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Film, TV credits roll differently under proposed legislation

Posted April 22, 2013 4:18 p.m. EDT
Updated April 22, 2013 6:28 p.m. EDT

— A bill backed by Rep. Paul Stam, R-Wake, would change a tax credit North Carolina provides to film and television production companies by insisting that they make money in the state before getting any credits.

Films, television shows and commercials that spend more than $250,000 in North Carolina are eligible for a tax credit worth 25 percent of what they spend in the state, up to a maximum of $20 million.

In 2011, various productions spent $220 million in the state, creating 3,300 crew positions, but a study by the Fiscal Research Division of the General Assembly attributes only 55 to 70 of those jobs to the presence of the tax credit.

By comparison, cutting business taxes by the same $30.3 million claimed under the credit in 2011 would have created 370 to 450 jobs, according to the study.

The study also notes that, unlike most tax credits offered by North Carolina, the film production credit isn't capped by a company's overall tax liability. In some cases, the state has cut checks to refund the amount of the tax credit to companies that don't owe any state taxes.

"There is little to restrain the potential growth of this tax expenditure," the study states.

Projections from the Department of Revenue show that the state paid out more than $45 million for the credit last year, when film and television productions spent a record $376 million in North Carolina and created 4,100 crew positions.

House Bill 994 addresses this portion of the credit by eliminating any refunds. Once a company has used up its state tax liability through the credit, it wouldn't receive any more money.

Stam called the refunds "welfare checks to Hollywood," noting that he has learned that movie producers have started structuring their business to maximize the tax credit and then run all other expenses through non-taxed entities.

"We have been had," he said in an email to WRAL News, adding that his bill gives producers "an incentive to earn their income here."

Film industry boosters fear that movie-making would fade to black in North Carolina without the tax credit.

"The North Carolina tax incentives that we have are very competitive right now in recruiting the industry, so that’s another selling point that we have," said Johnny Griffin, director of the Wilmington Regional Film Commission.

Griffin also pitches the 30 years of experience and the talents of crew members at EUE/Screen Gem Studios in Wilmington.

"What we play very well here is sort of what our industry refers to as 'Anywhere USA,'" he said.

CBS is shooting its new series "Under the Dome," about a town sealed off by a mysterious, transparent force field, in Wilmington. It's one of 11 productions currently filming in Wilmington, Charlotte and western North Carolina.

Griffin said the film industry's economic impact on North Carolina goes beyond employing hundreds of highly skilled film professionals and having Hollywood actors staying in hotels, renting cars and eating in town. Much of what's on the sets comes from local businesses, from the clothes the actors wear to furnishings for the sets to the cars, trucks and burning plane parts.

"They probably spend more money with local small businesses than any other industry," he said. "Plain and simple, it's jobs the industry creates – money they spend on local companies in the area."

Richard White, a Clayton native who is second assistant director on "Under the Dome," agrees that the tax credits have been a boon for the film and TV industry in the state.

"The past few years, there wasn’t a lot of work in North Carolina. Now, with the incentives, it’s picked back up, so (there are) more opportunities for us to work at home," White said.

"We know they're creating jobs because, last year, I was working in Los Angeles, and now, because of this show, I'm working at home," he said. "I can stay here and spend my money here and stay close to family and things like that. So, it's actually keeping businesses and jobs here in North Carolina, so that's great."