By Erich Schwartzel and Cameron McWhirter
More than a year before Friday's "Batman v Superman: Dawn of
Justice" was scheduled to hit theaters, a Michigan lobbyist backed
by the billionaire Koch Brothers was already giving the superhero
epic a bad review.
The main objection of Annie Patnaude, deputy state director for
the Michigan office of Americans for Prosperity, was the $35
million in tax credits given to the movie for filming in the state.
"It's Batman versus Superman, versus road repairs, income-tax
relief or any number of other priorities for Michigan families and
businesses," said Ms. Patnaude. About four months later, state
legislators killed the tax-credit program.
It was another victory for Americans for Prosperity, the
free-market political-advocacy group backed by conservative
billionaire brothers Charles and David Koch. The industrialists'
network of Americans for Prosperity staff and supporters across the
country are keeping busy, taking aim at the film tax credits that
have revamped how Hollywood does business. A spokesman for the Koch
brothers referred questions to Americans for Prosperity.
Americans for Prosperity is also targeting what it considers
unfair tax breaks for other industries and has launched campaigns
against Medicaid expansion, among other causes.
Over the past several years, Americans for Prosperity has
successfully organized campaigns to eliminate or reduce tax breaks
for entertainment productions in several states despite years of
bipartisan support in some cases and billions spent by governments
and private industry on soundstage infrastructure and work-training
programs. The group has found a natural adversary in what it
decries as "Hollywood handouts," calling out legislators who
accepted on-camera cameos and targeting politicians up for
re-election with ads lampooning their association with A-list
stars.
Americans for Prosperity President Tim Phillips said the "core
principle for us is ending government cronyism." He added: "This is
an insidious example of government picking winners and losers with
taxpayer dollars."
The Americans for Prosperity campaigns, along with shifting
state economics, have helped dial back several years of film
tax-credit fever across the country, one that created several
thriving miniproduction hubs in states far from California.
Thirty-five states have film tax programs, and nearly every
major-studio movie budget includes a line for subsidies. But just
as that has become the norm, Americans for Prosperity has launched
a nationwide campaign against the incentives, an opening salvo in
its fight against corporate tax breaks. After initial success in
several states, the group is targeting filmmaking hubs like Georgia
and anywhere they feel they can make headway. Even the specter of
political controversy can send productions scurrying to other
states.
Hollywood's moves across the country have forced it to weigh in
on other state debates. On Wednesday, several Hollywood production
companies said they would stop shooting in Georgia unless
Republican Gov. Nathan Deal vetoed legislation called the Free
Exercise Protection Act, which was passed this month by the
GOP-dominated Legislature. The act permits faith-based
organizations to fire employees if their "religious beliefs and
practices are not in accord" with the organization's. It also
allows faith-based groups to decline services for the same reason.
Gay-rights groups argue such wording would allow churches to
discriminate against gay or transgender people.
Walt Disney Co. and AMC Networks were among the companies saying
they would leave the state. Disney's Marvel Studios has filmed
several blockbusters in the state, including the upcoming "Captain
America: Civil War," and AMC's "The Walking Dead" has been an
economic boon to the Georgia town where the zombie thriller films.
Many nonentertainment businesses also have condemned the
legislation. Mr. Deal has spoken out against the bill but has said
he hasn't made up his mind whether he will veto it. He has until
May 3 to decide.
As critics attack the film credits in the U.S., foreign
countries, including Canada, the U.K. and Australia, are ramping up
their attempts to lure filmmakers.
Americans for Prosperity's animosity toward film tax credits is
playing out at the state level, but it is backed by two
billionaires who likely will have significant influence in the 2016
presidential election and state races nationwide.
Ten states have eliminated film-incentive programs since 2009,
which doesn't include some of the reductions made in program
funding in other states, according to Entertainment Partners, a
production-incentive consulting firm in Burbank, Calif. Some states
have dropped or reduced the programs in response to larger budget
problems, some driven by the steep drop in oil prices.
In Florida, Koch-backed radio ads told lawmakers to stop
supporting "Hollywood tycoons" by funding movies shot in their
state, highlighting salacious fare like the male-stripper drama
"Magic Mike." The organization's state director in New Jersey
testified in November that legislators should shun "glitz and
glamour" and instead focus on striking down a tax increase on gas.
Even Montana's tiny program was eliminated after Joe Balyeat, a
former Montana state senator then working as the director of
American for Prosperity's state office, became the first person
ever to testify against the subsidy.
"It was a surprise attack," said Deny Staggs, Montana's film
commissioner. Legislators, some of whom were already skeptical of
the subsidy, eliminated the program. The current state director for
Americans for Prosperity, David Herbst, said it didn't matter to
his group how small the Montana film-incentive program was. "We're
not just there for the big fights," he said.
