The Associated Press June 10, 2010, 8:19AM ET
NC House panel clears wide incentives bill
By GARY D. ROBERTSON
Story Tools
RALEIGH, N.C.
Boosters of an economic development package that cleared a House committee Wednesday said it will help bring good jobs to the state and perk up the ailing tax base -- even though a university study argues a portion of the tax breaks that woud be extended are no longer effective.
Part of the bill is similar to a measure designed to encourage computer data centers, an energy turbine manufacturer and a paper plant to expand in the state. Those expanded enterprises alone could generate at least 1,200 jobs and more than $2 billion in capital investment, deputy state commerce secretary Dale Carroll said.
The bill, if approved, could create $93 million in tax breaks annually by 2015, according to an analysis performed by legislative staff. But the measure should generate more tax revenues than it gives out to qualifying companies because the new jobs will generate income taxes and sales taxes from the items the workers purchase, said Rep. Bill Owens, one of the bill's primary sponsors.
"It's all about jobs," said Owens, D-Pasquotank, adding that tax revenues won't rebound in the slow recovery "unless we have people paying into the system." Companies won't receive tax credits, cash payments or sales tax refunds unless they create jobs or make investments, Owens added.
But the measure also would extend through 2013 some business tax credits first approved in the 1990s that give breaks to companies for each job they created in a handful of industries, and if they buy machinery.
The North Carolina Center for Competitive Economies, an organization linked to the UNC-Chapel Hill business school, presented a report to lawmakers in early 2009 arguing that incentives previously under the state's William S. Lee Act should be allowed to expire. The center found the credits worked well in the 1990s by giving firms a slightly higher employment growth rate than those that didn't get them. But the gap narrowed over time. The incentives were modified in 2006.
Rep. Pryor Gibson, D-Anson, another primary bill sponsor, said these per-job and machinery credits are still a key bargaining chip in trying to recruit companies deciding where to build.
"If we don't at least compete with the states that are attracting these industries, then we're not going to attract them," Gibson said. "Are they effective? (Companies) certainly take the money when they say, 'what are you going to do to attract us?'"
The measure, which now goes to the House Finance Committee, would also:
-- expand tax breaks for film productions that shoot in North Carolina and extend credits for renewable fuel facilities and the sales tax refund for certain fuel purchases by airlines and stock car racing teams.
-- create a new production tax credit of up to $7.5 million for companies that develop in North Carolina computer simulation programs for military training, education and entertainment.
-- give preferential tax treatment to companies that build inside an "Eco-Industrial Park," a business park whose tenants don't pollute, with state grants and tax breaks designed to promote green businesses in North Carolina.
Friday, June 11, 2010
Thursday, June 10, 2010
From The Omaha World-Herald
Published Wednesday June 9, 2010
Film, TV industry pushing NJ to keep tax credit
By DAVID PORTER
« Entertainment AP
SECAUCUS, N.J. (AP) - With a television series' dismantled set as a backdrop, a procession of actors, producers and directors made their case for New Jersey to extend its tax credit for production companies, an incentive that could be cut from the state budget by the end of the month.
Representatives from "Mercy" and "Law and Order: Special Victims Unit" urged Republican Gov. Chris Christie to reconsider ending the 20 percent tax credit the state has offered since 2006 to lure movie and TV production companies to the state. Both TV series are filmed largely in New Jersey.
Other productions to film in New Jersey in recent years include TV drama "The Sopranos" and feature films such as "The Wrestler" starring Mickey Rourke as a professional wrestler past his prime and "Julie and Julia" starring Meryl Streep as cooking legend Julia Childs.
"If there hadn't been a credit program in place, New Jersey would not have been an option" as a location for "Mercy," series producer Jim Bigwood told the hearing chaired by state Senate Budget Appropriations Committee Chairman Paul Sarlo, a Democrat and supporter of the tax credit.
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Wednesday's hearing was held in the warehouse where hospital drama "Mercy" has been filmed since last year. The series was not renewed by NBC but had been considered for cable, a possibility that was nixed because of uncertainty over New Jersey's tax credit, according to Brian O'Leary, tax counsel for NBC Universal.
O'Leary contrasted the fate of "Mercy" with that of "Law and Order: Criminal Intent," a New York-filmed series that NBC dropped but opted to move to USA Network.
"There was a stable credit in place in New York at the time that allowed that to happen," he said.
Critics have characterized New Jersey's film tax credit as an unnecessary handout to Hollywood. Christie has vowed to cut it from the state budget that must be passed by July 1.
"Like so many other items and programs in virtually every corner of the state budget, cuts had to be made and priorities considered in closing a $10.7 billion budget gap," Christie spokesman Michael Drewniak said Wednesday. "Unfortunately, many things we would like to have kept could not be saved this year."
Forty-four states and the District of Columbia have some form of tax credit program for production companies, and some offer credits as high as 35 to 40 percent. Companies qualify by meeting benchmarks for in-state hiring and spending.
New Jersey is the only state considering ending its tax credit program for budgetary reasons, according to Vans Stevenson, senior vice president for state government affairs for the Motion Picture Association of America. Some states are expanding their programs, he said.
Many of Wednesday's speakers described the ripple effect a television production can have. A scene on "Special Victims Unit" requires makeup artists, contractors, set designers and dressers, truck drivers, caterers and many others, said Tamara Tunie, who plays a medical examiner on the show.
"It's one scene on one episode on one show, and there are hundreds of people working to make it happen," she said.
"Special Victims Unit" has paid about $540 million in wages over 12 years to its cast and crew, not counting its featured stars, said producer Gail Barringer. The show also has paid about $150 million to New Jersey vendors over that time, she said.
According to the MPAA, about 7,000 direct jobs were related to production in New Jersey in 2008, an increase of nearly 1,000 jobs from 2006. New Jersey vendors received about $507 million in business from production companies, compared to $387 million in 2007, the association said.
Film, TV industry pushing NJ to keep tax credit
By DAVID PORTER
« Entertainment AP
SECAUCUS, N.J. (AP) - With a television series' dismantled set as a backdrop, a procession of actors, producers and directors made their case for New Jersey to extend its tax credit for production companies, an incentive that could be cut from the state budget by the end of the month.
Representatives from "Mercy" and "Law and Order: Special Victims Unit" urged Republican Gov. Chris Christie to reconsider ending the 20 percent tax credit the state has offered since 2006 to lure movie and TV production companies to the state. Both TV series are filmed largely in New Jersey.
Other productions to film in New Jersey in recent years include TV drama "The Sopranos" and feature films such as "The Wrestler" starring Mickey Rourke as a professional wrestler past his prime and "Julie and Julia" starring Meryl Streep as cooking legend Julia Childs.
