Film tax credits bill would bump up state budget
With two months left in the fiscal year, Pennsylvania's film tax credits are gone — as is a healthy portion of money available next year and beyond.
Critics say the state Film Office willingly pays for projects with future money, refuses to award unclaimed credits, and approves corporate subsidies such as $8.55 million this year for West Chester-based home shopping network QVC.
At least two lawmakers are pushing to change the rules again.
“The intention was to draw films here, to have them spending money that would not otherwise be spent in Pennsylvania. QVC was not part of that idea,” said Rep. Michael Sturla, D-Lancaster, who wrote a bill that revamped the film tax credit program in 2007.
“The program needs to be tightened up; there's no doubt,” said Sen. Wayne Fontana, D-Brookline, who has a bill to bump its annual budget from $60 million to $100 million. He is pondering legislation to limit awards to films, documentaries and television series, expressly prohibiting commercials and marketing programs.
Projects that have snagged tax credits include UPMC web commercials and employee community programs, and a Comcast public service program hosted by the mother of the cable giant's chairman and president, records show.
“Seeking Solutions with Suzanne,” made by Suzanne Fleisher Roberts, and a subsequent arts program she debuted received more than $1.5 million. The program is approved for more than $100,000 next year because “they consistently meet and exceed the determined criteria of the Film Tax Credit Program year after year,” Diane McGraw, executive director of PA Travel, Tourism and Film, wrote in an email.
McGraw did not explain the criteria and refused requests for an interview.
“The program is being taken over by corporate subsidies,” said Dawn Keezer, director of the Pittsburgh Film Office. “We're trying to split $60 million, and it's not enough money. Then add in the amount going to corporate subsidies, and it's even less.”
McGraw deferred $3.55 million of QVC's tax credits to next year's budget, calling the company “a strong Pennsylvania-headquartered employer and partner in the film tax credit program directly employing hundreds year after year.”
QVC, which posted sales of $8.6 billion in 2013, has collected about $24 million in credits for shows hawking merchandise from dinnerware to diamonds.
QVC has its global headquarters and broadcast operations — including pre- and post-production work — in Pennsylvania and in 2013 launched QVC Plus, a second broadcast channel, company spokeswoman Diane Zappas said.
“Through QVC's broadcast initiatives, day-to-day business operations and the QVC Studio Tour attraction, QVC benefits the local economy by promoting tourism and raising visibility for the state of Pennsylvania to 106 million US homes,” Zappas said.
McGraw's office said QVC establishes 4,000 jobs in Pennsylvania. This year, the company reported 1,500 employees projected to work on 58 projects — up from 716 who worked on 37 projects last year and 835 who produced 48 projects in 2011-12.
Its rival in Florida, Home Shopping Network, cannot tap that state's film entertainment incentive money. Florida dispersed nearly $300 million this year.
“HSN does not qualify,” company spokesman Brad Bohnert said.
Tweaking the law
The Pennsylvania Film Production Tax Credit Program has awarded $487 million since its start in 2004, including $30 million from future budgets.
When revamped in 2007 under then-Gov. Ed Rendell, the program gave $75 million yearly. Its budget fell to $60 million a year under Gov. Tom Corbett. The early version, from 2004 to 2007, gave $10 million in tax credits yearly.
The program was designed to lure filmmakers by allowing those who spend at least 60 percent of production budgets in Pennsylvania to apply 25 percent of expenses spent here to offset state taxes.
Lawmakers in 2012 amended the law to allow an additional 5 percent for applicants using qualified production facilities, such as 31st Street Studios in the Strip District and QVC's studios.
That's when the law began allowing multiyear deals, drawing money from future budgets, in order to attract TV series that operate on five-year plans.
The state film office has committed $18 million of next year's anticipated budget — including the $3.55 million of QVC's tax credits for 2013-14 work, and a third of $30 million awarded to “Hot Wheels,” a film touted by Philadelphia's Film Office since March 2013 that has not started work. The project received $8 million this year and is earmarked for $11.97 million in 2015-16.
If “Hot Wheels,” a nearly $200 million project, never gets rolling, Fontana wants to ensure the money is used to establish film and TV jobs in Pennsylvania. He recently introduced a bill directing the film office to allocate credits unused from previous fiscal years.
“It is the administration's position that, under the current statute governing the film tax credit program, unused credits from prior fiscal years cannot be reissued,” McGraw wrote in her email.
She said $6.2 million in credits went unused from 2011 through 2013.
Fontana estimates more than $20 million is available.
Fontana contends the office chose not to reallocate the money — just as it interpreted that the law allows multiyear deals for projects other than TV series.
McGraw said the office functions as the law directs, and that multiyear deals have attracted projects.
“There is no distinction in the law as to what types of projects are funded this way,” McGraw wrote. “The formula benefits television, as they tend to be multiyear projects, but it is also used with large-budget feature films in order to maximize the economic development impact of the program.”
‘It merits review'
Large-budget projects have been limited to no more than 20 percent of credits available in any given year, sometimes requiring their awards to be spread over multiple years.
Such was the case with “Jack Reacher,” the 2012 Tom Cruise movie filmed in Pittsburgh. It qualified for $16 million in credits — $12 million in 2011 and $4.4 million in 2012.
Offering smaller films multi-year deals cost Pittsburgh one project this year, and nearly another.
The state film office offered Relativity Media nearly $8 million in tax credits, spread over three years, to make “The Most Wonderful Time,” starring Diane Keaton and Alan Arkin. Producers instead took the film project to Mississippi. The studio declined to comment.
In January, Pittsburgh almost lost “Fathers and Daughters,” filming with Russell Crowe. Producers threatened to take the $16 million film elsewhere if the state spread a $5.7 million tax credit over four years. Officials compromised to award the money this year.
“We had to rattle the cages (at the state film office) big-time to save it,” said Fontana.
The office approves credits for qualified productions using a scoring system that measures economic impact, McGraw said. It award credits after expenses are audited.
Sturla questions whether the program is living up to its envisioned potential.
“As is the case with almost anything, as soon as you make dollars available, people find a way to get them for something other than what was intended,” he said. “Ultimately, when you start tinkering with this stuff in ways it wasn't originally intended, you hurt the original intention. Whether it's the film office or anyone, it sometimes merits review to see if we are getting what we intended.”
Jason Cato is a Trib Total Media staff writer. Reach him at 412-320-7936 or email@example.com.