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Witness: we got taxpayer money for saying we'll spend money someday

August 19, 2011

The trial of Iowa Film Director Tom Wheeler yesterday revealed a new and creative way taxpayers got swindled by the Iowa Film Tax Credit program: pretend pay for film employees.

The witness was filmmaker Bruce Elgin, an early booster of the Film Credit program, who is testifying under the terms of a plea bargain. He said that Mr. Wheeler encouraged him to claim tax credits based on "deferred" compensation that would only be paid if the film were sold, and was ultimately never paid. From The Des Moines Register:

For example, one invoice for an actor's pay that prosecutors showed the jury on Thursday totaled $11,100, of which $8,800 was deferred. Under the incentive program, half of the $11,100 ultimately went to Elgin's company.

"Iowa Film Production Services made a pretty good profit on a movie that never sold?" prosecutor Thomas H. Miller asked Elgin.

"Yes, sir," Elgin said.

So Mr. Elgin was able to sell film credits worth $5,550 based on actual wages paid of $2,300 -- a 241% tax credit, rather than the touted 50% credit.

Elgin, who submitted invoices worth roughly two and a half times what it cost to make his movies, received $5 in tax credits for every $2 he spent on his films.

Sweet deal, except for the taxpayers. The trial continues today.

Related: Let them Eat Canapes

Complete Tax Update film credit coverage

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