House panel denies film tax bid

House Republican leaders fended off a last-minute attempt Wednesday to add an extension of the state's film tax incentive program to the budget.

Rep. Ted Davis, R-New Hanover, introduced the amendment at the end of the House Finance Committee hearing on the budget, with the support of Rep. Susi Hamilton, D-New Hanover.

The proposal would have extended the refundable tax credit, due to expire at the end of the year, through 2016, albeit at a reduced rate. The per-production cap, now set at $20 million, would have been lowered to $15 million, and the amount productions could claim would fall from 25 percent of eligible expenditures to 22.5 percent.

In the meantime, under the proposal, the state would undertake a study of the economic impact of the incentive. 

Davis noted that a film industry-backed study showed a net profit for the state, while the legislature's fiscal research staff said the opposite was true.

"Why not allow this independent study to take place during that two-year extension, so we can truly see what those impacts are?" he asked. 

He warned the panel that the lowered credit would likely take the state out of the running for future blockbusters, but it would at least attract smaller films and TV production.

"This is the least amount that will keep North Carolina as a Tier 1 location. If you’re not a Tier 1, then you might as well have no incentives at all, because no one’s going to consider coming here," he told the panel.  

Davis said the film industry supports 4,200 full-time jobs in North Carolina at an average salary of $60,000. That doesn't count the part-time work, contracts and the impact on local businesses that service and supply the productions, he added.

With the credit ending, he said, the industry will go elsewhere, leaving highly specialized workers unemployed.

"This amendment is critical to economic development in North Carolina in a good, clean, non-polluting industry," he said.

The right-wing group Americans for Prosperity strongly opposes extending the film credits and is running radio ads against them in key Republicans' districts.

Alluding to that political pressure, Davis pleaded with his fellow Republicans to add the extension to the budget so it would become an item to be negotiated with the Senate in the final spending plan.

"There’s no reason for us to beat ourselves up over this in committee or on the House floor," he said. 

Rep. Robert Brawley, R-Iredell, spoke in favor of the bill, but more Republicans spoke against it.

Rep. Mike Hager, R-Cleveland, called the credits "an affront to our education system." He said the millions of dollars now going to the industry should be used instead to pay teachers and teaching assistants.

Rep. Bill Brawley, R-Mecklenburg, pointed out that the state is writing multimillion-dollar checks to subsidize productions, even those that pay little or no state tax.

Hamilton countered that the state also writes multimillion-dollar checks to US Airways every year to offset its fuel taxes.

"That’s an outside-of-North Carolina corporation," she said. "We’re talking about 4,200 workers in North Carolina that are already here."  

"If what we're about is jobs," added Rep. Kelly Alexander, D-Mecklenburg, "this makes sense."

The amendment failed 16-20, with all but three Republicans voting against it. Davis, Robert Brawley, and Rep Linda Johnson, R-Cabarrus, sided with Democrats in support of the extension.

Last week, the Senate added a film grant program to its public-private partnership legislation, but Davis said the program won't work because it will run out of money almost immediately. That bill hasn't yet been heard by the House.