"If there hadn't been a credit program in place, New Jersey would not have been an option" as a location for "Mercy," series producer Jim Bigwood told the hearing chaired by state Senate Budget Appropriations Committee Chairman Paul Sarlo, a Democrat and supporter of the tax credit.
Advertising
Wednesday's hearing was held in the warehouse where hospital drama "Mercy" has been filmed since last year. The series was not renewed by NBC but had been considered for cable, a possibility that was nixed because of uncertainty over New Jersey's tax credit, according to Brian O'Leary, tax counsel for NBC Universal.
O'Leary contrasted the fate of "Mercy" with that of "Law and Order: Criminal Intent," a New York-filmed series that NBC dropped but opted to move to USA Network.
"There was a stable credit in place in New York at the time that allowed that to happen," he said.
Critics have characterized New Jersey's film tax credit as an unnecessary handout to Hollywood. Christie has vowed to cut it from the state budget that must be passed by July 1.
"Like so many other items and programs in virtually every corner of the state budget, cuts had to be made and priorities considered in closing a $10.7 billion budget gap," Christie spokesman Michael Drewniak said Wednesday. "Unfortunately, many things we would like to have kept could not be saved this year."
Forty-four states and the District of Columbia have some form of tax credit program for production companies, and some offer credits as high as 35 to 40 percent. Companies qualify by meeting benchmarks for in-state hiring and spending.
New Jersey is the only state considering ending its tax credit program for budgetary reasons, according to Vans Stevenson, senior vice president for state government affairs for the Motion Picture Association of America. Some states are expanding their programs, he said.
Many of Wednesday's speakers described the ripple effect a television production can have. A scene on "Special Victims Unit" requires makeup artists, contractors, set designers and dressers, truck drivers, caterers and many others, said Tamara Tunie, who plays a medical examiner on the show.
"It's one scene on one episode on one show, and there are hundreds of people working to make it happen," she said.
"Special Victims Unit" has paid about $540 million in wages over 12 years to its cast and crew, not counting its featured stars, said producer Gail Barringer. The show also has paid about $150 million to New Jersey vendors over that time, she said.
According to the MPAA, about 7,000 direct jobs were related to production in New Jersey in 2008, an increase of nearly 1,000 jobs from 2006. New Jersey vendors received about $507 million in business from production companies, compared to $387 million in 2007, the association said.
Wednesday, June 9, 2010
From Zach Patton at Governing
The Value of Movie Tax Incentives
States spend billions on incentives to lure film productions away from Hollywood. Some say it's gone too far.
by Governing's Zach Patton, June 2010
In the 2009 movie Whip It, 17-year-old misfit Bliss Cavender longs to escape the beauty pageants and big hair of her tiny hometown of Bodeen, Texas, by joining an underground roller-derby league in Austin. In the film--actress Drew Barrymore's directorial debut--Bliss stares wistfully across the desolate Texas plains while killing time during her waitressing shift at the Oink Joint, the local barbecue dive that sports a giant pink pig on the roof and a sign touting its signature menu item, the "Squealer."
It's quintessential small-town Texas. Only it's not. It's southeast Michigan. Whip It was filmed almost entirely in and around Detroit. And Ypsilanti, a town near Ann Arbor, stood in for the fictional Bodeen. The Oink Joint was actually Ken's Diner, a shuttered restaurant in the little town of Birch Run, north of Flint. (Thanks to the increased local notoriety, Ken's has since been reopened and rechristened the Oink Joint. The giant pink pig, however, remains in storage.)
If you're wondering why a movie seeking to capture the flavor of Austin and its environs would set up shop in Michigan, it helps to know that for the past two years, the state has been home to the nation's most generous film incentives. Thanks to an aggressive tax-credit plan created by Gov. Jennifer Granholm in 2008, productions that shoot in Michigan can be reimbursed by the state for as much as 42 percent of their expenses.
That was enough to lure Whip It, which originally planned to shoot entirely in the Lone Star State. During filming, the movie's screenwriter told an Austin newspaper that the Michigan deal was just too good to pass up. "For a year, it was going to be Texas, and if it hadn't been for money, it would have been Texas all the way."
The influx of showbiz cash is welcomed by many in Michigan. In a state that's lost nearly a million jobs since 2000 and still suffers the nation's highest unemployment rate, attracting business revenue and creating new jobs--even the temporary, short-term positions associated with movie productions--is seen as a bright spot for the economy. But it's not quite that simple.
Michigan's movie-money measure has drawn all sorts of big-budget Hollywood productions, including Clint Eastwood's Gran Torino in 2008 and 2009's Up in the Air, starring George Clooney. This summer, the state will play backdrop for films starring Hugh Jackman, Pierce Brosnan and Jennifer Connelly, as well as the next installment of the Scream franchise. In the two years since the incentives became available, 89 movies and TV shows have been shot in Michigan. The state's film office says more than 4,000 jobs were created for Michigan crews in 2009, and another 4,000 were created for actors, including extras and day players. In 2007, before the tax credit was offered, film expenditures in the state were $2 million. That rose to $125 million in 2008 and to more than $223 million in 2009. Eastwood proclaimed that the state "will be the new film capital of the world."
Michigan may offer the sweetest deal to moviemakers, but the reality is that almost every state has some incentives designed to attract Hollywood productions. What was unique just a few years ago has quickly become standard. Back in 2002, only five states offered production incentives for film projects. But as of the beginning of this year, more than 40 states do. Arizona, Connecticut, Illinois and Louisiana, for instance, offer 30 percent tax credits or rebates, while Alabama, Maryland and North Carolina offer 25 percent--and on down the line. In fact, these types of incentives have become so de rigeur that even California has felt obliged to get in on the act. Lawmakers last year approved a 25 percent credit for films shot in the Golden State.
All totaled, states distributed $1.8 billion in incentives and tax credits to the entertainment industry from 2006-2008, according to an Associated Press study. "States are trapped," says Robert Tannenwald, an economist and a senior fellow at the Center on Budget and Policy Priorities. "Thanks to the extreme mobility of film production, when one state goes after these movies, another state, if it wants to stay in the game, has to match the deal they're offering."
But as those subsidies have become more widespread and generous, some policymakers are beginning to reconsider the whole idea. In recent months, several states have contemplated reducing the incentives they offer--or eliminating them altogether. Facing unprecedented fiscal pressures, some lawmakers question whether handing out money to Hollywood is the best use of increasingly limited public funds. And there's intense disagreement about the actual economic windfall associated with landing a movie production in your state. After a decade of ever-expanding film incentives, some say it's time to end states' gold rush for the silver screen.
