Lee Rood's Article in The Des Moines Register Today

Liability for film credits drops

By LEE ROOD

The state's potential revenue loss from tax credits owed moviemakers is shrinking, as investigators winnow a list of productions likely to survive enhanced scrutiny after scandal engulfed Iowa's filmmaking incentive program.

The maximum amount of state-backed tax credits that could still be issued for film projects is around $200 million, new estimates from the Iowa's attorney general's office show. The state's maximum theoretical liability was estimated to be about $330.5 million when the fledgling program crashed last year.

"It's taken a long time, and it's tedious," said Jeffrey Thompson, an assistant state attorney general who is one of the leaders in a multi-agency probe of Iowa's film program. "There is certainly a lot of frustration among moviemakers still, and I can't say it's unjustified. We just want to make sure we don't issue tax credits that are undeserved. We're seeing the full range of possibilities, from straightforward films to others where we're finding problems - which leads us to conclude we're making the right decisions."

In addition, the state still could face lawsuits from moviemakers who say they lost money because of delays resulting from the state's suspension of the film program or claim the state should make good on promises they perceive were made by fired Iowa Department of Economic Development workers, Thompson said.

Five state employees lost their jobs amid allegations of mismanagement, abuse and fraud discovered in one the state's largest economic development programs. Those ousted: the director and deputy director of Iowa Department of Economic Development; former film office chief Tom Wheeler, his direct boss; and the agency's most experienced tax credit specialist.

Three filmmakers have been charged criminally, and Wheeler faces an Oct. 11 trial for nonfelonious misconduct in office.

The scandal erupted last fall after state officials learned two filmmakers had purchased and kept luxury vehicles using the tax-credit program. Lawmakers in 2007 overhauled the program to become the most lucrative of any state nationwide, offering "half-off filmmaking." Projects inundated Wheeler, who was hired originally to market the state to those interested in filming in Iowa.

Reporting since the program's problems first came to light showed it lacked oversight typical in other large, state-run economic development programs and that several state officials besides Wheeler were aware of, and responsible for, serious problems.

Other examples of possible abuses were uncovered, including filmmakers claiming subsidies for expenses in which no cash changed hands and abnormally high prices for other expenses, such as a $1.09 million location fee for the movie "Peacock" in tiny Odebolt.

When Gov. Chet Culver suspended Iowa's film incentives in September, 22 projects were in the process of completing filming and 158 projects worth $504.8 million in spending were registered to move forward.

Here's the rough status of projects as of the end of last week:

- After an auditing process, the state recently approved two small, completed productions for tax credits, bringing to 24 the number completed. The total state tax-credit incentives issued since the program was overhauled is about $32 million.

- Fifty-nine projects once OK'd by the economic development office are no longer in the running for state tax credits, Thompson said. The state revoked registrations for the projects after filmmakers failed to respond to correspondence asking whether they still planned to move ahead.

- About 30 projects that were registered to move forward still don't have contracts. Thompson said the state has notified those filmmakers that the state is ready to proceed with contracts. The maximum liability for tax credits for those is $55 million to $60 million, he said.

- About 45 projects have contracts to make films - and that's where the brunt of the state's liability still lies, to honor promises for extending tax credits. Eleven projects have been completed and have submitted forms seeking tax credits. The maximum estimated tax credits that could be issued is about $20 million, Thompson said. Another 20 to 25 of those could result in $120 million to $125 million maximum in tax credits issued.

Thompson said he had hoped the state would be through the brunt of its investigation by now, but it will take about another six months before the probe is completed. The investigation should be complete by the time the program's suspension is scheduled to be lifted next year, he said.