Nov 13, 2012 11:01 AM by AP
BATON ROUGE, La. (AP) - A new online exchange that lets investors trade state tax credits has launched in Louisiana.
The Advocate reports that on the Online Incentives Exchange's first day, a $1 million film tax credit changed hands.
The exchange opened several weeks ago. Later this month, it will start trading tax credits from Georgia and California. Plans are to eventually expand the exchange to include all 45 states that offer transferable and/or refundable tax credits.
Danny Bigel is its co-founder and chief executive officer. He's an independent film producer, was a member of the New York Stock Exchange for 15 years, and taught a graduate-level course on movie financing at New York University's Stern School of Business.
He also was a partner with Broadway South, which sought to use tax credits for live entertainment to revitalize downtown New Orleans after Hurricane Katrina by establishing a theater district.
It was difficult to incorporate tax credits into a financing model for renovating theaters damaged by Katrina, he said. That gave him the idea for the exchange.
"Tax incentives are incredibly vital as an economic development tool," he said. "But there's no centralized marketplace."
Every year, the state of Louisiana offers $300 million in tradable tax credits. The OIX will give individual investors and businesses access to the market for tax credits, allowing them to offset tax liability and reinvest capital.
Roger Wilson, who led the Broadway South effort, is a chief consultant to OIX. Mike Olivier, the former head of Louisiana's economic development department, is serving as chairman of the OIX advisory board.
In some cases, state tax credits are going to businesses that can't really use the incentives. For example, a movie studio based in California has little need for a Louisiana film tax credit.
The OIX also reviews each tax credit to verify its validity.
"As long as the states issue credits, there is a desperate need for an efficient and transparent marketplace," Bigel said. "We want to bring a sense of confidence, credibility and accountability to tax credit buyers, so they feel comfortable."
The $1 million credit wasn't the only one offered on the first day. Bigel said he also was contacted by a small business in Baton Rouge that had a $14,000 digital media tax credit.
"They couldn't use the credit, and it was too small to sell in the wider markets," he said.