« Ind. Decisions - Yet more on: Remote voting sites at issue in Lake County | Main | Court - "Kentucky Bar leader tried to stall abuse deal, records show" »

Sunday, October 12, 2008

Ind. Law - "States’ Film Production Incentives Cause Jitters"

An interesting story with an Indiana twist today in the NY Times. Some quotes from Michael Cieply's long report:

LOS ANGELES — Already on the hook for billions to bail out Wall Street, taxpayers are also finding themselves stuck with a growing tab for state programs intended to increase local film production.

One of the most shocking bills has come due in Louisiana, where residents are financing a hefty share of Brad Pitt’s next movie — $27,117,737, to be exact, which the producers will receive by cashing or selling off valuable tax credits.

As the number of movies made under these plans multiplied in recent years, the state money turned into a welcome rescue plan for Hollywood at a time when private investors were fleeing the movies. But the glamour business has not always been kind to those who pick up the costs, and states are moving to rein in their largess that has allowed producers to be reimbursed for all manner of expenditures, whether the salaries of stars, the rental of studio space or meals for the crew.

Louisiana, one of the most assertive players in the subsidy game, wound up covering that outsize piece of the nearly $167 million budget of Mr. Pitt’s “The Curious Case of Benjamin Button” — the state’s biggest movie payout to date — when producers for Paramount Pictures and Warner Brothers qualified the coming movie, a special-effects drama, under an incentive that has since been tightened. Separately, Louisiana’s former film commissioner is set to be sentenced in January to as much as 15 years in federal prison for taking bribes to inflate film budgets (though not that of “Button”) and, hence, pay higher subsidies.

Michigan, its own budget sagging, is in the middle of a hot political fight over a generous 40 percent rebate on expenditures to filmmakers that was carried out, with little opposition, only last April. Producers of films for studios like Warner Brothers and the Weinstein Company rushed to cash in, just as homegrown businesses were squeezed by a new business tax and surcharge. Rebellious legislators from both parties are now looking to put a cap on the state’s annual film spending, which some have estimated could quickly hit $200 million a year. * * *

Until two years ago, Louisiana’s program offered a 15 percent credit for virtually the entire budget of a qualified film (and more for Louisiana resident wages), including money that may have been spent out of state. Things were fast and loose enough in Louisiana that Mark Smith, who oversaw the program, pleaded guilty last year to taking $67,500 in bribes to inflate budgets for a film production company that was not named by the authorities.

Kathy English, a spokeswoman for the United States attorney’s office in New Orleans, said the case remained open.

Louisiana’s new rules offer a larger credit, but only on spending within the state. That made the incentive less attractive for big-budget movies, like “Button,” which was done under old rules, and could recover parts of star salaries and other expenses that left Louisiana. But it has drawn a welter of smaller movies and TV shows, 70 of which have been shot so far in 2008, up from 56 the year before.

What about Indiana?The website Inside Indiana Business has an entry from Feb. 15th of this year that begins:
Governor Mitch Daniels calls the Indiana State Senate's vote to override his veto of a bill that would provide incentives to production companies filming in the state, "truly an irresponsible decision." The legislation provides refundable tax credits for specific production expenses. The bill now becomes law.
Governor Daniels vetoed the bill April 28, 2007. Here is the ILB entry from that date (and incidentally the ILB is bemoaning the fact that the veto message is not readily accessible -- well, here is another good example of why it should be.)

Inside Indiana Business' story on the veto override includes interesting quotes from the Governor and from one of the bill's cosponsors. From the latter:

“The governor said when he vetoed this bill it came with too high a price tag, but the millions of dollars that the film industry spends in the states in which they work could greatly benefit our state. Indiana has a lot to offer the film industry, but a filmmaker is going to shoot where it is the most economical for the production. Indiana has been losing out to neighboring states and these incentives are necessary to recruit filmmakers to come here and make their investments.”

Twenty-nine states offer various levels of incentives for media productions. The state of Louisiana has seen revenue from film jump from $20 million to over $600 million in the first four years after enacting incentives. Five years ago, Illinois began offering tax credits on in-state film production costs and brought in $77 million and 15,000 jobs in 2003.