Even in Michigan, where the incentives have brought in such high-profile success stories, the enticements have come under fire from people who say they're unnecessarily generous. The fact is that Michigan still faces a massive $1.6 billion budget gap, and it's been in a fiscal downturn for a solid decade. The state slashed spending on corrections, education and human services. At the same time, it doled out tens of millions of dollars in tax credits--$48 million in 2008, $68 million in 2009 and an estimated $155 million in fiscal 2011. Lawmakers last year debated placing an annual $50 million cap on the incentives that could be paid out. Even Granholm entertained the idea, but remained an avid supporter of the program as it stood. But the film industry and tax-cut advocates rallied, and ultimately no caps were put in place.
State Rep. Pete Lund was one of the legislators fighting for the cap. Lund says he has "no problem" with the basic idea of making tax credits available to film productions, but Michigan's handout is too generous. "I don't think we should be paying their bills," he says. "Is it creating jobs in the state? Sure. What industry wouldn't be creating jobs if the state were paying 40 percent of their bills for them? But you have to wonder how many other jobs we could be creating if we focused on reducing the tax burden on the businesses that we already have."
Michigan's dire economy and generous film incentives make it an extreme case. But the debate that's happened there is being replayed in states across the country. Governors in Massachusetts, Connecticut, Rhode Island, Oklahoma and elsewhere have recently proposed capping or eliminating their tax credits as a way to plug budget holes. Last year in Wisconsin, Gov. Jim Doyle essentially gutted his state's 25-percent no-limit tax incentive, turning it into a $500,000 annual grant program after a state Commerce Department report showed the benefit provided almost no net income for the state.
Kansas recently suspended its incentives for two years to save money. Although the program was modest compared to others, with a $2 million annual limit on payouts, the lack of any incentives effectively takes Kansas out of the running for attracting any projects, says Peter Jasso, the director of the state's Film Commission. "Just the way the industry works now--you have to have some incentive [to offer] to even start the conversation."
Officials in Iowa have suspended their film-credit program until mid-2013, after an independent audit in 2009 uncovered sweeping problems regarding credit oversight. The state had offered the nation's biggest rebate on film costs, reimbursing 50 percent of in-state spending and touting "half-price" filmmaking. But the audit showed moviemakers had grossly overinflated their expenditure figures and received credits for nonqualifying expenses, such as luxury car purchases. The state fired the head of the film office; he and two other employees await criminal trials later this year. Louisiana was similarly rocked by scandal last year when the state's film commissioner was sentenced to two years in prison for accepting bribes to award inflated credits.
But not all states are scaling back. Alabama, New York, North Carolina, Ohio, Utah and California have created or boosted their film incentives in recent months. And even in Louisiana, despite the scandal, lawmakers actually increased the state's tax credit and made it permanent.
Still, film incentives are increasingly coming under fire. Part of the problem is data. It's hard to get a good handle on the exact impact of an in-state movie production. In most places, the only reports on movie-production revenue and jobs come from the state film office--or the movie industry itself. Objective studies are relatively hard to come by. And even where independent studies of film incentives do exist, the data can easily be interpreted in myriad ways.
Take Massachusetts, which has offered a 25 percent film incentive since 2006 and already has attracted numerous big-name projects and stars, including Tom Cruise, Cameron Diaz, Leonardo DiCaprio and Mel Gibson. The Bay State is one of only a couple that require an annual, independent report on how the incentives are performing. When the most recent report was released by the Department of Revenue in July 2009, tax-incentive opponents said it unequivocally showed the credits weren't working. According to the report, the state paid out $113 million in movie tax credits in 2008, while filming in the state generated $17.5 million in new tax revenue and created about 1,100 full-time-equivalent jobs for state residents.
"That's roughly $89,000 spent by the state creating each new job," says state Rep. Steve D'Amico. "In terms of cost-to-benefit, it's clearly not justified." D'Amico sponsored a bill this year--ultimately unsuccessfully--to reinstate a $7-million-per-film cap that had been lifted in 2007. "Our funds are too scarce for us to be wasting money on economic development that has so little impact."
Looking at the same state study, though, film advocates saw Massachusetts' incentives program as an unqualified success. "We're gratified by the outcome," says Nick Paleologos, a one-time legislator who now heads the state's Film Office. The incentives were never meant to pay for themselves with new tax revenue, he says. Instead, they were intended to bring new spending to the state. Paleologos points to the $452 million spent by movie productions in Massachusetts in 2008. That's evidence, he says, that "the tax credit is working and doing what it was intended to do."
And that figure still doesn't capture the full impact of these productions, he says. For one thing, there's the "multiplier effect"--the money spent by film crews on hotels and food and other services keeps cycling through the local economy again and again. Added to that is the even less quantifiable--but no less important--boost in overall interest in the state. "When Sandra Bullock goes on TV and talks about how great it was to film in Rockport, Mass., it's like having a national celebrity tourism endorser for free." Discounting these kinds of secondary ripple effects misses the big picture, he says. "We may argue about how to count these dollars. But they're real."
Getting good data isn't the only problem. "These film credits have another shoe to drop," says Tannenwald of the Center on Budget and Policy Priorities. He's referring to the fact that in most states, the incentives paid to movie studios are transferrable. That means a film producer can sell unused credits on a secondary market. As a result, the credits could wind up benefiting people who have nothing to do with movies or entertainment. Worse, Tannenwald says, reselling the credits means they may be redeemed years down the line.
In Massachusetts, for example, credits awarded by the state in 2006 might not be redeemed until 2011 or 2012. And the number of the credits being resold is enormous: Of the $166 million in credits given out by Massachusetts from fiscal 2006 through fiscal 2008, $149 million were resold on a secondary market, according to Tannenwald. "It complicates budgeting and forecasting. It's a serious cost to policymakers and to the public in terms of uncertainty." So even if Massachusetts suspended its incentives today, it could still be paying out credits for years to come.
The worry, D'Amico says, is that states' one-upmanship may have created an irreversible system of incentive handouts. Offering these kinds of broad tax incentives to film companies isn't creating a permanent new industry in Massachusetts; it's merely setting the state up to pay an ongoing subsidy it can't easily get out of. Thanks to the constant competition from other states, he says, "these jobs will only persist as long as we continue to offer the credit. It's not as though we're creating jobs. We're renting them. But once you start handing out money, it's really hard to step away."
Despite those concerns and the uncertain economic benefits of film incentives, they remain extremely popular with the public. And that could prove to be one of the biggest obstacles to critics who want to do away with the tax credits. Even in the midst of Iowa's high-profile criminal investigation into its film program, a poll of state residents showed 61 percent still thought the credits were a good idea. In-state movie productions generate buzz, and visits from marquee-worthy celebs can engender no small amount of local pride. That can drown out a lot of talk about job creation and secondary credit markets. "It's hard for people to be rational about this industry," D'Amico says. "Everybody dreams they'll someday be in the movies. Everybody wants to see a celebrity walk down the street."
by Zach Patton
Zach Patton is a GOVERNING staff writer. He writes about a range of topics, including education, social policy issues, and urban planning and design. Patton is also the editor of GOVERNING's Management e-newsletter.
