Film credit repeal moves forward

JUNEAU — Sen. BIll Stoltze has gotten traction for Senate Bill 39, his effort to repeal the film production tax credit program.

“I hate to have something like this competing against our core responsibilities of government,” Stoltze, R-Mat-Su, told the Senate Finance Committee.

He cited as “core responsibilities” things like transportation infrastructure, public health and prisons. He noted that a tight fiscal climate in Juneau with falling oil prices has meant the Legislature must focus on those types of services.

Stoltze said that an audit of the program’s benefits showed a return on investment but, in his view, state money was used to fund the program, but the revenue generated did not return to state coffers.

“It’s hard to view that as a real one when it’s your money and it’s returning to somebody else,” he said. “I think there’s a lot of ways we could stimulate the economy more effectively.”

Representatives of the Alaska film industry argued against the bill in written testimony to the Legislature.

“SB39 does away with future new tech jobs, and destroys a business environment that is needed for Alaskan businesses to make decisions for investment in hardware, training, and infrastructure,” wrote Thomas R. Daly, president of the non-profit trade association Alaska Film Group, who went on to say that the industry has created “a plethora of new Alaskan businesses and positions.”

A group of film students in Fairbanks likewise wrote in to oppose the bill.

Alaska Department of Revenue Commissioner Jerry Burnett said during the Senate Finance Committee hearing Wednesday that the film tax credit program had already been effectively suspended.

Gov. Bill Walker zeroed the program out in his proposed budget. That will result in layoffs for three Department of Revenue employees and the discontinuation of the program June 30.

Burnett said that although it’s possible that the board that reviews film tax credit applications could approve a new application, it seems unlikely.

“It’s impossible for me to believe that they would approve an application at this point,” he said. “I can’t imagine any of our commissioners approving a credit at this time knowing what our fiscal situation is.”

The way the production tax credit works is that film companies apply to the program and receive a tax voucher. Because most television and film productions aren’t Alaska taxpayers, the production generally turns around and sells those tax credits to a company that pays state taxes.

According to Department of Revenue statistics submitted to the Legislature, 125 productions have received the credit since 2009. Of those productions, more than half — 65 —were in the “TV-Nonfiction” category.

Sen. Mike Dunleavy, R-Mat-Su, said that zeroing out the program and cutting those three positions resulted in a $346,000 savings in the budget. Exactly how much it will save in tax credits is unclear, as that would depend on how many were applied for and how many were approved if the program were allowed to continue.

The bill got a lukewarm reception from the finance committee. Dunleavy and Sen. Anna MacKinnon, R-Eagle River, recommended the Senate pass it. But Sen. Donny Olson, D-Nome, recommended against passage. Sens. Pete Kelly, R-Fairbanks, Click Bishop, R-Fairbanks and Lyman Hoffman D-Bethel, didn’t take a side, though Bishop is also a co-sponsor of the bill.

In the previous committee it visited, the Senate Labor and Commerce Committee, Sens. Mia Costello, R-Anchorage, and Cathy Giessel R-Anchorage, recommended passage, and Sen. Johnny Ellis, D-Anchorage, recommended against passage.

Considering that the bill has other co-sponsors in Sens. Charlie Huggins, R-Mat-Su, Pete Micciche, R-Soldotna, and John Coghill, R-North Pole, it stands a good chance of passage if it reaches the senate floor.

The bill was passed out of the Senate Finance Committee and goes to the Senate Rules Committee next.

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