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Louisiana Plans to Use 2257 to Block Film Tax Credits

Louisiana Plans to Use 2257 to Block Film Tax Credits
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Wednesday, Jun 6, 2012    Text size: 

BATON ROUGE, La. — As more lawmakers become aware of 18 U.S.C. §2257, it is likely they'll use its strictures as a part of imposing other burdens that were never contemplated by Congress.

Last month, Louisiana lawmakers approved legislation that places an explicit ban against adult entertainment films receiving state tax credits.

Senate Bill 513, sponsored by state Sen. A.G. Crowe, sailed through the state Senate and is now headed for the governor's desk.

Rather than define what sexually explicit filmmaking is, the bill simply prohibits tax credits for any film whose production company has to maintain 2257 records for it.

All filmmakers seeking tax credits, according to the proposed statute, would be forced to sign sworn statements declaring that their production company is not required to maintain records for production pursuant to 2257.

While porn productions are a rarity in Louisiana, mainstream film and TV productions are not, with the Louisiana Economic Development agency doling out the most lucrative incentives in the country.

The agency even brags that the state has "quickly become green-light central for an amazing variety of projects" because of "unique tax incentive packages."

As a result of the pending legislation, adult film producers are likely to be prohibited from taking advantage of tax benefits from the Bayou State.

"I'm obviously not happy whenever any state or local government treats an adult business differentially — and denies a benefit to it that non-adult businesses will enjoy," industry attorney Joe Obenberger told XBIZ. "When they do, it strikes me as violating the spirit of the First Amendment. But perhaps not the letter [of the law]."

Obenberger, however, said that he predicts that the discriminatory provision in the Louisiana measure is likely to survive a constitutional challenge.

"[M]y sense is that the current state of the law is that denial of a grant, subsidy and probably an amusement tax deduction on the basis of its erotic/sexually explicit content, is unlikely to be determined to be unconstitutional," he said. "[I]f I understand what this provision does, it's likely to survive attack."

Obenberger said he bases his conclusion on the Louisiana measure because of a similar issue litigated in Illinois involving Cook County and Chicago city taxes on live amusements  — the ordinances provided for an exemption from tax for such live performances but exempted adult cabarets.

According to operators of the Crazy Horse Too gentlemens club, excluding any adult entertainment establishments from a tax waiver on admissions was a violation of the company’s free speech. So the club sued.

The case continued to the Illinois Supreme Court after an appeals court held that it was an impermissible content-based discrimination against adult erotic-themed materials.

"The intermediate appeals court held that strict scrutiny was required by the Constitution and that the exemption to the exemption could not be justified on strict scrutiny," Obenberger said.

In the end, the case ended up at the U.S. Supreme Court, which denied Crazy Horse's appeal.

"I believe that there are analytic flaws in the [Crazy Horse Too] case, and I'd like to try to exploit them in another case," Obenberger said. "I would gladly be willing to take up a challenge to such a law and try to either turn the tide of prevailing decisions or to look for factors that distinguish the holding in this case from the facts of the other cases."

Obenberger said that with the Louisiana measure, it's the second time he's seen 2257 addressed in a state statute or legislation.

"It is interesting to note that the proposal mentions only Section 2257 and not Section 2257A, thus leaving the producers of simulations, much fetish content, and depictions regulated only because of lascivious exhibitions of genitals and public area eligible for the tax credit," he said. "I'm not so sure that I'd be in a rush to apply for that tax credit if I were a producer and identify myself to state officials from any department."

Obenberger noted that sometimes certain intentions of laws can cause unpredictable consequences.

"Just recently, I saw a determination of the Justice Department holding the election laws of two states to be invalid — I think both Texas and Florida were considered — because of their provisions requiring certain identification documents such as driver's licenses in order to vote. The Justice Department determined that this exerted an improper adverse effect against minority members who are less likely to possess such documents," he said.

"Given my focus, a potential challenge to Section 2257 based on the constitutional right of minority members to express themselves as performers in adult films immediately came to mind, one that could be supported directly from the mouth of the Justice Department itself.

"If I find myself in the defense of a client's Section 2257 charges, you can bet it will be on my list of preliminary attacks on the statute."

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