States spend billions on incentives to lure film productions away from Hollywood. Some say it's gone too far.
by Governing's Zach Patton, June 2010
In the 2009 movie Whip It, 17-year-old misfit Bliss Cavender longs to escape the beauty pageants and big hair of her tiny hometown of Bodeen, Texas, by joining an underground roller-derby league in Austin. In the film--actress Drew Barrymore's directorial debut--Bliss stares wistfully across the desolate Texas plains while killing time during her waitressing shift at the Oink Joint, the local barbecue dive that sports a giant pink pig on the roof and a sign touting its signature menu item, the "Squealer."
It's quintessential small-town Texas. Only it's not. It's southeast Michigan. Whip It was filmed almost entirely in and around Detroit. And Ypsilanti, a town near Ann Arbor, stood in for the fictional Bodeen. The Oink Joint was actually Ken's Diner, a shuttered restaurant in the little town of Birch Run, north of Flint. (Thanks to the increased local notoriety, Ken's has since been reopened and rechristened the Oink Joint. The giant pink pig, however, remains in storage.)
If you're wondering why a movie seeking to capture the flavor of Austin and its environs would set up shop in Michigan, it helps to know that for the past two years, the state has been home to the nation's most generous film incentives. Thanks to an aggressive tax-credit plan created by Gov. Jennifer Granholm in 2008, productions that shoot in Michigan can be reimbursed by the state for as much as 42 percent of their expenses.
That was enough to lure Whip It, which originally planned to shoot entirely in the Lone Star State. During filming, the movie's screenwriter told an Austin newspaper that the Michigan deal was just too good to pass up. "For a year, it was going to be Texas, and if it hadn't been for money, it would have been Texas all the way."
The influx of showbiz cash is welcomed by many in Michigan. In a state that's lost nearly a million jobs since 2000 and still suffers the nation's highest unemployment rate, attracting business revenue and creating new jobs--even the temporary, short-term positions associated with movie productions--is seen as a bright spot for the economy. But it's not quite that simple.
Michigan's movie-money measure has drawn all sorts of big-budget Hollywood productions, including Clint Eastwood's Gran Torino in 2008 and 2009's Up in the Air, starring George Clooney. This summer, the state will play backdrop for films starring Hugh Jackman, Pierce Brosnan and Jennifer Connelly, as well as the next installment of the Scream franchise. In the two years since the incentives became available, 89 movies and TV shows have been shot in Michigan. The state's film office says more than 4,000 jobs were created for Michigan crews in 2009, and another 4,000 were created for actors, including extras and day players. In 2007, before the tax credit was offered, film expenditures in the state were $2 million. That rose to $125 million in 2008 and to more than $223 million in 2009. Eastwood proclaimed that the state "will be the new film capital of the world."
Michigan may offer the sweetest deal to moviemakers, but the reality is that almost every state has some incentives designed to attract Hollywood productions. What was unique just a few years ago has quickly become standard. Back in 2002, only five states offered production incentives for film projects. But as of the beginning of this year, more than 40 states do. Arizona, Connecticut, Illinois and Louisiana, for instance, offer 30 percent tax credits or rebates, while Alabama, Maryland and North Carolina offer 25 percent--and on down the line. In fact, these types of incentives have become so de rigeur that even California has felt obliged to get in on the act. Lawmakers last year approved a 25 percent credit for films shot in the Golden State.
All totaled, states distributed $1.8 billion in incentives and tax credits to the entertainment industry from 2006-2008, according to an Associated Press study. "States are trapped," says Robert Tannenwald, an economist and a senior fellow at the Center on Budget and Policy Priorities. "Thanks to the extreme mobility of film production, when one state goes after these movies, another state, if it wants to stay in the game, has to match the deal they're offering."
But as those subsidies have become more widespread and generous, some policymakers are beginning to reconsider the whole idea. In recent months, several states have contemplated reducing the incentives they offer--or eliminating them altogether. Facing unprecedented fiscal pressures, some lawmakers question whether handing out money to Hollywood is the best use of increasingly limited public funds. And there's intense disagreement about the actual economic windfall associated with landing a movie production in your state. After a decade of ever-expanding film incentives, some say it's time to end states' gold rush for the silver screen.
Even in Michigan, where the incentives have brought in such high-profile success stories, the enticements have come under fire from people who say they're unnecessarily generous. The fact is that Michigan still faces a massive $1.6 billion budget gap, and it's been in a fiscal downturn for a solid decade. The state slashed spending on corrections, education and human services. At the same time, it doled out tens of millions of dollars in tax credits--$48 million in 2008, $68 million in 2009 and an estimated $155 million in fiscal 2011. Lawmakers last year debated placing an annual $50 million cap on the incentives that could be paid out. Even Granholm entertained the idea, but remained an avid supporter of the program as it stood. But the film industry and tax-cut advocates rallied, and ultimately no caps were put in place.
State Rep. Pete Lund was one of the legislators fighting for the cap. Lund says he has "no problem" with the basic idea of making tax credits available to film productions, but Michigan's handout is too generous. "I don't think we should be paying their bills," he says. "Is it creating jobs in the state? Sure. What industry wouldn't be creating jobs if the state were paying 40 percent of their bills for them? But you have to wonder how many other jobs we could be creating if we focused on reducing the tax burden on the businesses that we already have."
Michigan's dire economy and generous film incentives make it an extreme case. But the debate that's happened there is being replayed in states across the country. Governors in Massachusetts, Connecticut, Rhode Island, Oklahoma and elsewhere have recently proposed capping or eliminating their tax credits as a way to plug budget holes. Last year in Wisconsin, Gov. Jim Doyle essentially gutted his state's 25-percent no-limit tax incentive, turning it into a $500,000 annual grant program after a state Commerce Department report showed the benefit provided almost no net income for the state.
Kansas recently suspended its incentives for two years to save money. Although the program was modest compared to others, with a $2 million annual limit on payouts, the lack of any incentives effectively takes Kansas out of the running for attracting any projects, says Peter Jasso, the director of the state's Film Commission. "Just the way the industry works now--you have to have some incentive [to offer] to even start the conversation."
Officials in Iowa have suspended their film-credit program until mid-2013, after an independent audit in 2009 uncovered sweeping problems regarding credit oversight. The state had offered the nation's biggest rebate on film costs, reimbursing 50 percent of in-state spending and touting "half-price" filmmaking. But the audit showed moviemakers had grossly overinflated their expenditure figures and received credits for nonqualifying expenses, such as luxury car purchases. The state fired the head of the film office; he and two other employees await criminal trials later this year. Louisiana was similarly rocked by scandal last year when the state's film commissioner was sentenced to two years in prison for accepting bribes to award inflated credits.
