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End of tax credit in North Carolina could send filmmakers packing

By Marti Maguire

RALEIGH N.C. (Reuters) - The looming end of tax breaks that helped lure major film and television productions such as the Hunger Games and Sleepy Hollow to North Carolina has supporters fearing Hollywood will take its bright lights to states with more generous incentives.

State legislators were expected to finish their session on Friday without renewing a tax credit for the film industry that expires at the end of the year and was decried by critics as a "Hollywood handout."

The state budget signed last week by Republican Governor Pat McCrory instead allots $10 million for the first half of 2015 toward a grant program for the industry, a fraction of the more than $60 million in tax credits received by production companies last year.

Under the new program, the grant money will be shared among productions, though how it will be allocated has not been determined. Currently, film companies receive a 25 percent refundable tax credit on qualified expenses, with a cap of $20 million in savings per project.   

The issue sparked heated debate this summer and split the state's Republican majority. Supporters of the incentive program said it had helped create thousands of jobs and led to more than $254 million in spending in the state by productions in 2013.

Without that enticement, they argue, film projects will be likely to head to states such as Georgia, which offers a tax credit of up to 30 percent with no cap.

"I honestly feel like this is a murder trial, and I'm representing the film business in North Carolina," said Republican state Representative Ted Davis, whose coastal district is a hub for film-making. "And I’m fighting against the death penalty."

Opponents say the tax money would be better spent hiring teachers or creating jobs by giving tax breaks to small businesses.

"I just can't ask the hardworking people in my district to fund a Hollywood production with their hard-earned tax dollars," said Representative Jeff Collins, also a Republican.

As of March, 39 states had some sort of film tax incentive in place, according to the National Conference of State Legislatures, creating fierce competition for the jobs and prestige that come with landing major films and TV series.

North Carolina's varied terrain of mountains, coastline, cities and farms make it an attractive location for productions, said Vans Stevenson, the Motion Picture Association of America's senior vice president for government affairs.

But cost is also a major factor for an industry in which success is unpredictable.

"The cost of production is the main determinant about where they're going to locate," Stevenson said. "For North Carolina to continue to create and sustain the kind of job base and investment it has had, it would have to remain competitive with other states."

Katy Feinberg, a spokeswoman for the North Carolina Production Alliance, which lobbied for the tax credit to be extended, said the "Hollywood handout" label distorted the debate.

Many of the 4,000 full-time film jobs in North Carolina belong to set designers, film crews and other workers who rely on a constant supply of film projects to make a living, she said.

"We've had a steady stream of people coming here and setting up shop because of the work that's been here," Feinberg said. "There's been no red carpet for them."

(Reporting by Marti Maquire; Editing by Colleen Jenkins and Andrea Ricci)

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