Culver restores film tax credit

DES MOINES (AP) — Gov. Chet Culver has lifted his suspension of a tax credit to promote filming in Iowa for projects that already had been submitted, Iowa Attorney General Tom Miller said Monday.

Miller said that no new registrations will be accepted until after Culver and the Legislature have had a chance to re-evaluate the program next year.

Culver suspended the tax credit in September after questions were raised about spending practices and bookkeeping by the Iowa Film Office.

Backers of 28 film projects had contracts with the film office, and officials say contact has been made with 12 of them. There are 105 other registered projects, and letters have been sent to those companies offering an opportunity to negotiate a contract.

Miller said that if the state does not hear from a company by Dec. 15, the registration will be canceled.

A criminal investigation into the handling of the tax credits continues, Miller said. He cited several problems that surfaced, including claims for tax credits and expenditures not being properly vetted, or not vetted at all.

The formula used for awarding the tax credits also was not properly administered, he said.

Film office officials allegedly referred to a 50 percent tax credit or “half-price” moviemaking. Instead, there was a 25 percent credit for payments made to an Iowa individual or business for costs related to the production of a movie.

There also was a 25 percent credit for expenses incurred outside Iowa. That credit was determined after the amount spent in Iowa was subtracted from the total cost of the movie.

“Nowhere does it say 50 percent anywhere in the statute,” Miller said.

Miller said part of the investigation is looking into possibly fraudulent claims by moviemakers. He said in some cases a moviemaker may have created an Iowa business or corporation through which tax credits were awarded for out-of-state expenditures.

“These shell companies had little or no connection to Iowa and were set up to take advantage of Iowa tax credits, under the film office’s improper interpretation of the law,” Miller said.

He said more than $4 million in tax credits were paid to a company that spent only $400,000 in Iowa.

To date, about $32 million has been awarded for 22 film projects.

“We’re going to see if there is a way to get some of that back,” Miller said.

Fred Hubbell, the acting director of the Iowa Department of Economic Development, said part of the blame rests with the department.

“We did not have proper interpretation of the statute,” he said. “We did not have adequate oversight of the program.”

Hubbell promised that personnel changes would result in better program oversight. He said more review is needed before determining the program’s future.

“We have a really bad mess we need to clean up, but that doesn’t mean it was a bad idea when the Legislature approved it,” Hubbell said.

Culver said in a Monday statement that Iowa is legally obligated to move forward with existing contracts and approved applications. But he said further abuses won’t be tolerated.

“The days of out-of-state companies fleecing Iowans are over,” he said.

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