But not all states are scaling back. Alabama, New York, North Carolina, Ohio, Utah and California have created or boosted their film incentives in recent months. And even in Louisiana, despite the scandal, lawmakers actually increased the state's tax credit and made it permanent.
Still, film incentives are increasingly coming under fire. Part of the problem is data. It's hard to get a good handle on the exact impact of an in-state movie production. In most places, the only reports on movie-production revenue and jobs come from the state film office--or the movie industry itself. Objective studies are relatively hard to come by. And even where independent studies of film incentives do exist, the data can easily be interpreted in myriad ways.
Take Massachusetts, which has offered a 25 percent film incentive since 2006 and already has attracted numerous big-name projects and stars, including Tom Cruise, Cameron Diaz, Leonardo DiCaprio and Mel Gibson. The Bay State is one of only a couple that require an annual, independent report on how the incentives are performing. When the most recent report was released by the Department of Revenue in July 2009, tax-incentive opponents said it unequivocally showed the credits weren't working. According to the report, the state paid out $113 million in movie tax credits in 2008, while filming in the state generated $17.5 million in new tax revenue and created about 1,100 full-time-equivalent jobs for state residents.
"That's roughly $89,000 spent by the state creating each new job," says state Rep. Steve D'Amico. "In terms of cost-to-benefit, it's clearly not justified." D'Amico sponsored a bill this year--ultimately unsuccessfully--to reinstate a $7-million-per-film cap that had been lifted in 2007. "Our funds are too scarce for us to be wasting money on economic development that has so little impact."
Looking at the same state study, though, film advocates saw Massachusetts' incentives program as an unqualified success. "We're gratified by the outcome," says Nick Paleologos, a one-time legislator who now heads the state's Film Office. The incentives were never meant to pay for themselves with new tax revenue, he says. Instead, they were intended to bring new spending to the state. Paleologos points to the $452 million spent by movie productions in Massachusetts in 2008. That's evidence, he says, that "the tax credit is working and doing what it was intended to do."
And that figure still doesn't capture the full impact of these productions, he says. For one thing, there's the "multiplier effect"--the money spent by film crews on hotels and food and other services keeps cycling through the local economy again and again. Added to that is the even less quantifiable--but no less important--boost in overall interest in the state. "When Sandra Bullock goes on TV and talks about how great it was to film in Rockport, Mass., it's like having a national celebrity tourism endorser for free." Discounting these kinds of secondary ripple effects misses the big picture, he says. "We may argue about how to count these dollars. But they're real."
Getting good data isn't the only problem. "These film credits have another shoe to drop," says Tannenwald of the Center on Budget and Policy Priorities. He's referring to the fact that in most states, the incentives paid to movie studios are transferrable. That means a film producer can sell unused credits on a secondary market. As a result, the credits could wind up benefiting people who have nothing to do with movies or entertainment. Worse, Tannenwald says, reselling the credits means they may be redeemed years down the line.
In Massachusetts, for example, credits awarded by the state in 2006 might not be redeemed until 2011 or 2012. And the number of the credits being resold is enormous: Of the $166 million in credits given out by Massachusetts from fiscal 2006 through fiscal 2008, $149 million were resold on a secondary market, according to Tannenwald. "It complicates budgeting and forecasting. It's a serious cost to policymakers and to the public in terms of uncertainty." So even if Massachusetts suspended its incentives today, it could still be paying out credits for years to come.
The worry, D'Amico says, is that states' one-upmanship may have created an irreversible system of incentive handouts. Offering these kinds of broad tax incentives to film companies isn't creating a permanent new industry in Massachusetts; it's merely setting the state up to pay an ongoing subsidy it can't easily get out of. Thanks to the constant competition from other states, he says, "these jobs will only persist as long as we continue to offer the credit. It's not as though we're creating jobs. We're renting them. But once you start handing out money, it's really hard to step away."
Despite those concerns and the uncertain economic benefits of film incentives, they remain extremely popular with the public. And that could prove to be one of the biggest obstacles to critics who want to do away with the tax credits. Even in the midst of Iowa's high-profile criminal investigation into its film program, a poll of state residents showed 61 percent still thought the credits were a good idea. In-state movie productions generate buzz, and visits from marquee-worthy celebs can engender no small amount of local pride. That can drown out a lot of talk about job creation and secondary credit markets. "It's hard for people to be rational about this industry," D'Amico says. "Everybody dreams they'll someday be in the movies. Everybody wants to see a celebrity walk down the street."
by Zach Patton
Zach Patton is a GOVERNING staff writer. He writes about a range of topics, including education, social policy issues, and urban planning and design. Patton is also the editor of GOVERNING's Management e-newsletter.
Yay for Terry and Brad! (Not Hatcher and Pitt)
Former Iowa governor Terry Branstad wins the republican primary, which is great because he is reported to be a firm film supporter, as is Iowa legislator Brad Zaun, who won his primary race to face Leonard Boswell in the congressional race. Terry was an early film proponent and I believe he put the program in place. Even if you don't agree with Mr. Branstad, you should vote for him for Iowa governor, rather than re-elect the Big Oaf who abruptly killed our film lives.
Sunday, June 6, 2010
From Entreedicta
From Entreedicta:
Louisiana Film Tax Credit legislation deserves support
PostDateIcon June 6th, 2010 | PostAuthorIcon Author: admin
Fortunately most of Louisiana legislators, including Governor Bobby Jindal, see tax credits as an important part of the state???? the economy and pressure to expand the program. Jindal said he would support extending the current 25 percent tax credits for film extra two years and 5 years on infrastructure credits. Jindal also supports eliminating the 2009 deadline for the Digital Media Production Tax Credit, a program for the development of video games, animation and special effects. And since legislators seem to agree on continuing the debate moves to the question of what the future should look like for the tax credit program? Among the factors being discussed during the debate on the future of Louisianaâ???? Incentive Program for the film are: * Louisiana’s incentive structure created Motion Picture Act allows film producers to state for tax credits on their products to Louisiana and skilled labor costs. These tax credits can be converted into cash and help make a film based productions Louisiana more lucrative for producers and investors. The percentages and use of tax credits are something that the legislature should examine it carefully to ensure that the program remains competitive. * Financial impact of the film industry Cinema has become an important economic engine for Louisiana. Reports on the state Film Office that Louisiana has taken over $ 2 billion in revenues and $ 200 million in payroll generated by the film and television between 2002 and 2008. * Infrastructure development key support film productions of films no longer continue to take place in Louisiana a solid infrastructure related film has taken root across the state. These include post-production services, staffing, finance and even special education programs is now statewide. * Impact of a deteriorating economy, like most states, Louisiana is facing a budget deficit for 2009. Declining state revenues makes it more difficult to extend the tax incentives in times of economic downturn. However, the potential decrease in jobs or revenue from film and television is more concern for state officials. * Increased pressure from other states on the success of Louisianaâ???? State film program of the other are now trying to compete in this sector and have begun to offer incentives of their own. States like Georgia and Michigan have “raised the stakes” in setting tax credit to higher levels has already been done before. It is a great debate in the Member States, whether or not this is financially viable, but the net effect has been greater competition. FBT Film & Entertainment would like to see the film tax credits extended in their current state. While other states have established programs with greater reductions Louisiana has many other factors that contribute to leveling the game, including unique places, strong film infrastructure, highly qualified staff and ongoing support of the state and local officials.
