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Iowa's wheeler-dealer tax credit
October 05, 2009
Iowa today released the accountant's report on the film credit debacle. It reveals a few new wrinkles on this state-authorized looting of the treasury. My favorite: tax credits were issued to cover the cost of the middlemen who secured the tax credit:
Often, the tax certificates awarded to the investors and producers were transferred to other taxpayers. The tax credits are purchased by the taxpayer from the investors and producers at a negotiated discount. Brokers are used to find buyers for the tax credits. Fees are paid to the brokers by the investors and producers, usually structured on a contingent fee basis of 3 to 4 percent of the certificate value. In many cases, the broker's fees were included as qualifying Iowa expenditures used to calculate the Iowa credits, even though the certificates had not yet been issued. Thus, the expenditure for broker's fees actually occurred after the issuance of the certificate.We identified amounts for broker's fees included in the qualifying expenditures which exceed $100,000 for certain films. The total amount of broker's fees included in the productions exceeded $500,000, generating in excess of $250,000 in tax credits.
So Iowa taxpayers paid half the income of the middlemen in the film credit deals. I propose we just establish a new "middleman tax credit," where you issue tax credits just for the cost of selling tax credits -- cutting out Hollywood entirely. It looks like we're almost there anyway.
Now the Attorney General has launched a criminal investigation into the film credit fiasco. We'll learn whether paying criminal defense attorney fees will be a qualifying film expenditure.
More later.
UPDATE: The Iowa 'let's pretend' film tax credit
Related stories:
Radio Iowa (Via TheBeanWalker.com)
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Comments
Seemed like a very partial report to me. Hopefully a full audit will reveal more details that are obviously missing.
Was there any internal control? Could not a Mt. Mercy Audit class provide a better internal control system for this $100+ million credit program?
In fact, I would argue that any 16-year-old could provide a better internal control system for the department.
Perhaps we need some more accountants in these governmental programs. A dollar spent on an accountant could result in a thousand dollars saved.
I would have audited the program for free and come up with a better report than what was released.
Any responsible manager or governor would resign over this mess.
Posted by: Brad | October 5, 2009 1:47 PM
A question not answered in the audit report: why did they not use the state auditor's office? I think I know the answer: they didn't want to ask a Republican to audit a program run by Democrats. Very sad.
Posted by: Joe Kristan | October 5, 2009 2:28 PM