So this is what economic development in Iowa comes down to:
We have heard reports of two vehicles purchased through the tax credit program that were not used directly on a film. Upon learning this management dug into those two projects and was not satisfied with the explanation or the condition of the files and records and determined that procedures had not been followed.
The Code clearly authorizes the purchase of vehicles but the fact they were luxury vehicles (Mercedes and a Land Rover) were not used directly on the film and the amount of credits claimed was the full purchase price rather than the lease cost during the project were judged to be abuses.
This is from a memo by a defender of the Iowa Film Credit corporate welfare giveaway bonanza, released in a Friday bad-news dump late this afternoon. The author, Mike Tramontina, resigned this afternoon as Director of the Iowa Department of Economic Development. The memo outlined a wonderful list of corruption and waste in this most-prominent of Iowa's economic development programs. From the memo (my emphasis):
· Files on each film were inadequate. Most of the necessary information was in unsorted email archives.
· Contracts were amended, often to increase amount of credits requested substantially, after Director/Deputy approval. Signature pages appeared shuffled among versions of contracts.
· There were only receipts for two of eighteen film projects. Some receipts were obviously prepared in a single batch by the filmmaker who claimed for all of their vendors on identical receipts which were usually not signed.
· Ledger sheets that were accepted as claims were vague and overly broad. It appeared everything was allowed. Tax Credit certificates were issued for the full amount requested. It appeared nothing was ever disallowed.
· Many vendors clearly resided outside of Iowa.
· Some film makers were allowed to claim payment for several roles in a production leading to very high payments. Some of the roles played by a single individual such as Accountant/CPA should have held an arms length relationship but did not. Large payments were also made to family members.
· Some of the claimed services where not actually paid for. The vendor deferred payment until credits were sold or film was sold.
To be clear: even if the Film Credit program were run competently and honestly, it would be a bad idea to spend taxpayer money to bribe film companies to come to Iowa. But competence and honesty apparently were never part of the program. The carpetbagger film companies that came here to take our money saw us coming a mile away, and they grabbed with gusto. Mr. Tramontina, the biggest cheerleader for the giveaways that are slated to cost $77 million this year, at best took no effective steps to stop the film companies from buying new cars and enriching their relatives with our tax money.
Mr. Tramontina's memo shows only sloppiness on the part of the Iowans in charge of running the program. In Louisiana, the official in charge of a similar program went to jail on corruption charges.
You can tell that the Governor finds this very bad news by the way it was released at 4:56 this afternoon. Late Friday news dumps are the classic way to put out really bad news, to minimize coverage. The Governor has suspended all payouts from the film credit program.
It will be interesting to see whether the supporters of the program -- which was originally approved with only three dissents among Iowa's 150 legislators -- will have the nerve to try to restart the program now that it has been exposed as a pinata for out-of-state filmmakers. No wonder they all wanted to shoot here.
From earlier today: HOW DARE YOU OBJECT TO SPENDING YOUR MONEY TO PROMOTE MY BUSINESS?
Further Tax Update coverage: THE IOWA FILM CREDIT EXPLOSION: WE SHOULDN'T BE SURPRISED.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to