Red Stick Studio Dev. v. State By

• Citation: 56 So.3d 181
• Decision Date: 19 January 2011
• Docket Number: No. 2010–C–0193.,2010–C–0193.
• Parties: RED STICK STUDIO DEVELOPMENT, L.L.C.v.STATE of Louisiana by and through the DEPARTMENT OF ECONOMIC DEVELOPMENT; State of Louisiana by and through the Division of Administration; & State of Louisiana by and through the office of Entertainment Industries Development.
• Court: Supreme Court of Louisiana

56 So.3d 181

RED STICK STUDIO DEVELOPMENT, L.L.C.

v.STATE of Louisiana by and through the DEPARTMENT OF ECONOMIC DEVELOPMENT; State of Louisiana by and through the Division of Administration; & State of Louisiana by and through the office of Entertainment Industries Development.

No. 2010–C–0193.

Supreme Court of Louisiana.

Jan. 19, 2011.

Kantrow, Spaht, Weaver & Blitzer, APLC, Connell Lee Archey, William Scott Keaty, Paul Holden Spaht, Carlos Alberto Romanach, Pamela Miller Perkins, Stephanie Gray LeGrange, Leu Anne Lester Greco, Baton Rouge, LA, for Applicant.Adams & Reese, LLP, Verne Thomas Clark, Jr., Michael Olive Pierson, for Respondent.JOHNSON, Justice.¹

[2010-0193 (La. 1] We granted this writ application involving Louisiana's motion picture investor tax credit to address the correct interpretation of La. R.S. 47:6007, specifically as amended by Act 456, Section 3(C) of the 2007 Regular Session of the Louisiana Legislature (“Act 456”). The issue raised is whether Section 3(C) of Act 456 provides a time limitation for expenditures which would qualify for tax credits such that no tax credits can be earned on expenditures incurred after January 1, 2010.

For the reasons that follow, we reverse the decision of the court of appeal, and hold that Section 3(C) of Act 456 provides that no tax credits may be earned on expenditures incurred after January 1, 2010.

FACTS AND PROCEDURAL HISTORY

The State of Louisiana provides for certain motion picture investor tax credits, including tax credits for “State-certified infrastructure projects,” set forth in [2010-0193 (La. 2] La. R.S. 47:6007. Seeking to take advantage of these tax credits, Red Stick Studio Developments, L.L.C. (“Red Stick”) submitted an application for a State-certified infrastructure project comprised of full service motion picture production and post production facilities totaling $665,500,000 ² on February 27, 2007. At the time Red Stick submitted its application, a “State-certified infrastructure project” was defined as “an infrastructure project approved by the Governor's Office of Film and Television Development and the Department of Economic Development. The term ‘infrastructure project’ shall not include movie theaters or other commercial exhibition facilities.” La. R.S. 47:6007(B)(9) (2005). The definition of “State-certified infrastructure project” was revised by Act 456 to “a film, video, television, and digital production and postproduction facility, and movable and immovable property and equipment related thereto, or any other facility which supports and is a necessary component of such proposed state-certified infrastructure project, all as determined and approved by the office, the secretary of the Department of Economic Development, and the division of administration under such terms and conditions as are authorized by this Section. The term ‘infrastructure project’ shall not include movie theaters or other commercial exhibition facilities.” La. R.S. 47:6007(B)(12) (2007).

The Louisiana motion picture investor tax credit program is administered by the Office of Entertainment Industry Development (“OEID”),³ an office within the State's Department of Economic Development (“DED”). Red Stick's application and fee were submitted in accordance with the requirements of La. R.S. 47:6007 (2005), [2010-0193 (La. 3] which generally required an applicant to file an application for motion picture investor tax credits with the OEID, and obtain approval of the project from the DED, OEID, and the Department of Administration (“DOA”) in order to receive an initial certification letter from the State approving the project as a State-certified infrastructure project. ⁴

At the time Red Stick filed its application with the State, La. R.S. 47:6007 generally provided for a tax credit of twenty-five percent of the base investment, and allowed an additional fifteen percent tax credit until January 1, 2008. Thus, the available tax credits totaled forty percent. However, during the 2007 Regular Session, while Red Stick's application was pending, the Louisiana Legislature enacted Act 456, which amended La. R.S. 47:6007 to impose certain limits on these tax credits. Act 456 included a “grandfather clause” relative to applications filed on or before August 1, 2007. Section 3(C) of Act 456 provides:

