Thu August 29, 2013
Paying For Film, Part 3: How NC Compares
Thirty productions claimed tax credits last year for filming in North Carolina, including some blockbusters like Iron Man 3 and the Hunger Games. Charlotte has become home to a couple of successful TV shows: Homeland and Banshee. By all accounts, the Hollywood business is booming here. But there's a dark cloud on the horizon – come the end of next year, North Carolina's film incentives program is set to expire.
That prompted WFAE to take a close look at what filming brings to the state, and what it costs us to get those films here. Our two part series wrapped up Thursday morning and WFAE reporter Julie Rose joined host Mark Rumsey to answer a few questions.
RUMSEY: Julie, I understand that more than 40 states offer incentives to film companies – how does North Carolina's package compare?
ROSE: We're kind of down the middle. Production companies and advocates say we should keep it just the way it is. Any movie, TV show or commercial – except for porn – can qualify for the incentive if they spend at least $250,000 here. That's a little lower threshold than Georgia, for example – which gives us a lot of competition: Hunger Games 2 is filming there instead of coming back here. Productions in Georgia have to spend $500,000 to qualify. But films there can get up to 30 percent of their spending back where North Carolina only offers 25 percent.
Most states also cap the amount of money they're willing to spend in a year on film incentives. We don't have a total cap for the industry – but there is a $20 million limit to how much a single production can get.
A lot of states waive sales taxes for production companies. We don't. But, North Carolina is one of only about a dozen states that make their tax credits refundable – which as I explained in this morning's story means that we can – and generally do – end up paying production companies more money than we actually collect in taxes.
RUMSEY: Well, North Carolina had some big movies film here in the last two years - Iron Man 3 and Hunger Games. Does any of that box-office money come back to North Carolina? '
ROSE: No. This is an important distinction. The studios come to town and set up a new production company – in the case of Hunger Games, it was called Ludus Productions – the president of it was the general counsel of Lionsgate. But Ludus Productions was the North Carolina corporation that submitted its receipts to the state audit and claimed a $13.7 million incentive credit. What this arrangement means is that these production companies make no money. They exist purely to spend it on the film. So there's no corporate income the state can collect taxes on.
That leaves only sales taxes and the income taxes paid by people working on the films here. Stars pay North Carolina income tax while they're filming here, too. But even that usually doesn't add up to the size of the check the state usually ends up writing to these productions at the end of filming.
RUMSEY: Since every new production can qualify for an incentive – and each new season in the case of TV shows like Homeland - one of the economists you quoted this morning said it's like we're running on a hamster wheel, not getting any kind of lasting legacy for the incentives we're spending. Do we really have nothing to show for it?
ROSE: You certainly can't point to any building in Charlotte and say – the film industry built that. These productions come and set up in warehouses and do most of their shooting on location in the community and then they pull up stakes. It's not like other business incentives we give where we demand that companies build a new manufacturing plant or commit to create a certain number of jobs for a period of time. But what these film productions do leave behind is people who've made a nice living and can now pay their bills. And there are companies making good money supplying stuff to these productions. All the filming in Charlotte recently has led to growth in the film-related business sector here – stores that rent or sell all the special cameras and cranes and custom trailers movies use.
ROSE: It could. The producers in charge of filming Homeland and Banshee in Charlotte both think so. They're filming in a couple of warehouses right now – and Hunger Games did the same thing out at the Philip Morris plant in Concord. But if Charlotte actually had bona fide sound stages big enough to accommodate a major production, film companies probably would be willing to go there instead. The larger question is whether Charlotte can keep up this string of productions we've had coming through in the last few years. Otherwise, those new studios run the risk of sitting empty much of the time.
RUMSEY: How much of the current boom in filming here in Charlotte – and across the state – is tied to incentives?
ROSE: If the incentives go away, the big productions will go elsewhere and Charlotte, at least, would go back to being mostly just a place where smaller commercials are filmed.