Louisiana Film Tax Credit legislation deserves support
PostDateIcon June 6th, 2010 | PostAuthorIcon Author: admin
Fortunately most of Louisiana legislators, including Governor Bobby Jindal, see tax credits as an important part of the state???? the economy and pressure to expand the program. Jindal said he would support extending the current 25 percent tax credits for film extra two years and 5 years on infrastructure credits. Jindal also supports eliminating the 2009 deadline for the Digital Media Production Tax Credit, a program for the development of video games, animation and special effects. And since legislators seem to agree on continuing the debate moves to the question of what the future should look like for the tax credit program? Among the factors being discussed during the debate on the future of Louisianaâ???? Incentive Program for the film are: * Louisiana’s incentive structure created Motion Picture Act allows film producers to state for tax credits on their products to Louisiana and skilled labor costs. These tax credits can be converted into cash and help make a film based productions Louisiana more lucrative for producers and investors. The percentages and use of tax credits are something that the legislature should examine it carefully to ensure that the program remains competitive. * Financial impact of the film industry Cinema has become an important economic engine for Louisiana. Reports on the state Film Office that Louisiana has taken over $ 2 billion in revenues and $ 200 million in payroll generated by the film and television between 2002 and 2008. * Infrastructure development key support film productions of films no longer continue to take place in Louisiana a solid infrastructure related film has taken root across the state. These include post-production services, staffing, finance and even special education programs is now statewide. * Impact of a deteriorating economy, like most states, Louisiana is facing a budget deficit for 2009. Declining state revenues makes it more difficult to extend the tax incentives in times of economic downturn. However, the potential decrease in jobs or revenue from film and television is more concern for state officials. * Increased pressure from other states on the success of Louisianaâ???? State film program of the other are now trying to compete in this sector and have begun to offer incentives of their own. States like Georgia and Michigan have “raised the stakes” in setting tax credit to higher levels has already been done before. It is a great debate in the Member States, whether or not this is financially viable, but the net effect has been greater competition. FBT Film & Entertainment would like to see the film tax credits extended in their current state. While other states have established programs with greater reductions Louisiana has many other factors that contribute to leveling the game, including unique places, strong film infrastructure, highly qualified staff and ongoing support of the state and local officials.
Wednesday, June 2, 2010
WWAY TV-3, A North Carolina TV Station's Report
Wilmington Council meets with Film Commission
Submitted by Shontrelle Robinson on Tue, 06/01/2010 - 1:22pm.READ MORE:
* News
* New Hanover County News
* film incentives
* Hollywood East
* Wilmington
* Wilmington Film Commission
WILMINGTON, NC (WWAY) -- This morning Wilmington City Council found out about a bill in the state legislature to lift the cap on the state's tax incentives for film projects. Council asked the Wilmington Film Commission for a briefing so council could see what the commission has accomplished in the past year.
Commission director Johnny Griffin says it's asking for the caps to be removed so that production companies can get the most bang for their buck in the Tar Heel State.
"Essentially, the 25 percent incentive was passed last year, but because of some caps that were on it the companies have just not been able to fully utilize it," Griffin said. "So essentially what we're asking for these caps to be removed so the companies can fully utilize what was attended for them to utilize in the first place."
Griffin said if the incentive is passed, then the movie business will pick up here in Hollywood East.
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Disclaimer: Comments posted on this, or any story are opinions of those people posting them, and not the views or opinions of WWAY NewsChannel 3,
Submitted by Shontrelle Robinson on Tue, 06/01/2010 - 1:22pm.READ MORE:
* News
* New Hanover County News
* film incentives
* Hollywood East
* Wilmington
* Wilmington Film Commission
WILMINGTON, NC (WWAY) -- This morning Wilmington City Council found out about a bill in the state legislature to lift the cap on the state's tax incentives for film projects. Council asked the Wilmington Film Commission for a briefing so council could see what the commission has accomplished in the past year.
Commission director Johnny Griffin says it's asking for the caps to be removed so that production companies can get the most bang for their buck in the Tar Heel State.
"Essentially, the 25 percent incentive was passed last year, but because of some caps that were on it the companies have just not been able to fully utilize it," Griffin said. "So essentially what we're asking for these caps to be removed so the companies can fully utilize what was attended for them to utilize in the first place."
Griffin said if the incentive is passed, then the movie business will pick up here in Hollywood East.
» Post to Del.icio.us Share on Facebook Post to Digg Post to Reddit
Disclaimer: Comments posted on this, or any story are opinions of those people posting them, and not the views or opinions of WWAY NewsChannel 3,
Tuesday, June 1, 2010
The New Mexico Independent,Great Article
NM paid out $181 million in film tax credits over nearly three years
By Trip Jennings 5/31/10 12:25 PM Digg Tweet
New Mexico can be found a lot on the big and little screen these days. Watch AMC’s critically acclaimed Breaking Bad, featuring two-time Emmy winner Bryan Cranston, and there are the Sandias. It’s hard to tell, but, yep, there’s Galisteo in Legion, a thriller with a God-is-angry-with-humanity-so-here-comes-the-apocalypse storyline that was released earlier this year.
That steady activity of film and TV shoots is raising New Mexico’s profile in Hollywood as several films or TV series shot here have racked up Oscar and Emmy awards in recent years. But the bigger profile is also raising the amount of money New Mexico is paying out to film and TV productions through a controversial tax credit program.
Over the past 33 months, 118 film and TV productions were paid $181 million through the program, including $60 million this fiscal year, state documents show.
This year’s payout appears likely to eclipse the $61,464,418.56 New Mexico doled out last year. This year’s total –$60,519,012.63 — was through April 14, more than two months shy of June 30, the end of the fiscal year, documents show.
The film tax credit program is wearing a bigger bulls-eye these days as New Mexico’s lagging economy, and a strained state budget, add urgency to critics’ calls for an end to the program.
