Carolinas split on tax credits for filming

From wire reportsApril 27, 2013 

— Lawmakers in the two Carolinas are headed in opposite directions when it comes to film productions.

S.C. legislators this week agreed to fast-track a bill that would increase tax rebates for movies and TV shows in an attempt to woo a CBS legal drama to film in Charleston.

“Reckless” has already filmed its pilot episode in Charleston. The show must decide by mid May whether to shoot in South Carolina or Georgia, which offers more money than South Carolina, said Rep. Phyllis Henderson, R-Greenville.

“Basically, they said, ‘We can just as easily move this to Savannah. It’s got the same historical scenery,’ ” Henderson said. “That’s basically one of the reasons why we wanted to try to get (the bill passed) in the next week or so.”

Meanwhile in North Carolina, a House bill that would end tax refunds for film production companies is generating debate over the value of government-backed incentives for businesses.

The measure would stop production companies from collecting a check when the size of their credit is greater than what they owe in state taxes. Under the new legislation, companies could use tax credits to reduce what they owe but not to collect additional money.

Opponents say that change would gut the incentive because most crews have little to no tax liability and North Carolina can expect to see its film boom go bust. Supporters of the bill counter that there’s no evidence the $30 million spent subsidizing production companies in 2011 directly links to the level of job growth cited by the film industry.

South Carolina lawmakers are hoping for some of that growth. Deadline Hollywood described “Reckless” as a “sultry legal show set in Charleston, South Carolina, where a gorgeous Yankee litigator and a Southern City Attorney struggle to hide their intense attraction while clashing over a police sex scandal.” Henderson said the show “has a good chance it will get picked up” for the fall season but noted that “just because we pass (this bill) doesn’t necessarily mean it is definitely going to happen.”

But even if the House and Senate can pass the bill in the next few weeks, it’s unclear if Republican Gov. Nikki Haley would sign it. The governor and other GOP leaders just finished a campaign to borrow $120 million and give it to Boeing to help expand its facility in North Charleston and, according to company officials, hire 2,000 more people. Haley signed that bill into law on Tuesday.

But Haley has opposed other tax incentives, including an incentive used to lure online retailer to Lexington County in 2011. A spokesman said Haley and her staff are “watching the bill as it goes through the process.”

South Carolina already pays production companies a rebate of 15 percent of whatever they spend on wages and supplies purchased in South Carolina. The bill would increase those rebates to 30 percent for supplies and 20 percent for wages – 25 percent if the employees live in South Carolina.

Production companies would only get the money on two conditions: they spend at least $1 million in South Carolina, and South Carolina has enough money to pay them. Last year, lawmakers spent $6 million of the $10 million lawmakers set aside for movie and TV show rebates, according to the Department of Parks, Recreation and Tourism.

If “Reckless” films in South Carolina, it could spend between $60 million $70 million per year, according to Sen. Ray Cleary, R-Georgetown.

From 2007 to 2011, South Carolina paid rebates to nine film productions, including “Army Wives,” the drama series on the Lifetime network, filmed in Charleston, now in its seventh season. The state has paid $21 million in wage and supplier rebates to the productions, according to a 2011 study prepared for the state Department of Parks, Recreation and Tourism.

In North Carolina, production crews that spend more than $250,000 are eligible for credits valued at 25 percent of in-state expenses, up to $20 million. Those companies receive direct refunds if the value of their credit exceeds their tax liability. The recent bill, sponsored by Democrats and Republicans, would limit the credit to what the companies owe, effectively eliminating refunds.

Although they may not pay income taxes, film companies generate sales tax revenue and tourism interest, said Johnny Griffin, director of the Wilmington Regional Film Commission. They also employ people who pay taxes, he said.

But, he pointed out, the companies are rational players hunting for the best deals in a market with plenty of choices.

“I think in our case it’s very clear that our clients basically run financial models on each state, and the films taking place in `Anytown U.S.A.’ can be done in multiple locations,” he said. “It basically comes down to a business decision.”

Wilmington is the center of an industry that has grown as tax benefits in the state have become more attractive. But North Carolina hasn’t been alone. Elected officials across the country have pushed for incentives to draw film production, and now 45 states offer a combination of credits, rebates and exemptions.

After former Gov. Beverly Perdue more than doubled the cap on refundable tax credits in 2010, the film industry has reported record year after record year of investment in the state. In 2011, a year that saw “Iron Man 3” and “The Hunger Games” film in the state, the North Carolina Film Office reported $220 million in spending that created 3,300 jobs. That number climbed to more than $376 million the next year.

In 2011, the state paid $30 million in tax credits to 22 film companies that spent $120 million and employed 10,500 people, according to the N.C. Department of Revenue.

A recent analysis from the General Assembly’s nonpartisan research division concluded that only 55 to 70 jobs in 2011 can be directly attributed to the state’s tax credits. It also argued that the money spent in 2011 would have yielded 290 to 350 more jobs if the state cut business taxes across the board by the same amount.

The (Columbia) State and The Associated Press contributed to this report.

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