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Snipe hunting for film credits

October 28, 2009

The Iowa Attorney General's office says it may try to recover some of the $32 million in tax credits already issued in response to the well-publicized ~~looting~~ abuses in the program.

It's not clear exactly how this would work. The easiest thing to do mechanically would be to revoke the tax credit certificates that you attach to a return to claim the credits. There's just one little problem with this: film credits are "transferable," so almost all of them were sold by the filmmakers to third parties. That would punish third parties, not the offending filmmakers. It also invites lawsuits from taxpayers who paid good money for credits had been issued by a duly-authorized state authority, only to have them go away.

So maybe they plan to go after the filmmakers themselves to get cash repayments of the credits already issued. As the Des Moines Register reports, that's not easy:

Deb Copeland of Des Moines, a casting director, said she, too, is skeptical the state could successfully recover any money from recipients of tax credits. She noted that movie financing is complicated, and the tax breaks in some cases were distributed among dozens of moviemakers and investors.
Some companies that formed to make movies in Iowa are now defunct.

"It would be like a blood-out-of-a-turnip sort of thing," she said.

Movie companies typically set up a new LLC for each project. Once the film is done, the production LLC closes shop, the Land Rovers, Benzes and other properties used in the film are distributed, and only a shell remains. The state's lawyers will have to march through the LLC, possibly through a rats nest of other entities, to catch up with the proceeds of the sold credits.

They'll likely be as successful as many a young snipe hunter.

Tags: Corporate welfare.Economic development.Film accountant report.film credits.Film criminal investigation.harold hill.O Kay Henderson.