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Lawmakers question tax credit for movie studios
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Published: June 25, 2009
RALEIGH - North Carolina lawmakers are pushing through a hefty increase in the tax credit for movie makers even though a study commissioned by the state film office says the state would lose money on the deal for at least two years.
The experience other states have had with film credits suggest such an incentive might not pay for itself, leading some Republicans to question giving such a tax break as the state's cash crunch puts teachers in the unemployment line.
But representatives of the film industry and North Carolina's film office say the payoff will be down the road. They argue that the tax credit will not cost the state for the first two years, but it will lure jobs to the state.
As a bonus, Screen Gems Studios, which already operates studios in Wilmington, has pledged to build a production studio in Charlotte if the state increases the handout to Hollywood.
"Screen Gems has told the governor that if this (tax credit) goes to 25 percent," said John Merritt, a lobbyist for the film industry, "they will make a major investment in Charlotte in building a new film studio."
The Senate on Wednesday gave final approval to legislation that would raise the film tax credit from 15 percent to 25 percent of qualifying expenditures in the state. That means that a production company totals the money it spends in North Carolina on expenses such as salaries, hotel rooms, renting land and buildings, supplies, food and assorted other costs. They report that to the state the following year and get a 25 percent rebate on the total. The bill now goes to the House.
Proponents argue that the financial sweetener will help North Carolina boost its already considerable film production business. They say states are escalating the battle of giveaways to studios. Georgia, which beat out North Carolina in April for a movie featuring teen star Miley Cyrus, last year boosted its credit to 20 percent, plus an additional 10 percent if film makers include an animated Georgia logo in the final production.
A study by the accounting firm Ernst & Young showed the state would recoup 69 cents for every dollar given in the tax credit during 2010 and 67 cents in 2011.
If local tax revenue is included, the tax credit garners 92 cents for each dollar in tax credit during the first year and 89 cents in the second, according to the study.
Critics, primarily Republicans, aren't buying.
"We are out of money. ... At the same time, we are opening up the drawers, opening up the safe, opening up the piggy bank of the people of this state to increase the incentives given to the film industry," said Senate Republican Leader Phil Berger of Eden.
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