Magazine article Variety

The United States of Incentives

Magazine article Variety

The United States of Incentives

Article excerpt

The competition to offer Hollywood lucrative tax rebates is fierce even as some local pols begin to question the value of givebacks by peter caranicas and Rachel abrams

PRODUCERS LOOKING FOR A LOCATION weigh many factors - screenplay, crew base, availability of stages, travel and lodging - but these days, first and foremost, they consider the local incentives and tax breaks that can reduce a production's budget. Forty-two U.S. states and territories now offer such benefits, says Joe Chianese, who tracks incentives for payroll services firm Entertainment Partners. But while such givebacks can be good for the bottom line, they can also be tricky: Incentives can change on a dime, often subject to the whims of a state's political party when power changes hands.

Michigan's once-generous incentive program, for example, came under fire when Republican Gov. Rick Snyder came into office in 2011. Snyder cut the state's 42% refundable tax credit down to 32%, which damaged production infrastructure that had been lured to the state.

"The scaling back of the incentive drastically affected the waterfall of film activity pouring into the state," says Hopwood DePree, owner of Michigan-based production outfit TicTock Studios. Applications for the state's tax program fell off almost immediately. That same year, one of Michigan's largest production houses, Raleigh Studios, which had come to the state two years prior, defaulted on its $18 million bond.

Another critique is that incentives are open to corruption.

The industry was spooked in 2011 when Iowa's film commissioner was charged with criminal misconduct in his handling of the state's film tax credits. The case became a poster child for opponents of film incentives coast to coast.

"There are always individuals with ill intent," acknowledges Chris Stelly, exec director of Louisiana Entertainment, which oversees the state's transferable tax credit of up to 35%. "We won't tolerate any abuse toward these programs." He adds that Louisiana has a stringent review process in place, denies expenditures that don't qualify and turns cases that don't pass the sniff test over to law enforcement. Some cases are under investigation now, he says.

Other arguments against incentives hold that they don't help the states that offer them. In March, the Massachusetts revenue commission issued a scathing report on the state's tax credit program, which stated that two-thirds of the total $175 million awarded in 2011 went to out-of-state spending. …

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