CHICAGO - Iowa Gov. Chet Culver has suspended the state's film tax-credit program and asked the state auditor and attorney general to assist in a review after an audit found lax oversight had allowed producers to claim credits for unqualified expenses, raising questions over the value of the program as the state seeks to remain in the black.
The Department of Economic Development which oversees the state Film Office last week disclosed the results of an independent audit that criticized oversight of the program. The audit found that credits were claimed for two luxury vehicles not used in productions, few projects provided receipts for expenditures, contracts for tax credits were increased after their initial approval, and credits were claimed improperly for out of state purchases.
The full cost of the tax-credit program remains unclear. The state has received applications totaling more than $200 million in tax credits, but much of that spending might never occur if the projects fall through.
Culver on Friday accepted the resignation of Department of Economic Development director Mike Tramontina and on Monday dismissed Iowa Film Office manager Thomas Wheeler and Vince Lintz, deputy director of economic development.
In a letter Monday, Culver also requested the help of Iowa Attorney General Thomas J. Miller, state auditor David Vaudt, and revenue department director Mark Schuling in a review of the film, television and video project promotion program.
"I seek the review, advice and recommendations of your respective offices as to how this program can be improved and how pending issues can be resolved efficiently and effectively, allowing us to move forward in a manner that is consistent with the intent of this legislation and that protects the interests of Iowa taxpayers," Culver said.
Lawmakers are also expected to jump into the fray when the Legislative Oversight Committee meets tomorrow and may discuss a possible legislative probe of the film tax-credit program and possibly other tax-credit programs.
The program was established in 2007 to lure new film, television and video productions to Iowa in hopes of promoting spending and increasing the state's profile. Under the program, producers can seek tax-credit certificates equal to up to 25% of their qualified expenditures and up to 25% of qualified investments in their project. The credits are transferable and can be claimed on state income taxes.
Officials said the program remains a worthwhile economic growth tool. The state has issued $32 million in tax credits for more than 20 projects since 2007 resulting in $64 million of spending.
"This program has really helped to build an industry here," said Erin Seidler, a spokeswoman for the Economic Development Department. Six productions are currently underway.
Iowa could face a total liability in the coming years of $300 million based on contract awards, but Seidler cautioned that the figure fails to recognize that the applications are preliminary and some spending on some projects might fall short while other projects might fall through.
"There a big difference between the actual liability and the projected liability," she said.
Producers rushed to file applications by a July 1 deadline because state lawmakers capped spending on all five of the Economic Development Department's tax-credit programs at $195 million. The department has allocated $50 million for film credits.
Iowa's financial picture looks better than many of its neighbors as it benefits from $600 million in reserves, but it is still struggling with poor revenue collections and some lawmakers have warned that it faces a $900 million deficit in its $6.2 billion fiscal 2010 budget.
Iowa's film tax-credit program - considered one of the nation's most generous - has come under scrutiny as some states across the country are reviewing whether or not film tax credits are worth the drain on state coffers. More than 40 states offer credit subsidies to lure filmmakers.
Iowa carries an Aa1 issuer rating from Moody's Investors Service, an implied GO rating of AA-plus from Fitch Ratings, and a AAA from Standard & Poor's.
