Senate wants a new grant program for film incentives
Posted June 5, 2014
Raleigh, N.C. — Film and television productions could apply for state grants under a program crafted by senators to replace a tax credit for the industry that will expire at the end of this year.
Industry advocates have told lawmakers that allowing the credit to expire without a replacement will cost the state jobs. This issue is a bipartisan one, with Republicans and Democrats from areas that have hosted productions, including Wilmington, Charlotte and Winston-Salem, lobbying for the grants, while lawmakers from other areas are more skeptical about the program.
"I hope that we're taking a step here to retain that film industry and give them a chance to grow," said Sen. Bill Rabon, R-Brunswick.
The film credit measure was added to a bill that would remake the Commerce Department, turning many government functions over to a public-private partnership. The Senate Appropriations Committee approved the bill Thursday morning. The full Senate gave the measure tentative approval 38-6 this afternoon. A final floor vote will likely come next week before the measure goes to the House.
Under this new program:
- Film productions would have to spent at least $10 million in the state. Television series would have to spent at least $1 million per episode. Commercial productions would have to spend $500,000.
- Grants could not exceed 25 percent of qualifying expenses and would be capped at $5 million for a film or television production and $250,000 for a commercial. The state's current program allows companies to receive up to $20 million in tax breaks.
- Grants could not go toward a production that is obscene, political advertising, fundraising, marketing, news programming, a live sporting event, radio production or and an awards show.
- The Commerce Department would be expected to give priority to productions that employ North Carolina residents, those that invest in permanent structures or improvements to the state, those that film in economically distressed areas of the state and those that are "likely to increase tourism."
The measure is at odds with a proposal by Gov. Pat McCrory that would have remade the state's current tax credit program to be less generous and focus on in-state production companies.
Sen. Harry Brown, R-Onslow, the sponsor of the bill, said the new provision gives both the state and filmmakers certainty.
For the state, Brown said, it was important to know how much the legislature will spend on the industry every year. Claims made against North Carolina's tax credit have varied. In 2012, production companies claimed $78 million in credits, according to the Department of Revenue. In 2013, revenue reports show producers claimed $61.1 million in credits. That number is expected to dip for the 2013-14 year, according to members of the legislature's staff.
The grant program, he said, "allows us to look at it every single year. If it makes sense, we can add more."
The Senate bill provides $20 million for the program, which would become available Jan. 1, 2015, for six months. In theory, that is equivalent to $40 million in annual funding, although the current General Assembly cannot force the next set of lawmakers to set aside that funding. Still, the Senate bill represents a scaling back of the state's commitment to the industry and a curtailment of what any one individual production could receive.
Far from creating certainty, say critics of the bill, the Senate plan would create an annual scramble for funds.
"We'll be fighting this battle every year, and the industry won't stand for it," said Rep. Susi Hamilton, D-New Hanover.
Other state grant programs frequently find themselves fighting for renewal during the annual budget process, with funding and allegiances shifting depending on how flush state coffers are and which lawmakers are in charge of budgeting.
Conservative critics say the shift away from the tax credit program is a good start but not the ideal.
"In an ideal world, we would have no special treatment for special businesses," said Becki Gray, a lobbyist with the John Locke Foundation, a conservative public policy group.
In some ways, this bill is aimed at continuing to help the film industry over the philosophical objections of Republican lawmakers and conservative independent expenditure groups such as Americans for Prosperity.
"Don't say the 'I-word.' It's not an incentive," Rabon said. "It's a grant."