The Wisconsin Production Guide - Badger Guide LLC
The Joint Finance Committee voted unanimously to keep tax credits for the film and video game industries in the budget. This version of the program, for the first time, puts Wisconsin workers at an advantage.
Currently, there is a residency requirement, but it can easily be avoided if workers are paid through a payroll company. The legislation from the joint finance committee eliminates that loophole and only allows a 20% tax credit for non-resident salary and wages up to $20,000 per employee.
The new legislation only allows tax credits on purchases from Wisconsin vendors. The current rules state that purchases only have to be made in Wisconsin. This language allowed production companies to buy and rent from out of state vendors and still be awarded a tax credit.
The entire program would have a cap of $3 million per year until 2011. After that, individual projects would be capped at $10 million. The new legislation also eliminates the non-refundable credit for sales tax spent in Wisconsin.
The budget still has to pass both houses and be signed by the Governor, who could partially veto items he doesn't like. The Department of Revenue would then rewrite rules based on the new law. The exact details won't be available for a few months.
More information is available on Film Wisconsin's website.
May 13, 2009
March 26, 2009
Film Incentive Counter Proposal
The Wisconsin Production Guide - Badger Guide LLC
Amazingly, during a budget debate that raises taxes and fees almost everywhere around the state, proposals to give tax credits to film and video game companies keep coming forward. Tamara Grigsby (18th Assembly District - Democrat) in a March 19th letter to Mark Miller and Mark Pocan (Co-Chairs, Joint Finance) proposes per project caps, closing the non-resident loophole, and opening the credits to existing companies.
From the Proposal:
Currently due to the Department of Commerce's misinterpretation of the law, Wisconsin allows out-of-state employees paid through a payroll company to count as a "production expenditure" credit instead of a "salary and wage" credit.
If Commerce counted Mann's salary under "salary and wages" only the first $25,000 of Mann's Salary would have been eligible.
This proposal creates incentives for the hiring of Wisconsinites by limiting the credits to the first $50,000 paid to each non-Wisconsin resident employee.
Under this proposal no worker being compensated at or above $1 million is eligible for credits.
This proposal requires that a minimum of 35% of the project's total budget must be spent in Wisconsin to be eligible for the credits.
A cap of $15 million per project.
Opens the 15% investment tax credit to existing production companies.
Eliminates the non-refundable tax credit for sales tax spent on the purchase of tangible personal property and taxable services that were used directly in producing an accredited production.
Charges an application fee of 2% or $5000, whichever is less.
Require more extensive annual reporting. (Requires the Commerce Department to use financial tracking forms and permits standard to the industry.)
Even though this proposal ends the payroll company loophole, a company can still get a 25% tax credit for hiring a non-resident. The only difference is that the credits are limited to the first $50,000 of wages paid to each non-resident. This doesn't seem to put residents at much of an advantage. A company can still hire a crew person from Chicago and get a 25% tax credit. Unless that worker will be making more than $50,000 on that project there is no tax advantage to hiring a resident.
There is nothing in this proposal that puts Wisconsin rental companies at an advantage. Currently any money spent on rentals while in the state qualify for a 25% tax credit. It doesn't matter where the rentals came from, the equipment just has to be used in Wisconsin. A company can rent a camera package from California and use it in Wisconsin and get a 25% tax credit. Wisconsin would still be paying tax money that would not directly benefit any Wisconsin vendors.
The proposal wants to open eligibility to companies other than production companies. The intent is likely to allow rental companies, sound stages, etc. to claim a 15% investment credit; however, the language in the proposal reads, "as long as the purpose of the investment is for the making of accredited productions as qualified under the statutes, and meets the 50% test." In other words, there would be no change for most companies. Most productions in this state do not qualify for a tax credit. If you are a rental company, over half of your business would have to be with accredited productions or you would not qualify for the 15% investment credit.
If you read press accounts you may think that there were 26 or more productions that qualified for incentives, but an open records request with the Department of Commerce shows that in 2008 only 5 film productions qualified for the 25% tax credit and one of those has yet to begin rolling film. If this remains as the actual success rate of the program, it will be nearly impossible for a rental company or sound stage to qualify for the 15% investment tax credit. There won't be enough qualified productions to meet the 50% requirement.
The current system system does not attract commercial work and this new proposal doesn't seem to do anything to change that. Department of Commerce rules that make it very difficult for a commercial production to qualify were not addressed in this counter proposal.
