Film credits now target local projects

As the most active movie producer in Rhode Island and recipient of $946,000 in state film tax credits over the last two years, Chad Verdi stood to potentially lose out when lawmakers began working on an overhaul of the program in reaction to 38 Studios’ demise this spring.
But Verdi, the East Greenwich maker of Inkubus, Infected, and Paz, said he would rather state funds leave the entertainment sector than have them go to Curt Schilling’s video game company or another like it in the future.
“These credits should be for Rhode Island filmmakers and not for companies that come in from out of state trying to take advantage,” Verdi said.
For Rhode Islanders who delight in watching Hollywood stars like Dana Delany and Bill Murray chew up Ocean State scenery, the film-credit overhaul lawmakers came up with in the fiscal 2013 budget may force a newfound taste for independent cinema.
What lawmakers settled on included a new $5 million per-project maximum credit and an existing $15 million cap on all film tax credits that can be issued in a given year.
To nurture the local industry, Rhode Island eligibility requirements were changed to allow locally done post-production, editing, writing, sound design, and music composition to count toward qualifying for a credit. (Marketing costs were expressly excluded.)
Where before a majority of shooting had to take place in the state, now a project qualifies if 51 percent of total production cost is spent here.
The 51 percent local filming helped draw Hollywood crews to shoot films in Rhode Island, but left out companies like Providence Pictures, which is based in downtown Providence, but shoots its documentaries around the world.
Along similar lines, the new rules set the minimum budget for tax-credit-eligible projects at $100,000 instead of $300,000, which will broaden the potential pool of low-budget, local independent projects that can qualify. The program now has a 2019 sunset date.
The 7-year-old film tax-credit program was slated for an overhaul even before 38 Studios desperately applied for $14.3 million in credits to stave off insolvency. Concerns about the cost of the program and that it amounted to a Hollywood handout had prompted proposals to put limits on the size of credits while making it possible for smaller productions to get a piece of the pie.
“I think [the new rules] are very positive for smaller companies and independents,” said Gary Glassman, executive producer and director of Providence Pictures, which makes television documentaries. “Common sense tells you that a tax credit going to a Rhode Island-based company is better from an economic-development standpoint than a New York or California company.”
But while Glassman is happy to see the rules changed to include a wider range of productions, he acknowledged that it came at a potential cost of becoming less attractive to Hollywood film and television productions like ABC’s Body of Proof and Wes Anderson’s Moonrise Kingdom.
“Unfortunately, I think this is going to be a deterrent to larger Hollywood productions coming in because to them $5 million is lunch money,” Glassman said.
Since the film tax-credit program was launched in 2005, 43 projects have received credits for a total cost of $70.9 million in lost tax revenue, according to figures from the R.I. Film & Television Office.
Only three projects have reached the $5 million mark: Underdog, 2006, $9.5 million; Dan in Real Life, 2006, $5.1 million; and Brotherhood Season 3, 2007, $5.5 million.
In only one year, 2006, when a bumper crop of productions claimed $22.8 million in credits, did the total cost of credits exceed $15 million. Last year set a new low for credits with the $2.9 million going to Moonrise Kingdom, representing the total for 2011.
Body of Proof had applied for both 2011 and 2012 tax credits, but last year ABC decided to shoot the series’ second and third seasons in Los Angeles.
Currently, Paz, which is in production, is the only movie with an application for 2012 film tax credits. The estimated tax credits for the $12 million independent film are $3 million, according to the Film & Television Office. Of course, the total would have been higher if Gov. Lincoln D. Chafee’s administration had allowed 38 Studios to collect $2.1 million in 2011 credits for the production of its video game Kingdoms of Amalur: Copernicus. This year 38 Studios applied for $12 million more.
But the Chafee administration prevented any credits from being issued to 38 Studios before the company imploded this spring.
That didn’t stop 38 Studios from securing loans backed by the credits, including $8.5 million from Bank Rhode Island, that are now the subject of a state and federal criminal probe.
In the weeks before 38 Studios filed for Chapter 7 protection, Chafee proposed a series of changes to the film tax-credit law to prevent a similar situation that were ultimately approved.
They included the $5 million cap, moving oversight of the program from the film office to the division of taxation and a new rule barring any entity from double dipping by using state funds to qualify for film tax credits.
Steven Feinberg, executive director of the R.I. Film and Television Office, declined to comment on what having the program moved out of his management would mean.
Across the border, Massachusetts’ film tax-credit program has been so popular with movie producers that it’s become the Bay State’s most expensive tax-credits program, costing $38 million in 2011. The Bay State does not cap its credits.
Along with opening up the film tax credits to smaller productions, the amendments in the R.I. fiscal 2013 budget make theatrical productions eligible for the first time.
Although he supports the new 38 Studios-inspired taxpayer protections, Verdi hopes state officials will waive the caps, which they can do, if an important Hollywood production expresses interest in coming to Rhode Island.
“There should be exceptions if there is a legit project coming here and we need to compete with other states,” Verdi said. •

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