Citing pared-down state services, higher unemployment and forced state worker furlough days — most state workers took their fifth, and final, furlough day of the fiscal year Friday, opponents say 2010 isn’t the time to be handing out money.
“We’re cutting services, furloughing state employees. And we’re sending tens of millions of dollars to Hollywood. That ain’t right. It’s wrong,” said first-term Rep. Dennis Kintigh, R-Roswell.
Kintigh, along with two top Senate Democrats, has emerged as a vocal critic of the program, citing worries about the state paying an industry to do business here at a time when New Mexico is hurting.
“We’re told if we don’t provide these incentives they will pack up and leave. If that’s the case the industry doesn’t have any roots here,” Kintigh said. “We don’t do that for the newspapers or the TV business.”
Doing away with the program is short-sighted, advocates say. The tax credits go toward reimbursing a portion of money production companies already have spent here in New Mexico, not to subsidize Hollywood.
Plus the incentives have helped grow New Mexico’s local film and TV industry from a few dozen folks several years ago to about 3,000 individuals earning a living, they say.
The average salary for someone working in the industry is “between $17 and $22 an hour, and that’s for the first 8 hours and then you go into the overtime and double time,” said Lisa Strout, director of the New Mexico Film Office.
At the same time the program helps bring in much-needed tax revenue for the state and local governments, thanks to the 24 major projects a year between films and TV series that New Mexico hosts, Strout said.
End the program, and you risk losing the jobs, not to mention the tax revenue, generated by the tax credit program.
“When certain people say, I don’t believe Hollywood will go away, well, call,” said Lisa Strout, director of the New Mexico Film Office. “I’ve had people tell me, ‘If this goes away, well, yeah, see ya.’”
The tax credit and how it works
The film tax credit isn’t a true tax credit, it’s more like a rebate. The film productions spend money in New Mexico and then the state reimburses a quarter of what each production spends in ‘qualified expenses,’ a broad category that contains any direct production expense purchased in New Mexico that has a state tax attached.
That could mean lumber purchased in New Mexico to help build a set, meals bought from a local caterer or receipts from a local car rental company for vehicles used by producers.
The money New Mexicans earn while working on the production, as carpenters or electricians or technical crew, also qualify as expenses eligible for the 25 percent reimbursement.
Restrictions keep a film production from claiming expenses for non-residents, although there are exceptions. A production company can get a rebate on money paid in rent for non-resident actors and stunt performers (but not for directors or producers), according to rules on the New Mexico Film Office’s website.
A production company also can claim what a non-resident actor or stunt performer is paid as a qualified expense, but only after they are paid through a “New Mexico entity and the non-resident actors agree to file a New Mexico personal income tax return,” the rules say.
If the state has given a rebate of 25 percent, then the 118 productions that were paid $181 million since July 1, 2007, have spent at least $724 million in New Mexico.
That’s a pot of money that likely would not exist without the tax credit and other incentives, including New Mexico’s no-interest film loan program, the state has used to attract film and TV productions, supporters say.
“You cannot just look at the half the connection,” Strout added. “You can’t just look at money going out. You have to look at the money coming in. This is money that came in to this state that is new. The benefit that we’re looking at is to New Mexicans.”
Fact checking and audits
Strout said the state has put in safeguards to ensure the production companies aren’t reimbursed for more than they’re entitled to, including two types of audits performed by the state’s Taxation and Revenue Department.
Rick Homans, the state’s tax and revenue secretary, told the Independent that his department asks smaller productions to document “every single expense.”
“On the larger ones, where there’s mountains of paperwork, we will randomly select invoices or receipts,” Homans said. “If in that random selection we see discrepancies then we will go deeper and deeper. We don’t commit the resources to go through every receipt.”
After going through receipts and invoices, his department then does a line-by-line audit of a production company’s application to confirm that every expense being applied for is eligible for the 25 percent reimbursement.
“If there’s any doubt about a transaction qualifying, then we ask for additional documentation until we’re satisfied,” Homans said.
The tax department has added personnel to its film tax credit division, which does 90 percent film tax credit work to “make sure we are paying these things out appropriately,” Homans said.
A competitive market
It’s not hard to find signs that New Mexico has raised its profile in Hollywood.
In addition to Breaking Bad, two other TV series are shooting in Albuquerque these days – USA’s In Plain Sight and Scoundrels, an ABC series premiering next month.
Meanwhile, dozens of films have been shot in New Mexico, from small character studies like Crazy Heart, for which Jeff Bridges won an Oscar this year, to the 2007 Oscar winner No Country for Old Men, based on Cormac McCarthey’s book by the same name.
But Strout said New Mexico can’t take that steady activity for granted. The competition for film and TV productions is fierce, with 40 other states offering incentives to lure productions their way.
The 25 percent New Mexico reimburses production companies for ‘qualified expenses’ is lower than the rate offered by 12 other states, including Michigan and Louisiana, Strout said.
“We are talking about one of the top exports from this country – the film and media industry –it’s like No. 2 or 3,” Strout said. “That’s why everyone is offering incentives.”
Not a convincing argument
Kintigh doesn’t find Strout’s argument convincing.
“This is a business bailout in advance,” Kintigh said. “We’re paying people to do business in New Mexico. That doesn’t work in any economic sense.”
Kintigh was unsuccessful this past legislative session in trying to stop the program with sponsored legislation. But he had some powerful allies in his fight, including Sen. President Pro Tem Tim Jennings and Senate Finance Committee Chairman John Arthur Smith. Smith has consistently questioned the economic worthiness of the program while Jennings suggested that Gov. Bill Richardson should shut down the program if he vetoed legislation restoring a state tax on food. (Richardson vetoed the tax but did not take Jennings up on his suggestion.)
Kintigh said he realizes what might be lost if the state stops the tax credit program.
“I’m scared they might” leave the state, Kintigh said of the film production companies.
The Roswell lawmaker said he has spoken with supporters of the tax credit program and feels for them.
“If these businesses leave their dreams are smashed,” Kintigh said. “I don’t want to destroy people’s dreams. That really grates on me, the people who have poured themselves into this. They have been sucked into something that isn’t sustainable.”
By Trip Jennings 5/31/10 12:25 PM Digg Tweet
New Mexico can be found a lot on the big and little screen these days. Watch AMC’s critically acclaimed Breaking Bad, featuring two-time Emmy winner Bryan Cranston, and there are the Sandias. It’s hard to tell, but, yep, there’s Galisteo in Legion, a thriller with a God-is-angry-with-humanity-so-here-comes-the-apocalypse storyline that was released earlier this year.
That steady activity of film and TV shoots is raising New Mexico’s profile in Hollywood as several films or TV series shot here have racked up Oscar and Emmy awards in recent years. But the bigger profile is also raising the amount of money New Mexico is paying out to film and TV productions through a controversial tax credit program.
