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The Crazies remake spent some time in Iowa and in this trailer I even recognize two shots that were done the day I was a PA on the location set in May 09.  It was a highly amusing and educational experience to see a true Hollywood set in action.  It looks like they got a great look for the movie for their $30M budget, not to mention great actors like Tim Olyphant and Radha Mitchell.

Thanks to Ask Hasselbalch for the trailer link!

We’ve seen a lot of news lately about the Iowa film tax credits program.  The tax credit system is Byzantine and lots of people have no idea how it works.  So I will provide a very simplified example below to help people understand. 

Whatever the outcome of this issue, Landlocked Film Festival is not affected.  We remain an international festival.  We also believe in training people here in Iowa to become filmmakers or to improve their skills in filmmaking, and that will continue.

EXAMPLE:

I decide to make a narrative feature, which is expected to cost $1,000,000 ($1M for short) to produce, edit, etc.  I don’t have any spare cash so I want an investor to provide 100% of the money.

Mr. Moneybags decides to invest in my movie.  So far, so good.  He is willing to invest this money because I’m shooting my film in Iowa where we will manage to get a $1M movie for only about $500,000.  More bang for our buck.

I apply for the tax credits in Iowa and am given the go-ahead.  I then spend $1M in Iowa – renting hotel rooms, hiring bit players, makeup people, catering people, crew, etc.  Any money spent on non-Iowans or non-Iowa sources cannot get tax credits.

After providing my receipts, proving that I spent $1M in Iowa, the film office gives me a certificate for $500,000 in tax credits.  It’s not a check, but it does represent a net negative against the tax revenues of Iowa.  It can be used by anyone – it is not limited to film or video companies.  Furthermore, the tax credit is NOT a reduction in taxes owed by my movie!!

I go to a tax credit broker (there are many around the country).  Brokers have access to people or corporations that owe big tax bills to Iowa.  Let’s say Ms. Millionaire owes $500,000 in tax to the state of Iowa.  The broker goes to her and offers to sell her the tax certificate for a discount – $450,000.  Ms. Millionaire pays $450,000 for the certificate.  She then sends it to the Iowa tax agency instead of sending $500,000 in cash. She saves $50,000.

Meanwhile, Mr. Moneybags gets $450,000 (since the investor is paid back first).  So his investment in my movie is now down to $550,000 instead of $1M.  Depending on the budget, I may have paid myself a hefty salary as well, half of which was covered by Iowa taxpayers.  But some producers and directors take deferred payment in the hope that their movie will go all Blair Witch Project.  If that happens, then Moneybags and I will get rich but Iowa won’t get anything extra.  If my movie goes nowhere, Moneybags is out the money.  Film is a high-risk investment, what can I say?  I still got paid.  My Iowa cast and crew got paid.

Now what? Well, Iowa’s tax coffers are missing $500,000 that they should have had because Ms. Millionaire owed taxes but instead handed over the tax certificate.  What does Iowa get back on their investment?  It’s really hard to say but the basic answer is “not much up front.”  I rented hotel rooms and bought supplies for my movie, so the taxes on those (approx. 12% hotel; 6% retail) go back into Iowa’s coffers.  Any Iowans that I employed do not have to pay Iowa tax on their income from my movie (that’s part of the incentives act).  So far Iowa hasn’t got much.

My movie did provide some stimulation for the economy, however, and it did provide some jobs in hotels and catering, some in acting, some in makeup, costumes, rental of houses for shooting scenes, etc.  Were a few dozen jobs on my movie worth the $500,000 hole in Iowa’s tax coffers?  That’s the big question, and no one has a definitive answer.  Other states have been using the tax-credit system for years.  Some have decided it wasn’t worth it and abandoned their programs.  Others have lowered the credits they give out. 

Remember – if Iowa’s revenue stream loses money, then ordinary Iowa taxpayers are going to be asked to pony up that money.  On the other hand, if production companies from Los Angeles relocate to Iowa and create thousands of new jobs and rent big new spaces, then that increases the tax base for Iowa – more money into the coffers in the future.