There is a problem with a state that tries to be "film friendly" but doesn't make efforts to be "business friendly." Our elected officials have to realize that Wisconsin will not have a healthy business environment by offering tax credits to a select few while at the same time taxing and auditing businesses across the state. If the state feels tax credits, or tax cuts, attract business then that policy should be extended to more than just what they define as"production companies." Wisconsin needs a more consistent and welcoming attitude to businesses across the board.
Amazingly, during a budget debate that raises taxes and fees almost everywhere around the state, proposals to give tax credits to film and video game companies keep coming forward. Tamara Grigsby (18th Assembly District - Democrat) in a March 19th letter to Mark Miller and Mark Pocan (Co-Chairs, Joint Finance) proposes per project caps, closing the non-resident loophole, and opening the credits to existing companies.
From the Proposal:
Currently due to the Department of Commerce's misinterpretation of the law, Wisconsin allows out-of-state employees paid through a payroll company to count as a "production expenditure" credit instead of a "salary and wage" credit.
If Commerce counted Mann's salary under "salary and wages" only the first $25,000 of Mann's Salary would have been eligible.
This proposal creates incentives for the hiring of Wisconsinites by limiting the credits to the first $50,000 paid to each non-Wisconsin resident employee.
Under this proposal no worker being compensated at or above $1 million is eligible for credits.
This proposal requires that a minimum of 35% of the project's total budget must be spent in Wisconsin to be eligible for the credits.
A cap of $15 million per project.
Opens the 15% investment tax credit to existing production companies.
Eliminates the non-refundable tax credit for sales tax spent on the purchase of tangible personal property and taxable services that were used directly in producing an accredited production.
Charges an application fee of 2% or $5000, whichever is less.
Require more extensive annual reporting. (Requires the Commerce Department to use financial tracking forms and permits standard to the industry.)
Even though this proposal ends the payroll company loophole, a company can still get a 25% tax credit for hiring a non-resident. The only difference is that the credits are limited to the first $50,000 of wages paid to each non-resident. This doesn't seem to put residents at much of an advantage. A company can still hire a crew person from Chicago and get a 25% tax credit. Unless that worker will be making more than $50,000 on that project there is no tax advantage to hiring a resident.
There is nothing in this proposal that puts Wisconsin rental companies at an advantage. Currently any money spent on rentals while in the state qualify for a 25% tax credit. It doesn't matter where the rentals came from, the equipment just has to be used in Wisconsin. A company can rent a camera package from California and use it in Wisconsin and get a 25% tax credit. Wisconsin would still be paying tax money that would not directly benefit any Wisconsin vendors.
The proposal wants to open eligibility to companies other than production companies. The intent is likely to allow rental companies, sound stages, etc. to claim a 15% investment credit; however, the language in the proposal reads, "as long as the purpose of the investment is for the making of accredited productions as qualified under the statutes, and meets the 50% test." In other words, there would be no change for most companies. Most productions in this state do not qualify for a tax credit. If you are a rental company, over half of your business would have to be with accredited productions or you would not qualify for the 15% investment credit.
If you read press accounts you may think that there were 26 or more productions that qualified for incentives, but an open records request with the Department of Commerce shows that in 2008 only 5 film productions qualified for the 25% tax credit and one of those has yet to begin rolling film. If this remains as the actual success rate of the program, it will be nearly impossible for a rental company or sound stage to qualify for the 15% investment tax credit. There won't be enough qualified productions to meet the 50% requirement.
The current system system does not attract commercial work and this new proposal doesn't seem to do anything to change that. Department of Commerce rules that make it very difficult for a commercial production to qualify were not addressed in this counter proposal.
There is a problem with a state that tries to be "film friendly" but doesn't make efforts to be "business friendly." Our elected officials have to realize that Wisconsin will not have a healthy business environment by offering tax credits to a select few while at the same time taxing and auditing businesses across the state. If the state feels tax credits, or tax cuts, attract business then that policy should be extended to more than just what they define as"production companies." Wisconsin needs a more consistent and welcoming attitude to businesses across the board.
February 26, 2009
Doyle: The Anti-Business Governor
The Wisconsin Production Guide - Badger Guide LLC
Governor Doyle does not apparently share the views of his Lieutenant Governor or Film Wisconsin. His proposed biannual budget eliminates the film tax credit program and replaces it with a grant program which allocates $500,000 for creating permanent jobs. This shows a lack of understanding on the Governors part of how the film business works.
