with an infrastructure
investment in excess of $10 million (the “Project”). The Project consists of a contiguous
entertainment venue, bar, café and commercial kitchen. When configured as a dinner
theatre, the Project will have a seating capacity of 144 patrons, and when configured for
row seating, the Project will have a seating capacity of 192 patrons. The Project will host
live performances similar to the USO performances. These performances will be produced,
rehearsed, marketed, administered, recorded and performed before live audiences at the
Project. A bar/café is incorporated into the Project to provide services prior to show time
and dinner theater services during certain performances. The Project will also be supported
by other features of the major capital expansion project, including an adjacent ticket
counter, gift shop, outdoor promenade and a special exhibit space. However, for purposes
of applying for the M&TP Credit for the Project, expenditures for the Ancillary Projects
are not included in the Company’s application to LA DED.
The Sole Shareholder followed the passage of the M&TP Credit legislation closely in the
Louisiana Legislature 2007 Regular Session because the incentives created by the M&TP
Credit statute provide critical funding needed to bridge financing gaps for the construction
of the Project and to secure future funding to underwrite continuing live productions. The
Company tried to delay the commencement of the Project until the promulgation and
adoption of rules by LA DED and the approval of such rules by the House Committee on
Ways and Means and the Senate Committee on Revenue and Fiscal Affairs; however, due
to construction and financing commitments related to the overall major capital expansion
project, the Company did commence construction on the Project on December 4, 2007,
some five months following the effective date of the M&TP Credit statute.

617 North Third Street
P. O. Box 44098
Baton Rouge, Louisiana 70804-4098
225-219-2780  225-219-2759 Fax
TDD# 225-219-2114  www.revenue.louisiana.gov

PLR No. 09-010
Page 2 of 6
February 13, 2009

Summary of Law:
Louisiana Revised Statute 47:6034(C)(1)(a)(ii)(aa) of the M&TP Credit statute provides
that a “base investment” credit may be granted for certified, verified and approved
expenditures in the state for the construction, repair or renovation of a “state certified
musical or theatrical facility infrastructure project”, subject to certain per project and
annual caps. A “state-certified musical or theatrical facility infrastructure project” is
defined in La. R.S. 47:6034(B)(8) of the M&TP Credit statute as “a capital infrastructure
project in the state directly related to the production or performance of musical or theatrical
productions as defined in this Section, and movable and immoveable property related
thereto, or any other facility which supports and is a necessary component of such facility,
and any expenditures in the state related to the construction, repair or renovation of such
project, which are certified, verified and approved as provided for in this Section” (an
“M&TP Infrastructure Project”). A “base investment” is defined in La. R.S.
47:6034(B)(1)(b) to include investments made for expenditures in the state for the
construction, repair or renovation of an M&TP Infrastructure Project. Louisiana Revised
Statute 47:6034(C)(1)(a)(ii)(bb) imposes certain conditions upon the timing and receipt of
M&TP Credits for any M&TP Infrastructure Project that is deemed to be “a multiple-use
facility.” Under La. R.S. 47:6034(C)(1)(a)(iii)(cc), a M&TP Infrastructure Project with a
total base investment that is greater than one million dollars shall be eligible for a tax
credit of twenty-five percent of the base investment made with respect to such project,
subject to a maximum base investment cap of $10,000,000 per project as set forth in
Section 6034(C)(1)(a)(ii)(a) of the M&TP Credit Statute. Louisiana Revised Statute
47:6034(D)(1) provides that (i) the M&TP Credits shall be allowed against any Louisiana
individual or corporate income tax liability of the company or financier of the M&TP
Infrastructure Project and (ii) any excess of the M&TP Credits over the income tax liability
over which the M&TP Credits may be applied shall constitute an overpayment, which shall
entitle such company or financier to a refund from the Secretary of the Department of
Revenue. Under La. R.S. 47:6034(D)(2)(c) of the M&TP Credit statute, corporate partners
or members shall claim their share of any credit on their corporation income tax returns.
To the best of the Company’s knowledge, the Louisiana Department of Economic
Development (“LA DED”) has not established an official form for the application of the
M&TP Credit. Therefore, the Company has submitted to the LA DED a letter with
exhibits, which is attached hereto as Exhibit D, to serve as its formal application for the
allocation of M&TP Credits.
SPECIFIC RULINGS REQUESTED:

