Does N.C.'s Film Incentive Help or Hurt State's Economy?

Changes in the state's film incentive could dim some of North Carolina's bright lights.North Carolina's scenery and its residents have a long history starring in television series such as Homeland and in countless movies, including Iron Man 3.

“It's a leading edge industry," says State Representative Susi Hamilton. "It's an entrepreneurial industry; there are many opportunities if we can keep it healthy in the state.”   Hamilton represents District 18, which includes Wilmington and parts of Brunswick Counties near the coast. She's also a strong advocate of North Carolina's film incentive. “Ever since this particular tax credit went into effect, we've seen almost no break in production in the state. There's been something going on in our state consistently 365 days a year since this went into play.”

The state's film incentive began in 2005. That's when productions got a 15 percent tax credit with an overall cap of $7.5 million. Five years later, state legislators increased the film incentive to 25 percent with a cap of $20 million. But some argue the film incentive hurts the state. “It has a concentrated benefit but it has a dispersed cause and in general is a money loser for the state,” says Jon Sanders. He is Director of Regulatory Studies at John Locke Foundation. He believes  incentive programs prevent the state's economy from growing more rapidly because those tax dollars are not being used in areas that would benefit a wider population. “Teacher pay is one; there's always calls to improve roads, universities -- maybe they need more buildings, state employees  haven't had large raises…a decision that is not made if the money is sent into any economic incentive.” Sanders also says if incentives were eliminated, the state would need less tax dollars from residents who then would have more disposable income.

In 2012, movies and television projects shot in North Carolina generated revenues of $376 million dollars for the state. In 2013, that amount dropped to $254 million dollars. Supporters say the state offers incentives for various industries including NASCAR, manufacturing, agriculture and this is just a way of doing business. “It's a no-brainer. It's a really good economic tool,” agrees Tom Keith, who owns property in Pender County with small homes and log cabins. He rents two production companies for their shoots, earning $500 to $1,000 dollars per day. “Suppose I get a check for $5,000. I take that money and spend it with an electrician. Next time I see that electrician, he has a brand new truck. The guy he bought it from has done something with that money, bought groceries maybe," explains Keith. "Each time they (North Carolina) get 7.5 percent income tax. So if that money changes hands three times the state has almost gotten all of its money back.”

But the fate of North Carolina's film incentive is uncertain. It's scheduled to end Jan. 1, 2015 unless state legislators step in. Next month, they can either extend it or make the film incentive permanent. The movie EYEBORGS was shot in Winston-Salem. This is the base city for Richard Clabaugh of Crimson Wolf Productions. He produced, directed and co-wrote the 2009 science fiction-thriller with his wife Fran. "Producers from all around the country and from around the world, what they look for when they're choosing a location is which state is for the most financial incentives to go." Clabaugh says state film incentives are imperative, so North Carolina can compete with its neighbors.

South Carolina offers a 20 percent credit for cast and resident wages and another 20 percent for goods and services. Georgia's tax credit totals 30 percent with no cap. Louisiana gives a 30 percent transferable tax credit plus an additional 5 percent on resident hires. Currently, nationwide, 34 states including Puerto Rico have some kind of film incentive program. “It lets them get better production quality and more bang for the buck. If you don't have film incentives, you don't have a film industry,” Claubaugh contends.

Lamont Jackson owns Chiaco-Alice films in Durham. He's says his hockey movie, The Head Game, has been approved for a tax credit on anything shot in North Carolina this year. But according to Jackson, uncertainty surrounding the state's film incentive is creating a chilling effect for final funding.

“My investors are holding off on doing anything until they see what happens," says Jackson. "So it appears now I'll either be filming it in Michigan or Vancouver Canada.” Jackson and Clabaugh are among the 4,200 industry professionals who call North Carolina home. Many earn an average of $66,000.

Recently, film commissions across the state funded a supply chain study of the economic impact of North Carolina's Motion Picture and Television Industry. It asserts that extending the current tax incentives would generate more than $587 million worth of spending. Researcher Jon Sanders with the John Locke Foundation says this projection is exaggerated. Instead, he recommends growing the state economy across the board by cutting regulation and lowering the corporate taxes all together. "If we cut taxes, we'd be able to attract industry.”

Meanwhile, as North Carolina producers and directors fight to keep the 25 percent film incentive in place, they want legislators to modify it so small productions will also qualify for the tax credit.

“Right now, extremely small independent films done at the $50,000 or $100,000 range don't qualify," Clabaugh says. "But if we do three or four of those in a year, we've spent more the minimum for the rebate so that would be useful for those of us who make small independent films.” Supporters of North Carolina's film incentive are using social media urging residents to contact their legislators and push for the tax credit to be kept in place. Lawmakers are expected to address this issue when they return for a short session
in the North Carolina General Assembly May 14.