Gov. Pat McCrory seeks drastic changes to North Carolina’s film incentives program, according to his budget proposal that was filed in the Senate late Thursday.
The current film incentives package that expires at year’s end allows production companies to claim 25 percent of their qualifying expenses up to $20 million for production companies that spend at least $250,000.
The governor’s proposal replaces that 25 percent rebate with several separate credits and tax exemptions for expenses. It would reimburse state corporate sales and gas taxes, credit 5.3 percent of wage expenses and credit 4 percent of payments for services from out-of-state businesses and 5 percent from in-state businesses.
Counties also would have the option to reimburse their local sales taxes to the production companies.
McCrory’s proposal also lowers the rebate cap to $6 million and requires at least $1 million in qualified spending.
According to a statewide film audit detailing the money spent by productions in 2013, two major productions filmed at least partially in New Hanover County received a rebate of more than $6 million – NBC’s adventure series “Revolution” ($14.2 million) and CBS’ summer series “Under the Dome” ($8.3 million). HBO’s locally filmed comedy series “Eastbound and Down” received $5.2 million from the program.
Since the current incentive program was implemented in 2011, only one production, Marvel’s locally filmed “Iron Man 3,” has met the $20 million cap.
The governor’s office declined to answer questions about the bill but issued a statement.
According to the statement from spokesman Josh Ellis, “The governor’s budget revises the state’s film strategy in order to encourage long-term capital investments versus short-term projects with short-term returns.”
“The budget reforms the film credit program by implementing a more cost-effective approach to encourage investment in the film industry in North Carolina,” Ellis said via email. “Under this proposal, the production company would receive a refund on all state taxes paid by the company, including income taxes paid by film employees. It would give local governments the option to rebate local taxes in the same manner. A new credit for investment in production and post-production facilities is also proposed to encourage capital investment..”
State Commerce Secretary Sharon Decker said McCrory’s inclusion of the incentive proposal in his budget is a sign of his support for the industry’s continued presence in North Carolina.
“That’s a really strong message,” she said. “I think there will be an awful lot of discussion about this in the House and Senate over the next few weeks.”
Of what the governor proposed, Decker said: “It’s really a total redesign” that bases the credit on sales tax.
The bill also provides a tax credit to companies that build production or post-production facilities, such as soundstages.
State Rep. Susi Hamilton, D-New Hanover, said that’s a good idea in theory but won’t do any good if the film industry flees to other more competitive states.
“There won’t be any need to build new facility studios if no production companies will come here to use them,” she said. “I understand the gesture, but it doesn’t fit the industry. He’s trying to treat the industry like a traditional manufacturing incentive, and that’s not how it works. That’s not how the industry functions.”
Johnny Griffin, director of the Wilmington Regional Film Commission, said he needed time to study the particulars before commenting Thursday.
Vans Stevenson, senior vice president, state government affairs for the Motion Picture Association of America, said he was encouraged by the continued dialogue.
“We are gratified the governor supports the continuation of the production tax incentive program and has put forth a proposal,” he said. “The House is considering a bipartisan bill to extend the incentive, and we are hopeful the Senate will engage soon. We have growing optimism that the governor and both chambers working together will enact a competitive and reliable production tax incentive that will continue to be competitive, and sustain North Carolina’s motion picture and television industry as a vibrant source of jobs and economic activity for years to come.”
Earlier this week, Hamilton along with Reps. Frank Iler, R-Brunswick, and Ted Davis, R-New Hanover, proposed legislation that would keep the incentives as they are and do away with the expiration date, also known as a sunset date.
The governor proposes extending the film’s sunset date to Jan. 1, 2018.
By Molly Parker & Hunter Ingram