But a broader look at the Governors policies reveal a general anti-business attitude. His budget calls for raising business taxes around the state. He has also been using the Department of Revenue to audit existing businesses. These audits have involved many in the film and video industry. The Governor himself referred to filmmaking as "Manufacturing for the 21st Century." This slogan is in direct contradiction to the Department of Revenue which does not consider film production "manufacturing." This has been used by the Sales and Use Tax Department to fine companies and charge back taxes which threaten to put some companies out of business.
How do you argue with a Governor that has that attitude towards local businesses?
The press, who seemed to be helping the cause, did an abrupt about face after Johnny Depp left the scene. They started running stories about a highway near Columbus that collapsed under the additional traffic which had been diverted around filming. Next came story after story about the $4.6 million of Wisconsin tax money that was given to NBC Universal. Radio talk show hosts railed against the $450,000 of tax money spent for Michael Mann's salary. Zach Brandon from the Department of Commerce was quoted as saying, "The idea that paying 25 percent of a Hollywood director's seven-figure salary somehow has a direct economic impact to the State of Wisconsin is ludicrous."
The proponents of the tax credit program have been encouraging people to write the Governor as well as various Legislators. A Facebook Cause entitled Save Wisconsin Film Incentives now has over 1000 members. Film Wisconsin has talking points available on their website as well as a letter from Stephen Dedow, the Business Representative of IATSE Local 470 who spoke of the many members of his local that worked on Public Enemies. Some producers are threatening to take potential films elsewhere and some people are even proposing a "die in" at the Capital to symbolize the death of the film industry.
Filmmakers from both inside and outside the state have been detailing how the incentive package has been of benefit.
However, reader comments from a recent Reel Chicago article entitled "Governor wants to kill film incentives" showed that not everyone is in agreement with the benefit of tax credits:
The argument here isn't about anecdotes like these; it's about ROI (Return On Investment). The data the Department of Commerce collects is what the Governor is considering and the Department of Commerce right now is calling the program "a wash." You could argue that breaking even is acceptable for the first year of a program, but if you do you should be able to establish how the program will eventually turn a profit.
I personally took a different approach. Rather than have my letter thrown into the pile with all the others asking the Governor not to cut the program, I agreed with the Governor. I outlined the problems with the current system and referred to a recently released analysis from New Mexico which shows a return of $1.50 in tax revenue for every dollar of tax credit spent. We too could have a program that has a return on investment of 150% if he would care to discuss it. I rather doubt he'll call.
Governor Doyle does not apparently share the views of his Lieutenant Governor or Film Wisconsin. His proposed biannual budget eliminates the film tax credit program and replaces it with a grant program which allocates $500,000 for creating permanent jobs. This shows a lack of understanding on the Governors part of how the film business works.
But a broader look at the Governors policies reveal a general anti-business attitude. His budget calls for raising business taxes around the state. He has also been using the Department of Revenue to audit existing businesses. These audits have involved many in the film and video industry. The Governor himself referred to filmmaking as "Manufacturing for the 21st Century." This slogan is in direct contradiction to the Department of Revenue which does not consider film production "manufacturing." This has been used by the Sales and Use Tax Department to fine companies and charge back taxes which threaten to put some companies out of business.
How do you argue with a Governor that has that attitude towards local businesses?
The press, who seemed to be helping the cause, did an abrupt about face after Johnny Depp left the scene. They started running stories about a highway near Columbus that collapsed under the additional traffic which had been diverted around filming. Next came story after story about the $4.6 million of Wisconsin tax money that was given to NBC Universal. Radio talk show hosts railed against the $450,000 of tax money spent for Michael Mann's salary. Zach Brandon from the Department of Commerce was quoted as saying, "The idea that paying 25 percent of a Hollywood director's seven-figure salary somehow has a direct economic impact to the State of Wisconsin is ludicrous."
The proponents of the tax credit program have been encouraging people to write the Governor as well as various Legislators. A Facebook Cause entitled Save Wisconsin Film Incentives now has over 1000 members. Film Wisconsin has talking points available on their website as well as a letter from Stephen Dedow, the Business Representative of IATSE Local 470 who spoke of the many members of his local that worked on Public Enemies. Some producers are threatening to take potential films elsewhere and some people are even proposing a "die in" at the Capital to symbolize the death of the film industry.