1. Are otherwise eligible expenditures incurred by the Company after July 19, 2007
   for the construction of a theatrical facility infrastructure project located in New
   Orleans, Louisiana eligible for M&TP Credits? The Requesting Parties respectfully
   suggest that the answer is yes. The effective date of the M&TP Credit Statute is
   July 19, 2007. Although La R.S. 47:6034(E)(1)(a)(ii) of the M&TP Credit statute
   prohibits the “granting” of any M&TP Credits until the adoption of rules approved
   by the House Committee on Ways and Means and the Senate Committee on
   Revenue and Fiscal Affairs, the Requesting Parties respectfully suggest that there is
   no statutory impediment to the accrual of otherwise eligible expenditures incurred

PLR No. 09-010
Page 3 of 6
February 13, 2009

after July 19, 2007 for the construction of a to-be-certified theatrical facility
infrastructure project; provided, however, that no such M&TP Credits shall be
granted or claimable by the Company or its Sole Shareholder unless and until (i)
the theatrical facility infrastructure project is certified by the state and (ii) such
rules have been adopted by the LA DED and approved by the House Committee on
Ways and Means and the Senate Committee on Revenue and Fiscal Affairs. The
Requesting Parties further suggest that this interpretation would serve public policy
by (x) not delaying the construction of otherwise qualifying infrastructure projects
that are vital to the economic development of the state and (y) not penalizing
companies or financiers who have acted in good faith and in reliance upon this
statutorily authorized incentive from being awarded M&TP Credits. The
Requesting Parties further suggest that allowing companies or financiers to accrue
otherwise eligible expenditures until such rules are duly adopted and approved
would not thwart the to-be-promulgated rules because such otherwise qualifying
infrastructure projects would nevertheless have to be certified and comply with the
adopted and approved rules prior to being “granted” the M&TP Credits.

2. If the answer to Requested Ruling 1 is deemed to be no, will otherwise eligible
   expenditures incurred by the Company after the date of its application letter to the
   LA DED for the construction of a theatrical facility infrastructure project located in
   New Orleans, Louisiana be eligible for the M&TP Credit? Although the Requesting
   Parties strongly believe that a favorable response to Requested Ruling 1 is
   warranted, if the Louisiana Department of Revenue deems otherwise, then for the
   reasons described in Requested Ruling 1 above, the Requesting Parties respectfully
   suggest that, at a minimum, they ought to be entitled to accrue otherwise eligible
   expenditures incurred on or after the date of its application letter to the LA DED for
   the construction of a to-be-certified theatrical facility infrastructure project;
   provided, however, that no such M&TP Credits shall be granted or claimable by the
   Company or its Sole Shareholder unless and until (i) the theatrical facility
   infrastructure project is certified by the state and (ii) such rules have been adopted
   by the LA DED and approved by the House Committee on Ways and Means and
   the Senate Committee on Revenue and Fiscal Affairs.
3. May the Sole Shareholder, as the sole shareholder of the Company, claim the
   M&TP Credits certified by the state for the Project as an overpayment pursuant to
   Section 6034(D)(1) of the M&TP Credit statute? The Requesting Parties
   respectfully suggest that the answer is yes. Louisiana Revised Statute
   47:6034(D)(1) provides that (i) the M&TP Credits shall be allowed against any
   Louisiana individual or corporate income tax liability of the company or financier
   of the M&TP Infrastructure Project and (ii) any excess of the M&TP Credits over
   the income tax liability over which the M&TP Credits may be applied shall
   constitute an overpayment, which shall entitle such company or financier to a
   refund from the Secretary of the Department of Revenue. Louisiana Revised Statute
   47:6034(B)(2) broadly defines “company” or “financier” as “any individual, firm,
   partnership, limited liability company, joint venture, association, corporation,
   estate, trust or other entity, group or combination acting as a unit, and the plural as

