Unique, different and thinking outside the box. That’s what film industry officials have called Gov, Pat McCrory’s proposal to significantly alter North Carolina’s film incentive program.
A Senate budget bill filed Thursday on behalf of the governor put forward a massive overhaul of the film incentives that strikes the current 25 percent rebate and replaces it with several separate credits and tax exemptions for expenses. That came on the heels of legislation filed by three local lawmakers seeking to keep the tax credits package as it is, but do away with its Jan. 1, 2015, sunset date.
But it’s a plan that hasn’t even been released yet that could have the most impact on the debate.
State Sen. Bill Rabon, R-Brunswick, said he’s working with his Senate colleagues on another proposal that he described as “a little different” than the governor’s plan.
“The film industry has been good to us and we should support them,” he said.
Rabon, who co-chairs the powerful Senate Finance Committee, declined to release details, saying discussions were still premature.
It’s important to note that although several film incentives proposals have been floated, the heavy negotiating has yet to begin. The House and Senate take turns starting the budget process, and during this two-year legislative session it is the Senate’s turn. That happened Thursday when three senators on behalf of McCrory released bills outlining his budget proposal – the governor’s film incentives rewrite included.
Before the budget can be considered on the Senate floor, it must go through several committees. It is largely before and during the committee process where senators – namely Senate Republican leaders – will craft their own budget language to reflect their priorities.
The budget will then go to the House, where a similar process will be followed.
Where the two chambers disagree on matters, a conference committee will be named to include House and Senate members. This is likely where the finer details of a film incentives package will be worked out. These meetings are held in private, though official votes are taken in public.
McCrory’s film plan
From those who watch the industry closely, McCrory’s plan for film incentives moving forward raised more questions than provided answers.
Still, several supporters of the film credits said they were glad to see that he at least addressed the issue as some members of the General Assembly advocate doing away with them altogether.
“I think the main thing I’m thankful for is he did include it in his budget,” said state Rep. Ted Davis, R-New Hanover, who is one of those three Wilmington-area lawmakers who introduced the bill to extend the film credits without an expiration date.
Said state Commerce Secretary Sharon Decker: “The important thing about that package is that he has included something in his budget. That speaks to what is a priority and that’s getting long-term investment in the industry in the state.”
A plan of its own
Others seemed to find consensus in the fact that McCrory’s plan is creative, at the very least.
“It’s different than anything I know of that’s currently operating in the United States,” Davis said.
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. It also would cap payout at $6 million and require film companies to spend at least $1 million to qualify.
Further, counties also would have the option to reimburse their local sales taxes to the production companies, and companies that build production or post-production facilities such as sound stages would be eligible for tax breaks.
The proposal also narrows the types of qualifying productions, dropping sporting events and talk shows, for instance.
The N.C. Production Alliance, which represents an array entertainment partners including film workers and studios, called McCrory’s plan unlike any film credit program currently operating in the country.
“The governor certainly deserves an A for originality and obviously his team spent quite a bit of time on this effort,” said alliance spokeswoman Katy Feinberg.
But is that a good thing?
“The devil will be in the details,” Feinberg said, adding that at first blush it appears he may have missed the mark on his stated goal of building the industry and increasing film-making investment in the state.
Others decried McCrory’s plan as too complicated.
University of North Carolina Wilmington film professor Terry Linehan, who also wrote and directed the locally filmed drama “Don’t Know Yet,” calls the potential changes a “bureaucratic nightmare” that “nickel and dimes” productions with small percent credits on certain services.
“A flat rate of 25 percent seems so logical, and it works. Why make it more difficult to figure out the tax rebate?” he said. “I like the saying, ‘If it ain’t broke, don’t fix it.’ Nothing is fixed with this version of the incentive. It’s only more complex, less competitive with other states, and will scare away or severely limit qualifying productions.”
Johnny Griffin, director of the Wilmington Regional Film Commission, also said a convoluted program could be a deterrent.
“(The structure of the incentive) is something our clients look at whenever they are making their initial analysis. The more simplistic the analysis, the easier it is to determine where to go do business,” he said. “If it is too complicated, they will go to the path of least resistance.”
Shaun O’Rourke, a driver for the Wilmington-based CBS drama series “Under the Dome,” said he is “cautiously optimistic” about the incentive talks moving forward as the short session continues, but he feels the governor’s proposed budget is more of a ploy than a long-term solution.
“His budget is a political move to claim that he saved the industry,” O’Rourke said. “Unfortunately, the changes he has put in the budget are going to make productions go somewhere else.”
Wayne Faulkner contributed to this story.