Film Tax Incentive Scandals

In recent years twenty-eight states, including California, Louisiana, Arizona, Iowa,  and Utah, have offered state tax credits and incentives for filmmakers.  The purpose of these incentives was to help these states by promoting the states and increasing jobs.  Unfortunately many of these states are starting to realize that these incentives are more damaging than they are doing good.  In fact, several lawsuits have come to light in the past few years highlighting some of the scandals that have occurred as a result of these film incentives.

The state of Iowa was quick to provide film tax credit and soon became one of the most generous tax incentive states in the country.  However in 2007, a tax audit found that 80% of the $32 million in tax-credit certificates issued to film projects were improperly used.  Due to this, Chet Culver, the then-governor of Iowa, suspended the tax incentive program. 

The State of Iowa vs. Wendy Runge case of 2011, more popularly known as the Iowa Film Office Scandal, is one of the most well known cases of Iowa tax credit abuse and mismanagement.  Runge pleaded guilty for defrauding the state of Iowa.  She had inflated the expenses on the application for the film tax credits and received $1.8 million for the production of a low budget film.  Runge was sentenced to a maximum of ten years in prison.  Two of Runge’s partners also pleaded guilty, who were sentenced to probation.  This case also led to the termination of the manager in the Iowa Film Office.

The result of the Film Office Scandal and many other similar cases was that some states, Iowa and Louisiana included, suspended their film tax incentive programs.  These cases have made many people debate whether this tax incentives even help the states that are offering them.  Now that there are less tax incentives offered, the film industry has to look in other states for incentives, go overseas where it may be cheaper to film, or simply budget more for the film projects.

     It is unfortunate for those film makers who are honest and could use those film tax incentives.  However, like many other things in life, it takes just a few dishonest people to ruin something good for everyone.  On the bright side, some of the states who stopped their incentive programs are slowly lifting their suspensions and offering incentives again.