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The Iowa 'let's pretend' film tax credit

October 05, 2009

Hollywood is a fantasy factory. The special effects carry over into their accounting, where they turned pretend expenditures into real money, according to the new outside accountant report on the Iowa Film Credit program. From the report:

Organizations were contracted by production companies to provide advertising for the films, often referred to as "sponsorships". In return, the sponsoring organization would generally receive advertising from the production company in the film or on merchandise related to the production. In these situations, no cash was exchanged, but the amount was included as an Iowa qualifying expenditure. In certain productions, we identified this situation multiple times, with some amounts exceeding $1,000,000 for each sponsorship.
A specific production had 4 sponsorships at $1,250,000 each, totaling more than 75% of the total qualifying expenditures. We were able to identify a total of 12 sponsorships exceeding $1,000,000 or more for each sponsorship, all of which were listed as qualifying Iowa expenditures totaling $13,400,000.

$13.4 million x 50% = $6.7 million tax credits issued for nothing. At least nothing worth paying cash for. So all of you folks who think we should carefully examine these tax credits because they are such a good thing, so we can continue to have parties with these wonderful film people: yeah, let's not be hasty.

Link: More Tax Update Coverage of the Film Credit accountant report

Tags: Corporate welfare.Des Moines Register. Rekha Basu.Economic development.Film accountant report.film credits.Film criminal investigation.harold hill.