PLR No. 09-010
Page 4 of 6
February 13, 2009

well as the singular number.” Both the Company and its Sole Shareholder are
corporations—albeit non-profit corporations. Moreover, there is nothing in the
M&TP Credit statute that limits or otherwise prohibits non-profit corporations from
meeting the definition of “company” or “financier,” as the case may be, or from
otherwise earning M&TP Credits under the M&TP Credit statute.

4. If the answer to Requested Ruling 3 is deemed to be yes, what is the mechanism by
   which the Sole Shareholder may submit a claim for the overpayment? Louisiana
   Revised Statute 47:6034(D)(2)(c) of the M&TP Credit statute provides that
   “[c]orporate partners or members shall claim their share of any [M&TP Credit] on
   their corporate income tax returns.” However, both the Company and its Sole
   Shareholder anticipate that each will be exempt from the Louisiana corporate
   franchise tax pursuant to La. R.S. 47:608(5), which provides, in pertinent part, that
   “corporations . . . organized and operated exclusively for religious, charitable,
   scientific, literary or educational purposes . . . ., no part of the net earnings of which
   inures to the benefit of any private shareholder or individual and no substantial part
   of the activities of which is carrying on propaganda or otherwise attempting to
   influence legislation” are exempt from the corporate franchise tax. In addition, the
   Company has applied for a ruling of exemption from the Internal Revenue Service
   and anticipates a favorable ruling, and the Sole Shareholder has already received a
   favorable ruling of exemption from the Internal Revenue Service on its own behalf.
   Accordingly, if neither the Company nor its Sole Shareholder is subject to the
   corporate franchise tax, neither would be required to file a Louisiana corporation
   franchise return and, thus, it would not be possible for the Sole Shareholder to
   claim its share of the M&TP Credit on its corporate income tax return. However,
   the Requesting Parties suggest that its Sole Shareholder should be able to claim its
   share of the M&TP Credit as a refundable “overpayment” by submitting to the
   Department of Revenue the following: (i) a copy of favorable exemption ruling
   from the Internal Revenue Service, (ii) a copy of the certificate allocating the
   M&TP Credits by the LA DED to the Company and (iii) a completed Form R20127-L, entitled “Claim for Refund of Taxes Paid.”
5. Will a facility that is primarily and directly related to the performance of musical or
   theatrical production be deemed a “multiple-use facility” under Section
   6034(c)(1)(ii)(bb) of the M&TP Credit statute if it is also used to show recorded
   performances during non-peak times? The Requesting Parties respectfully suggest
   that the answer is no. Louisiana Revised Statute 47:6034(C)(1)(a)(ii)(bb) provides
   that “if all or a portion of an infrastructure project is a facility which may be used
   for other purposes not directly related to the production or performance of musical
   or theatrical production activities, then the project shall only be approved if a
   determination is made that the multiple-use facility will support and will be
   necessary to secure musical or theatrical production activities for the musical or
   theatrical . . . performance facility . . . .” (Emphasis added.) Here, the Project
   cannot be deemed to be a multiple-use facility in support of the musical or
   theatrical performance facility because the Project is the musical and theatrical
   performance facility. As noted in the “Summary of Law,” a “state-certified musical

