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Reforming the Film Program

Changes needed for Alaska business

SB23 is expected to become active once the State Legislature convenes this month and may actually be one bill that passes before this legislative session is over. There is a sense of urgency by some to hurry up and pass it to prevent the Alaska film production incentive program from expiring next year. While many believe changes are needed to the program and this bill has several, some of these changes don’t help Alaska business.

SB23 includes a 10-year, $200 million expansion of film tax credits; program audits every four years (2013, 2017, 2021); three years to spend at least $100,000 instead of two years; six years to use the credit instead of three years; six years to bring a lawsuit instead of one year—to name a few of the changes.

There are revisions to qualifying criteria language, i.e., “…the film office may consider [(1)] the effect of the production on (1) both the immediate and long-term prospects for the film industry in Alaska; (2) both the immediate and long-term prospects for the employment of Alaska residents; (3) both the immediate and long-term prospects for the economy of the state; and (4) the public perception of state policy on the utilization and development of the natural resources of the state.”

Another change is the addition of a secrecy clause: “Sec. 12.AS44.33.234 is amended by adding a new subsection to read: (c) Information submitted in an application under (a) of this section is confidential and is not subject to inspection or copying under AS 40.25.110 – 40.25.125.” This speaks to the requests for more transparency to the program.

There’s language requiring the CPA verifying qualifying expenditures to be licensed in Alaska, and that qualifying expenditures must be made by a production company licensed to do business in Alaska, and the expenditures must be made for work done in Alaska (but not necessarily by Alaskans).

There’s a new requirement for end credits to include the film office logo and the words, “Filmed in Alaska with the Support of the State of Alaska and the Film Office, Alaska Department of Commerce, Community, and Economic Development” or not. The other option is “on each DVD or other media produced for distribution, a short Alaska promo video or advertisement approved by the film office.”

There are changes to the amount of the credit; productions in rural areas are increased from 2 percent to 6 percent, base rates for “nonfiction productions produced for television” are reduced from 30 percent to 20 percent.

“Rural area” is redefined. A community has to be in Alaska (apparently that wasn’t stipulated before), and if the population is 1,500 or less it’s considered a rural area, or if a community has a population up to 10,000 (an increase from 5,500) if there is no road or rail connection to Anchorage or Fairbanks.

There’s the declining rule; whereas qualified expenditures cannot exceed 15 percent of the total production budget between 2013 and 2016, 12 percent between 2016 and 2018, 10 percent after 2018. Is this the ACES concept of the longer they stay, the more they spend, the less they’re rewarded? It doesn’t pencil out as a good business model for more barrels or for more movies.

Granted, the Alaska film production incentive program needs changes, but are these really the changes it needs? The Alaska Film Alliance is calling for “reform of the credit/broker incentive system, more support for Alaska-based businesses wishing to work with out of state filmmakers, better incentives for hiring Alaskans, the creation of a work force development program, and using a small portion of the tax credits to build film and media infrastructure in Alaska.”

This growing group of Alaska businesses is asking for the creation of an Alaska Film Board to “oversee the state’s involvement in the film industry” and wants “extensive public hearings on this program before moving the bill out of committee” and who can blame them? Ten years and $200 million is a lot of time and money, let’s get it right, let’s get it for Alaska business.

This editorial first appeared in the January 2012 print edition of Alaska Business Monthly magazine.

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