Finally, for now, the Indianapolis Star's Christopher Lloyd had a long Star blog post dated Aug. 15 headed "Indiana film incentives fail to attract filmmakers so far." Some quotes:
Indiana has finally positioned itself to become the real-life backdrop for blockbuster films and network TV shows.

But in the six weeks or so since offering its new film incentives program -- which went into effect July 1 -- no new film or television productions have qualified for the tax rebates offered. No applications have even been received.

Compare this to Michigan, which introduced its own film incentives just three months earlier. Since then, more than $150 million in film business has flooded into the state, including Clint Eastwood's newest film, "Gran Torino."

The difference? With up to a 42 percent rebate on production costs, Michigan's incentives are nearly triple the 15.percent in rebates the Hoosier state offers. * * *

Even Bloomington's Angelo Pizzo, the writer/producer of two of the most quintessentially Indiana movies, "Hoosiers" and "Rudy," admits that if forced to choose between shooting his next projects here or in another state with better incentives, it might be hard to persuade his financiers to stay here.

"One of the reasons I got behind the (incentives) bill is there are a number of projects I'm involved with that I want to shoot in Indiana. And right now, I'm faced with a real dilemma. Do I, out of sentiments, out of wanting to support the film business in Indiana, do it for 15 percent here, or for 42 percent (in Michigan)?" he said. "Economically, it's hard for me to justify." * * *

Brad Rateike, a spokesman for Daniels, said the governor thinks the incentives as currently authorized are an improvement over the bill he vetoed, citing changes made in the past legislative session to cap the total amount of tax rebates at $5 million annually, and to bring applications under the review of the IEDC.

Still, Daniels remains concerned that too many categories of expenses, such as legal work, will qualify for rebates, and that incentives will end up going to productions that were going to shoot in Indiana anyway. * * *

Indiana film incentives

Went into effect July 1; qualified media productions are eligible for a tax rebate of up to 15 percent on production costs, with an annual cap of $5 million. They're also eligible for exemption from state sales tax on lodging and acquisition or rental of tangible personal property. The minimum spending for eligible productions is $100,000 for feature films, television shows and documentaries and $50,000 for commercials, short films and music videos.
Other states:

Michigan: Up to 42 percent of production costs, with 25 percent for the construction of new studios and 50 percent for on-the-job training of state residents. Recent productions: "Gran Torino," starring and directed by Clint Eastwood; "Prayers for Bobby," a Lifetime Network movie starring Sigourney Weaver.

Louisiana: 25 percent, with up to 40 percent for studios building soundstages that applied before August. Recent productions: "Disaster Movie"; "W," directed by Oliver Stone.

New Mexico: 25 percent, with 50 percent for on-the-job training of state residents. Recent productions: "Beer for My Horses," starring Toby Keith; "Swing Vote," starring Kevin Costner.

Illinois: 20 percent. Recent productions: "The Dark Knight," starring Christian Bale and Heath Ledger.

New York: 30 percent, with 35 percent for productions in New York City. Recent productions: "Ugly Betty"; "The Greatest," starring Pierce Brosnan and Susan Sarandon.

Connecticut: 30 percent. Recent productions: "Revolutionary Road," starring Leonardo DiCaprio and Kate Winslet.

California: The historic capital of filmmaking does not have any film incentives, although Gov. Arnold Schwarzenegger is pushing tax credits.

You can see the text of the overridden veto - HEA 1388, here - the "Media Production Expenditure Tax Credit," IC 6-3.1-32, here, beginning on p. 2.

Changes made in 2008 to tighten up the law (putting a $5 million limit on all tax credits, rather than on tax credits per corporation) can be found in HEA 1125 (PL 131-2008), SECTIONS 18-20 (pp. 27-29).

Here is the current text of IC 6-3..1-32.

Posted by Marcia Oddi on October 12, 2008 08:13 AM
Posted to Indiana Law