Lawmakers debate repeal of tax credit benefiting reality TV shows

Lisa Demer
Nat Geo

JUNEAU -- A proposal to abolish Alaska's 6-year-old film subsidy program cleared a key House committee Tuesday but a number of members said they were torn and the bill may not have the support to pass the full Legislature.

The program is immensely popular with those who work on films, documentaries and the growing lineup of reality TV shows, as well as support businesses including caterers, hotels and RV rental companies.

But the program also is costly. Already the state has paid or committed more than $100 million in film and television tax credits. Killing it could save the state about $200 million authorized for the program over the next nine years, according to the state Department of Revenue.

Lawmakers tightened up the film production subsidy two years ago to direct more of the tax credits at Alaska workers and away from big-name stars. Backers say it creates jobs and helps diversify an economy that revolves around the oil industry. But concerns remain about whether it generates enough benefit for the state.

Since the restructuring, no feature films have committed to shooting in Alaska. But the number of reality shows and spinoffs seems never ending: "Ice Road Truckers" and "Deadliest Catch," "Bering Sea Gold" and "Bristol Palin: Life's a Tripp," all of which received film production tax credits in the budget year ending June 30, 2013, according to the Alaska Film Office.

State Rep. Bill Stoltze, R-Chugiak, is the prime sponsor of the repeal measure, House Bill 112. He said the subsidies are too expensive, especially with the state facing budget deficits.

"Some good things have happened from this subsidy but the amount spent to create the ability for someone to be up here isn't justified. And it's a lot of money," Stoltze said Tuesday evening. "Would they be here if the state wasn't propping them up?"

The measure moved out of the House Finance Committee, which Stoltze co-chairs, earlier in the day. Only two of the 11 members recommended passage, Stoltze and a co-sponsor, Rep. Mark Neuman, R-Big Lake. Two Democrats -- Les Gara of Anchorage and David Guttenberg of Fairbanks -- urged against passage and the remaining seven all gave no recommendation in the committee report -- including some who were undecided and others who said they would vote "no" on the floor.

"I'm really struggling with myself on this," Rep. Steve Thompson, R-Fairbanks, said. While the program hasn't had a chance to completely prove itself, he said, is the state giving away money it can't afford to?

Rep. Tammie Wilson, R-North Pole, questioned whether the exposure from some reality TV shows hurts the state's image.

She said she recently watched a show shot on Kodiak Island that made it look like "you can just go and kill a bear anytime you want and fish anywhere you want and that we have no rules, no laws, no anything."

Some small mine operators have told her they are being more regulated because of a wrong impression that anything goes here, Wilson said.

It wasn't clear whether the problematic shows received tax credits -- the 2012 changes keep the names of qualifying movies and shows confidential. Four state commissioners -- sitting as the state Film Commission -- must sign off on scripts or synopses of shows as being in Alaska's best interest.

Stoltze said he wasn't familiar with the reality shows. He got rid of cable and doesn't watch television. But he didn't like "The Frozen Ground," a feature filmed here about a serial killer that qualified for a $6.3 million tax credit.

Rep. Mia Costello, R-Anchorage, led a subcommittee two years ago that crafted the reforms.

"I see it like a capital project" -- a way to create jobs, Costello said.

Every state that has created a film industry tax benefit has had "a love-hate relationship with it," she said, expanding it, then scaling back.

Under the program, film and TV productions can apply to the Alaska Film Office for tax credits based on spending. Because most aren't the type of corporation that must pay income taxes in Alaska, they sell the credits to other businesses that do, such as retailers, wholesalers and fishing interests, said Johanna Bales, deputy director of the state Tax Division. She said she didn't know if oil companies had bought any.

After the 2012 changes, film production companies can seek tax credits that theoretically could cover as much as 100 percent of wages for Alaskans, but just 5 percent of that for high-paid non-Alaskans including actors and directors, said Kelly Mazzei, executive director of the Alaska Film Office.

The 2012 changes "Alaskanized it," Guttenberg said. "I just think we're pulling the rug out from under something we have nurtured and is growing."

It doesn't make sense to ramp the program up one year only to ramp it down the next, said Rep. Cathy Munoz, R-Juneau.

An average $20 million a year isn't that expensive for a program that is beginning to diversify the economy, Gara said.

Still, if a new crop of movies and TV shows all started filming at once, the state could owe significantly more in a single year, Stoltze said.

He now is trying to corral enough votes to pass the tax credit repeal in the full House. Regardless of whether he's sure of the vote count, he wants a vote on the floor, he said.

Reach Lisa Demer at ldemer@adn.com or 952-3965.

 


By LISA DEMER
ldemer@adn.com
Contact Lisa Demer at LDemer@adn.com or on