Filmmakers from both inside and outside the state have been detailing how the incentive package has been of benefit.
| To assume that Public Enemies is a litmus test for the success of a film tax incentive, or that one year out of the gate is long enough for an incentive to bear fruit, is extremely short sighted. It’s time for benefactors inside and out of the film community to express their disappointment. Let’s ask the Governor to visit Door County as they continue to film “Feed the Fish”. Stop in at the local pub, “The Sister Bay Bowl” and ask Eddie the bartender if he’s enjoyed serving the nightly crew of 45. Or ask Kat, the hotel clerk at the Scandinavian Lodge, how it’s turned her sleepy winter lodge into a bustle of activity. Or all the interns, PA’s, grips and crew members that are hoping to continue their career in the state that they grew up in and love, if the incentives are kept in place. The film community is only going to succeed exponentially as the incentives are given a chance to grow. -------------------- As an executive producer on the Tony Shalhoub film, “Feed the Fish” currently being filmed in Door County, I can testify to the fact that this bill works. It is pumping thousands of dollars into a sleepy winter community that generally waits for the summer months to draw a crowd.I’ve talked with Eddie the bartender in the Sister Bay Bowl that serves a crew of 45 nightly as they unwind from the days shoot. Trina the waitress at the infamous Al Johnson’s Restaurant in Sister Bay, serves breakfast daily to cast, crew, and onlookers. She and her friends gather customers as they talk of their day on the set as extras. Kat, the hotel clerk at the Scandinavian Lodge is thrilled to see all the activity that the film is creating in an otherwise quiet season. Cast members such as Barry Corbin (“No Country for Old Men”) is back for his second time in WI for a film, reminding the naysayers that long after the film is shot, spectators want to visit that scene they just witnessed on the big screen. If these tax incentives were not in place, these dollars would be spent in another state. Writer/Director Michael Matzdorf and Tony Shalhoub, Emmy Award winning star of Monk, have 3 more projects that they are planning on bringing back to Wisconsin, if the incentives are in place. If these incentives are eliminated, we tell the film community that we are not open for business. |
However, reader comments from a recent Reel Chicago article entitled "Governor wants to kill film incentives" showed that not everyone is in agreement with the benefit of tax credits:
| Like most incentives created in this country, they mean more money for the ones who already have the money. There are NO conditions, such as "you must employ a certain percentage of your crew within local talent." Until TAX incentives carry along such mandates, they are a joke. All they do is favor L.A. guys who keep using the country as a set and treating locals like ignorants who don't deserve to work in the industry. -------------------- Much has been made about the film incentives program here in Michigan but so far it only benefits the current studio system that brings in its own crews. It seems like big-name directors, producers, and studios basically come into an area, do what they want, and leave. It does no significant hiring, training or encouragement of local permanent employment. |
The argument here isn't about anecdotes like these; it's about ROI (Return On Investment). The data the Department of Commerce collects is what the Governor is considering and the Department of Commerce right now is calling the program "a wash." You could argue that breaking even is acceptable for the first year of a program, but if you do you should be able to establish how the program will eventually turn a profit.
I personally took a different approach. Rather than have my letter thrown into the pile with all the others asking the Governor not to cut the program, I agreed with the Governor. I outlined the problems with the current system and referred to a recently released analysis from New Mexico which shows a return of $1.50 in tax revenue for every dollar of tax credit spent. We too could have a program that has a return on investment of 150% if he would care to discuss it. I rather doubt he'll call.
February 18, 2009
Doyle Proposes Ending Film Tax Credits
The Wisconsin Production Guide - Badger Guide LLC
If you were waiting to get work from the Film Wisconsin bill you had better get it quick. The Governor topped the Department of Commerce's proposal to cap the film program at $5 million by proposing to end it. The replacement program would allow the D.O.C. to award up to $500,000 a year in grants to film and video project that create permanent jobs in Wisconsin.
I can't wait to see how a "project" is defined. Hey, it could be worse, he could be letting criminals out of prison to save money.
If you were waiting to get work from the Film Wisconsin bill you had better get it quick. The Governor topped the Department of Commerce's proposal to cap the film program at $5 million by proposing to end it. The replacement program would allow the D.O.C. to award up to $500,000 a year in grants to film and video project that create permanent jobs in Wisconsin.
I can't wait to see how a "project" is defined. Hey, it could be worse, he could be letting criminals out of prison to save money.
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