PLR No. 09-010
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February 13, 2009

or theatrical facility infrastructure project” is defined in the disjunctive in La. R.S.
47:6034(B)(8) of the M&TP Credit statute as “a capital infrastructure project in the
state directly related to the production or performance of musical or theatrical
productions as defined in this Section, and movable and immoveable property
related thereto, or any other facility which supports and is a necessary component
of such facility, and any expenditures in the state related to the construction, repair
or renovation of such project, which are certified, verified and approved as
provided for in this Section.” (Emphasis added.) There is no doubt that the
construction of the Project should be deemed “directly related to the production or
performance of musical or theatrical productions” rather than merely a supporting
facility, as the Project venue will host live musical and/or theatrical performances
on a year-round basis. Specifically, it is anticipated that live musical and/or
theatrical performances will be held at the Project nightly on Thursday through
Saturday with weekend matinees and possible additional evening performances to
be scheduled based upon demand. However, in order to make the Project
economically viable, it is anticipated that the venue will be used to show recorded
performances during times that would not make live performances financially
feasible (i.e., weekdays, weeknights or perhaps Saturday or Sunday afternoons in
the off season for tourism). The Requesting Parties respectfully suggest that the
“multiple-use facility” described in La. R.S. 47:6034(C)(1)(a)(ii)(bb) of the M&TP
Credit statute was only intended to reference facilities that are not “directly related
to the production or performance of musical or theatrical production” but that,
rather, are facilities that primarily act in support of such directly-related
performance venues, such as back-end production or marketing headquarters or
facilities used to store costumes, lightning, props and/or other equipment. To
conclude otherwise could lead to absurd results. For example, prior to Hurricane
Katrina, no one would argue that the Saenger Theater located on Canal Street was
not “directly related to the production or performance of musical or theatrical
productions” even though the theater was sometimes used for other purposes, such
as an anniversary screening of “Gone With the Wind” or private parties and
receptions. However, if La. R.S. 6034(c)(1)(ii)(bb) of the M&TP Credit statute
were strictly construed to deem any facility that is ever used for purposes other than
live performances as a “multiple-use facility,” then even the Saenger Theater would
be deemed a supporting “multiple-use facility.” Surely, the legislature did not
intend such a result. Like the Saenger Theater, the Project’s primary purpose is to
serve as a live venue for musical and theatrical productions. As such, it should not
be deemed to be merely a supporting “multiple-use facility” under La. R.S.
6034(C)(1)(a)(ii)(bb).
RULINGS
1., 2., and 5. These ruling requests are not within the purview of the Department of
Revenue. The Louisiana Department of Economic Development is the proper authority to
answer these ruling requests.

3. We agree with your analysis and so rule.

PLR No. 09-010
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February 13, 2009

4. The Sole Shareholder may submit a claim for the overpayment as suggested by the
   taxpayer in the ruling request so long as the Department of Revenue has not provided a
   form for non-profit or non-tax filers to claim credits. Before the Sole Shareholder submits
   the claim for overpayment, the taxpayer should contact Deborah Underwood in the Office
   Audit Division of LDR to find out if such a form exists. She can be reached at (225) 2192270.
   If you have any questions or need additional information, please call Leonore Heavey,
   Senior Policy Consultant or Danielle B. Clapinski, Attorney, Policy Services Division, at
   219-2780.
   Sincerely,

Cynthia Bridges
Secretary
By:
Danielle B. Clapinski
Attorney
Policy Services

This correspondence constitutes a private letter ruling (PLR) by the Louisiana Department
of Revenue, as provided for by section 61:III.101 of the Louisiana Administrative Code. A
PLR provides guidance to a specific taxpayer at the taxpayer's request. It is a written
statement that applies principles of law to a specific set of facts or a particular tax situation.
A PLR does not have the force and effect of law, and is not binding on the person who
requested it or on any other taxpayer. This PLR is binding on the department only as to the
taxpayer to whom it is addressed, and only if the facts presented were truthful and
complete and the transaction was carried out as proposed. It continues as authority for the
department's position unless a subsequent declaratory ruling, rule, court case, or statute
supersedes it.