The group has found common cause with liberal policy groups in
Kentucky, Florida and Louisiana that oppose the credits. "I would
be delighted if the folks at AFP, who we have not always seen
eye-to-eye with, would be at the table arguing for limits to this
program," said Jan Moller, director of the Louisiana Budget
Project, a liberal policy group.
Americans for Prosperity's playbook was on full display in North
Carolina, where the film industry in 2013 awarded $61 million in
incentives and was having its biggest year when the group took aim.
The state's generous tax-credit program, built over the past decade
with general political support, offered a 25% refundable tax
credit, as much as $20 million per production. Refundable credits
reimburse a company for its investments, even if it doesn't owe
state taxes.
The subsidies had attracted major films like "The Hunger Games"
and "Iron Man 3." But then mailers produced by Americans for
Prosperity started arriving in mailboxes, splashed with photos of
Tom Cruise and asking if voters really wanted their tax dollars
going to millionaire celebrities.
"We needed about three sentences to explain our position," said
Aaron Syrett, then North Carolina's film commissioner. "They needed
two words: Tom Cruise."
Soon after, the 2014 elections went overwhelmingly to
Republicans and an Americans for Prosperity board member, Art Pope,
became state budget director. Proponents brought industry vendors
to the state capitol to meet with lawmakers in an effort to gin up
support. But the film tax credit was drastically reduced to a $10
million grant program that was only recently raised to $30
million.
Union officials say productions have headed elsewhere. Georgia
wooed away the "Hunger Games" sequels as well as some television
productions.
"We were outspent and outgunned the whole time," said Jason
Rosin, business agent for a film workers' union that spans North
Carolina, South Carolina and Georgia. Following the legislative
change, the proportion of his members living in North Carolina
plummeted, he said.
Americans for Prosperity, co-founded and supported by the owners
of the closely held Koch Industries, is known as a pro-free-market,
pro-business organization that supports limited government
involvement in the marketplace. It has no qualms criticizing
Republicans who support incentives, especially in GOP-dominated
states where the subsidies have been popular but where tea-party
activism is high. "Despite their rhetoric about limited government
and limiting government expenditures...Republicans definitely bear
more responsibility," said Mr. Phillips.
The Motion Picture Association of America, representing the six
major Hollywood studios, has been the leading lobbying force for
film tax programs as the subsidies have grown more important for
its members. When a tax credit comes up for debate, the MPAA
lobbies lawmakers with economic-impact studies and dispatches a
representative or studio executive to testify and lobby in its
favor--appearing over the past year in Florida, Louisiana, North
Carolina and Michigan, among others.
In recent years, Americans for Prosperity officials failed to
get anywhere in Georgia, now one of the most popular destinations
for Hollywood.
But this legislative session, the group has started lobbying to
convince politicians that the state's credits--some of the most
generous in the U.S.--should be rolled back. The group plans to
build legislative and grass-roots support this year, then back
specific legislation next year, said Michael Harden, the group's
lobbyist in Atlanta.
Support for film credits in Georgia, once widespread, "has hit
its high-water mark," he said. Mr. Deal has spoken out in support
of the credits in recent weeks--endorsements that have led some
political observers in his state to wonder if he is girding for a
fight.
(MORE TO FOLLOW) Dow Jones Newswires
March 25, 2016 15:47 ET (19:47 GMT)
Any attempt to pull back the Georgia program would face
significant opposition, since the state's officials have embraced
their new identity: "Y'allywood." Billions have been spent in
soundstage construction near Atlanta in recent years. The state
paid out $226.8 million in credits in 2013. Credits for 2014 are
still being processed, though $101.5 million has been paid out so
far, according to the state Department of Revenue.
Another bout is expected in Florida, where Americans for
Prosperity will fight proponents seeking renewed funding.
Supporters point to "Live by Night," a film being directed by Ben
Affleck and set in Ybor City, the Latin section of Tampa, Fla.
Because tax credits are more generous in Georgia, the production
built a mini-Ybor City replica in Brunswick, Ga.
"It's easy to vilify an industry that's seen as rich and
powerful and glamorous, and not see what the reality is: people who
are working long crew days," said Agustin G. Corbella, chairman of
a Florida government council that encourages film production in the
state.
Chris Hudson, state director of the Americans for Prosperity
chapter in Florida, said his organization has fought tax credits in
the state for nearly three years and won't stop now. "You don't see
them doing this for plumbers," he said.
(END) Dow Jones Newswires
March 25, 2016 15:47 ET (19:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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