Over the past 33 months, 118 film and TV productions were paid $181 million through the program, including $60 million this fiscal year, state documents show.
This year’s payout appears likely to eclipse the $61,464,418.56 New Mexico doled out last year. This year’s total –$60,519,012.63 — was through April 14, more than two months shy of June 30, the end of the fiscal year, documents show.
The film tax credit program is wearing a bigger bulls-eye these days as New Mexico’s lagging economy, and a strained state budget, add urgency to critics’ calls for an end to the program.
Citing pared-down state services, higher unemployment and forced state worker furlough days — most state workers took their fifth, and final, furlough day of the fiscal year Friday, opponents say 2010 isn’t the time to be handing out money.
“We’re cutting services, furloughing state employees. And we’re sending tens of millions of dollars to Hollywood. That ain’t right. It’s wrong,” said first-term Rep. Dennis Kintigh, R-Roswell.
Kintigh, along with two top Senate Democrats, has emerged as a vocal critic of the program, citing worries about the state paying an industry to do business here at a time when New Mexico is hurting.
“We’re told if we don’t provide these incentives they will pack up and leave. If that’s the case the industry doesn’t have any roots here,” Kintigh said. “We don’t do that for the newspapers or the TV business.”
Doing away with the program is short-sighted, advocates say. The tax credits go toward reimbursing a portion of money production companies already have spent here in New Mexico, not to subsidize Hollywood.
Plus the incentives have helped grow New Mexico’s local film and TV industry from a few dozen folks several years ago to about 3,000 individuals earning a living, they say.
The average salary for someone working in the industry is “between $17 and $22 an hour, and that’s for the first 8 hours and then you go into the overtime and double time,” said Lisa Strout, director of the New Mexico Film Office.
At the same time the program helps bring in much-needed tax revenue for the state and local governments, thanks to the 24 major projects a year between films and TV series that New Mexico hosts, Strout said.
End the program, and you risk losing the jobs, not to mention the tax revenue, generated by the tax credit program.
“When certain people say, I don’t believe Hollywood will go away, well, call,” said Lisa Strout, director of the New Mexico Film Office. “I’ve had people tell me, ‘If this goes away, well, yeah, see ya.’”
The tax credit and how it works
The film tax credit isn’t a true tax credit, it’s more like a rebate. The film productions spend money in New Mexico and then the state reimburses a quarter of what each production spends in ‘qualified expenses,’ a broad category that contains any direct production expense purchased in New Mexico that has a state tax attached.
That could mean lumber purchased in New Mexico to help build a set, meals bought from a local caterer or receipts from a local car rental company for vehicles used by producers.
The money New Mexicans earn while working on the production, as carpenters or electricians or technical crew, also qualify as expenses eligible for the 25 percent reimbursement.
Restrictions keep a film production from claiming expenses for non-residents, although there are exceptions. A production company can get a rebate on money paid in rent for non-resident actors and stunt performers (but not for directors or producers), according to rules on the New Mexico Film Office’s website.
A production company also can claim what a non-resident actor or stunt performer is paid as a qualified expense, but only after they are paid through a “New Mexico entity and the non-resident actors agree to file a New Mexico personal income tax return,” the rules say.
If the state has given a rebate of 25 percent, then the 118 productions that were paid $181 million since July 1, 2007, have spent at least $724 million in New Mexico.
That’s a pot of money that likely would not exist without the tax credit and other incentives, including New Mexico’s no-interest film loan program, the state has used to attract film and TV productions, supporters say.
“You cannot just look at the half the connection,” Strout added. “You can’t just look at money going out. You have to look at the money coming in. This is money that came in to this state that is new. The benefit that we’re looking at is to New Mexicans.”
Fact checking and audits
Strout said the state has put in safeguards to ensure the production companies aren’t reimbursed for more than they’re entitled to, including two types of audits performed by the state’s Taxation and Revenue Department.
Rick Homans, the state’s tax and revenue secretary, told the Independent that his department asks smaller productions to document “every single expense.”
“On the larger ones, where there’s mountains of paperwork, we will randomly select invoices or receipts,” Homans said. “If in that random selection we see discrepancies then we will go deeper and deeper. We don’t commit the resources to go through every receipt.”
After going through receipts and invoices, his department then does a line-by-line audit of a production company’s application to confirm that every expense being applied for is eligible for the 25 percent reimbursement.
“If there’s any doubt about a transaction qualifying, then we ask for additional documentation until we’re satisfied,” Homans said.
The tax department has added personnel to its film tax credit division, which does 90 percent film tax credit work to “make sure we are paying these things out appropriately,” Homans said.
A competitive market
It’s not hard to find signs that New Mexico has raised its profile in Hollywood.
In addition to Breaking Bad, two other TV series are shooting in Albuquerque these days – USA’s In Plain Sight and Scoundrels, an ABC series premiering next month.
Meanwhile, dozens of films have been shot in New Mexico, from small character studies like Crazy Heart, for which Jeff Bridges won an Oscar this year, to the 2007 Oscar winner No Country for Old Men, based on Cormac McCarthey’s book by the same name.
But Strout said New Mexico can’t take that steady activity for granted. The competition for film and TV productions is fierce, with 40 other states offering incentives to lure productions their way.
The 25 percent New Mexico reimburses production companies for ‘qualified expenses’ is lower than the rate offered by 12 other states, including Michigan and Louisiana, Strout said.
“We are talking about one of the top exports from this country – the film and media industry –it’s like No. 2 or 3,” Strout said. “That’s why everyone is offering incentives.”
Not a convincing argument
Kintigh doesn’t find Strout’s argument convincing.
“This is a business bailout in advance,” Kintigh said. “We’re paying people to do business in New Mexico. That doesn’t work in any economic sense.”
Kintigh was unsuccessful this past legislative session in trying to stop the program with sponsored legislation. But he had some powerful allies in his fight, including Sen. President Pro Tem Tim Jennings and Senate Finance Committee Chairman John Arthur Smith. Smith has consistently questioned the economic worthiness of the program while Jennings suggested that Gov. Bill Richardson should shut down the program if he vetoed legislation restoring a state tax on food. (Richardson vetoed the tax but did not take Jennings up on his suggestion.)
Kintigh said he realizes what might be lost if the state stops the tax credit program.
“I’m scared they might” leave the state, Kintigh said of the film production companies.
The Roswell lawmaker said he has spoken with supporters of the tax credit program and feels for them.
“If these businesses leave their dreams are smashed,” Kintigh said. “I don’t want to destroy people’s dreams. That really grates on me, the people who have poured themselves into this. They have been sucked into something that isn’t sustainable.”
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