Bills Would Demand More Info From Filmmakers Getting Special Tax Breaks
A Mackinac Center for Public Policy story that looked into a questionable land deal has prompted two politicians to create legislation to bring more transparency in the state agency overseeing it.
State Reps. Dave Agema, R-Grandville, and Tom McMillin, R-Rochester Hills, said they are planning bills to address the Hangar42 Studios controversy.
The Mackinac Center for Public Policy's Kathy Hoekstra and Michael LaFaive uncovered an oddity in the tax incentive deal involving Hangar42 Studios.
The studio was in line for a refundable infrastructure tax credit worth 25 percent of the investment in the project in Grand Rapids. But as late as February, the facility — located on the site of a former Lear Corp. manufacturing facility — had been listed by a realtor for $9.8 million. It raised a question: Why would investors pay $40 million for a building that did not sell when listed for a quarter of that price?
Additionally, contractors hired to help convert the property into a studio said they had not been paid and there were six liens outstanding.
Wood TV Channel 8 picked up the Mackinac Center story and reported that the Michigan Film Office said in an e-mail that it was directed by the Attorney General's office and Treasury Department to not divulge either an approval or denial of the $10 million tax credit.
"I'm not surprised, but I am startled by the audacity of their claims to secrecy," said LaFaive, the Mackinac Center's fiscal policy director.
Said McMillin: "This idea that we aren't going to tell you — what arrogance. It just doesn't make sense."
McMillin's bill would not allow tax credits to be awarded until the vendors had been paid.
Agema's bill would allow for tax documents filed by film companies to be open for public inspection so the public can see how their tax dollars are being spent. Under current law, this is confidential information.
"It probably had a good intention," Agema said. "Now it has become, 'I'm going to cover our ass because we did something that we probably shouldn't have done.'"
The Michigan Film Office does give estimated tax credits awarded to film companies in an annual report. It doesn't list specifics of the expenditures by film and production companies that are reimbursed by the state for up to 42 percent.
Other states have had reports of questionably high expenditures. For example, according to Tony Hozeny of the Wisconsin Commerce Department, the production company spent a total of $5,626.15 for Johnny Depp's hairstyling while filming of "Public Enemies" took place in Wisconsin. The production company received a tax credit of 25 percent of that amount, or $1,406.29.
"How do we know it is not the film office's sibling that is getting the $5,000 for the haircut?" asked McMillin, who has reviewed some of the expenditures by film companies that were eligible for reimbursement by the state. "When there is so much money being thrown around, there is so much opportunity for fraud. It's our money.
"What we are seeing in Hangar42 is just an example. But there are a lot of Hangar42 situations that go on. There are a lot of people out there that will see an opportunity and the type of outrageous payments and schemes that are created by these kind of tax incentives. If we are going to have something like this, we should put as much spotlight on it as we can, not just a little candle. There is no reason to only put out a few numbers. This is the 21st century."
The Michigan Film Office said it has procedures in place that provide oversight in the reimbursement of expenses.
Anything purchased must be either donated to a charity at the film's conclusion or prorated for use in Michigan.
Nothing described as "personal" is allowed. For example, if an mp3 player was purchased, it would need to be donated or prorated at the end of filming. One film company had an auction of movie memorabilia in Michigan and donated the money to a local food bank in the Grand Rapids area.
Catered meals on sets are eligible. The cost of renting production office space and rental cars from established agencies are eligible. The rental of camera and lighting and sound equipment is also covered, as is the rent for a house or an apartment for an actor staying in town. Vehicles are covered as long as they are in the movie.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.