An application for an infrastructure project filed on or before August 1, 2007, shall have twenty-four months from the date of approval of the rules or January 1, 2008,⁵ whichever is earlier, in which to qualify for the forty percent tax credits earned on expenditures. Tax credits on infrastructure projects shall be considered earned in the year in which expenditures are made, provided that a minimum of twenty percent or ten million dollars of the total base investment provided for in the initial certification that is unique to film production infrastructure shall be expended before infrastructure tax credits can be earned on expenditures. The payment of tax credits may extend beyond or be made after the year expenditures are made. (Emphasis added)

[2010-0193 (La. 4] Red Stick's application proceeded through the State's review and approval process, and Red Stick and the State negotiated terms and conditions relative to the proposed project. On August 27, 2007, the State issued an Initial Certification Letter to Red Stick for its proposed project. However, this letter also included paragraph (ii), containing the following language: “[S]ince this application was filed on or before August 1, 2007, the applicant shall have until January 1, 2010 to earn tax credits on this project.” Red Stick disagreed with the language in paragraph (ii), contending the State had confused “earning the credits” with “qualifying to earn the credits,” contrary to the language of Section 3(C).

Red Stick filed a Petition for Writ of Mandamus on November 13, 2008, asking the court to direct the State to remove the requirements contained in paragraph (ii) of the Initial Certification Letter and either not replace them or replace them with language taken directly from Section 3(C). Red Stick amended its petition for Mandamus, seeking a declaratory judgment that Section 3(C) does not provide a time limitation for expenditures which would qualify for tax credits and that tax credits may be earned on expenditures beyond January 1, 2010. Red Stick took the position that as long as it received the Initial Certification Letter, and made the minimum spend (i.e., twenty percent or $10 million) within twenty-four months of January 1, 2008 (i.e., January 1, 2010), it is entitled to forty percent tax credits on all expenditures until the project is completed. The State asserted that Red Stick is only entitled to forty percent tax credit on expenditures made by January 1, 2010, and entitled to no tax credits after that date.

On December 3, 2008, the parties entered into a stipulation pursuant to which the State provided Red Stick with a new Initial Certification Letter, subsequently issued on January 14, 2009, and replaced paragraph (ii) of the original letter with [2010-0193 (La. 5] language citing Section 3(C) of Act 456. The parties further agreed that if a final judgment in the pending action declares, or if a future statutory amendment or enactment by the legislature provides, that Section 3(C) of Act 456 does not provide a time limitation for expenditures which would qualify for tax credits, and that tax credits may be earned on expenditures beyond January 1, 2010, then Red Stick shall be entitled to earn tax credits on this project for expenditures during a period of the lesser of sixty months from the date of final judgment or effective date of legislation, or seventy-eight months from the date of this initial certification letter. The writ of mandamus was dismissed with prejudice.

Red Stick's declaratory judgment action came to trial on March 10, 11, 12, 13 and 16, 2009. The parties presented extensive evidence relative to Red Stick's application process and the legislative history of Act 456, including testimony of various legislators and other witnesses regarding their understanding of Section 3(C) and legislative intent. Following trial, the trial court ruled in favor of Red Stick, finding the statute was clear and unambiguous and that Red Stick qualified for the tax credits when it received its pre-certification letter and made the minimum spend. The trial court held that Red Stick had from that point until it finishes the project to claim the forty percent tax credit. The stipulation between the parties was also made part of the judgment. Because it found the statute to be clear and unambiguous, the trial court stated it was not required to look to legislative intent. However, the court went on to note that even if it were to look at legislative intent, it was embodied in the testimony of Taylor Townsend, Chairman of the House and Ways Committee who authored Act 456 and supported Red Stick's position.

The State appealed the trial court's ruling regarding the interpretation of Section 3(C) and also challenged the trial court's ruling allowing legislators and non-legislators[2010-0193 (La. 6] to give testimony regarding their interpretation of the statute and legislative intent. The court of appeal affirmed the trial court, finding that Section 3(C) of Act 456 is clear and unambiguous, and its application does not lead to absurd consequences.⁶ The court of appeal agreed with the trial court's determination that the words “qualify for” as they are used in Section 3(C) mean that an application filed on or before August 1, 2007, must (1) apply for and receive its Initial Certification Letter and (2) spend a minimum of twenty percent or $10 million of the total base investment provided for in the Initial Certification Letter that is unique to film production infrastructure before January 1, 2010. Thereafter, an applicant is qualified to earn forty percent infrastructure tax...