1,000-Plus Protest Bill Targeting North Carolina's Movie, TV Tax Breaks
WILMINGTON, NC – Since the state of North Carolina brought back generous incentives to attract film and TV productions in 2010, movies such as The Hunger Games, Safe Haven and Iron Man 3 have shot there as well as such series as NBC’s Revolution; Showtime’s Homeland; and the CBS miniseries Under the Dome.
However, a bill introduced in the state legislature last Wednesday would alter the incentives to make them virtually worthless to out-of-state companies, which has brought a howl of protest from the local industry and the guilds and unions, which work on productions.
The bill, which is retroactive to this past January, is not likely to be made into law because North Carolina Governor Pat McCrory is among those who supported the tax breaks for the industry, but the very idea set off a strong reaction.
On Saturday, more than 1,000 area residents – many of them actors, extras, location scouts, Teamster drivers, stylists, designers, and more – flooded downtown Wilmington to protest.
Rally-goers chanted “Film Equals Jobs” and pumped slapdash signs in the air. “Please don’t take my job,” said one. And another, scribbled in Sharpie by the young girl holding it: “Our family supported by North Carolina film.”
“This is not about Robert Downey, Jr., or the big names out of Hollywood,” declared state Rep. Susi Hamilton. “This is about you guys!”
Sponsored by Local 491 of IATSE, the film and television technicians union, the rally featured brief appearances by a slew of local and state representatives, most of whom emphasized that film in North Carolina is not a partisan issue.
Under the current system, production companies that spend at least $250,000 on qualified, in-state expenses can claim a 25-percent refundable tax credit for up to $20 million. If passed, the proposed bill would waive production companies’ tax liability for five years. The catch? Unless the company is based in North Carolina – and few of them are – the company has no tax liability. In other words, the incentive isn’t an incentive at all, say the bill's detractors. There’s nothing to waive.
“It’s not an intelligent bill,” says Bill Vassar, executive vice president of EUE/Screen Gems Studios and a member of the North Carolina Film Council. “It doesn’t show that the people backing it really thought out what it meant. No one – once they think this out – is going to want to be known as the group that forced an industry to leave and rescinded its commitment. That’s not a positive way of doing business.”
Sponsors of the bill – including local Republicans Rick Catlin and Chris Millis – say it’s a step toward greater accountability in state government. Catlin emphasizes that the bill does not reduce the tax credit; it simply cuts the refund. He says that after he studied the details of a fiscal research report on film incentives, “my heart and my commitment to our hard working citizens forced me to bring light to this issue.
“The film company can take all profits to another state so they have no income tax in NC,” says Catlin. “Since they need no tax credits they receive their incentives as a bonus check up to $20,000,000 per production, pay no North Carolina income taxes and another state gets all the spending benefits of their profits.”
Vassar says that ignores the millions spent on the productions in the state, which includes payroll and sales taxes.
“When you’re pushing millions and millions of dollars through the economy, this is not local money being spent.,” says Vassar. “It’s all out of state money that’s being brought into the state.”
Catlin and other conservatives in the state legislature have argued for simplifying the state’s tax code across the board, rather than targeting incentives at specific industries like film and television.
“I do not support using taxpayer dollars to pick and choose to contribute to one business at the expense of other hard working taxpayers,” Catlin says.
But according to Halmilton, “that’s now how the industry works.”
“The film industry does not benefit from that blanket reduction in tax liability in this state,” she says. “These people [production companies] come into town, they spend millions of dollars, they hire hundreds of people who do pay state income taxes in the state, and they pay lots of sales tax, and then they go away. And then the next production comes in and employs the same crop of people. So they can say it will benefit from those overall reductions, but it’s just comparing apples to oranges. It’s disingenuous.”
In addition to eliminating tax credits, the bill would work retroactively as of Jan. 1, 2013, affecting not just future projects but those currently in production.
“It’s retroactive, which is just bad business. I question the legality of that all together,” Hamilton says. “And it’s a cardinal sin: you never change the rules midstream when you’ve made an agreement.”
Last Thursday, Republican House Speaker Thom Tillis referred the bill to the Committee on Rules, Calendar and Operations of the House, where bills have been known to rot and eventually die, a side effect of parliamentary procedure. Noting that the speaker himself broke from his own caucus in 2010 to pass the current bill, and that Governor McCrory and Commerce Secretary Sharon Decker have vocalized their support of the incentives, Hamilton is confident the bill won’t pass.
“North Carolina is not going to pass this bill. Period. I’m very comfortable saying that,” she says. “The film industry has bipartisan support. This was just folly. It never should have happened.”
According to the North Carolina Film Office, film and television production companies spent more than $376 million in the state last year – up $156 million from the year before – and created more than 4,100 “well-paying crew positions for the state’s highly skilled workforce.” All told, nearly 50 productions registered with the state film office, creating roughly 20,000 job opportunities, “including talent and extra background positions.” So far in 2013, more than 20 productions have either indicated their intent to film or have already begun filming, and total in-state spending has already exceeded $138 million.
“And there’s a huge intrinsic value that is hard to put a value on, and that’s tourism,” Vassar says. “People come here from all over still to look at the houses where One Tree Hill and Dawson’s Creek were shot. There are people that go to Rodanthe to see the beaches of Nights of Rodanthe. There’s been an uptick of tourism in Southport because of Safe Haven…there are a lot of benefits that are hard to quantify, but they do benefit from the film industry being here.”
Rep. Catlin says he anticipated backlash when he first introduced the bill.
“The immediate and obviously coordinated phone calls and emails, along with the quickly scheduled rally confirmed my assumption,” he says. “I also suspected the film industry would make sure that their employees thought their jobs would be lost to use that fear as a weapon to preserve the tax credit reimbursements. I’m certain the industry knows that the bill is parked in committee, so the continued attacks tell me we touched a nerve. The old saying “thou doth protest too much” comes to mind and makes me curious…I’ll keep researching and asking questions.”
Carson Vaughan is a freelance writer based in Wilmington, North Carolina. THR senior editor Alex Ben Block contributed to this report.