Two films to get state high-tech tax credits

By John Duchemin
Advertiser Staff Writer

The state's recent approval of high-tech tax credits for two film productions has Hawai'i business leaders hoping the news will stimulate more use of the credits.

Shangri-La Entertainment, producers of "The Big Bounce," a $50 million film starring Morgan Freeman and Owen Wilson, yesterday confirmed that investors in the movie received state Department of Taxation approval for investment tax credits under Act 221, a high-technology industry incentive passed in 2001.

Also, a local filmmaker received Act 221 approval for a yet-to-be-filmed, $100,000 independent production, "Our Hearts Were Touched With Fire," about Hawai'i's nisei soldiers in World War II.

Film industry advocates called Act 221 approval for "The Big Bounce" a watershed for the film industry, which has shown increasing interest in using the tax credits — but also shied away from controversy surrounding the act.

"This is something that's very positive for the industry," said Donne Dawson, state film commissioner. "I'm now dealing with an onslaught of calls — Hollywood is showing tremendous interest in Hawai'i."

Act 221 has been the target of critics who say it's too broad and vaguely worded. The credits have been used extensively by the high-tech industry, but when investors in surf movie "Blue Crush" received approval for more than $18 million in Act 221 tax credits, critics questioned the appropriateness of using a high-tech tax incentive to attract a film production.

Film industry observers said a backlash against "Blue Crush" caused the Tax Department to be more cautious in approving movies for the tax credits — prompting filmmakers to think twice about Hawai'i.

But the industry's fears will likely be eased now that a second high-profile motion picture has closed an Act 221 deal, said Nancy Grekin, a Honolulu tax lawyer who represented Shangri-La in structuring the "Big Bounce" deal.

"I think this will send a signal, and Shangri-La will certainly get calls from other studios who may want to do this, too," said Grekin, an attorney with law firm McCorriston Miller Mukai MacKinnon.

The deal did highlight some of the difficulties films have encountered in using Act 221.

Grekin said "The Big Bounce" received Act 221 approval Dec. 2, after the deal almost fell apart over a technicality. She said the state Tax Department had to be persuaded to accept several details in the complex deal's structure.

But now that the deal is complete, "Big Bounce" producers said they hope to return for more film projects and are spreading the news to the Hollywood community. The movie wrapped up a three-month shoot on Hawai'i's North Shore this week.

"The decision for 'The Big Bounce' to film in Hawai'i rested on Act 221," said Andy Meyers, vice president of business affairs for Shangri-La Entertainment, which produced the feature that Warner Bros. will distribute. "Because of Act 221, Hawai'i can continue to compete with other filming locations, both inside and outside the United States, that share the natural and diverse beauty that attracted us to this island paradise in the first place. Not only is Hawai'i a stunning location, but the local crew experienced and savvy. All this combined makes Hawai'i a perfect location for filming. We look forward to returning to Hawai'i to shoot in the future."

In its 221 deal, Shangri-La partnered with local investors including lawyer Tony Takitani and Shep Gordon, a Maui-based restaurateur, manager and veteran entertainment industry figure.

"We were convinced we could live within the guidelines and make 221 available," Gordon said when reached in India, where he was on a business trip.

The approval, Gordon said, "will make Hawai'i very competitive in the marketplace. It's also great for employment, because a lot of (locals) were hired. It took so long (to get the green light) because we had to do it the right way, find the path that's fair for everyone, building that highway that will work for other people down the line."

The producers of "Our Hearts Were Touched With Fire" plan to launch production in July with a local cast and film crew, project leader Stacey Hayashi said.

Advertiser Entertainment Writer Wayne Harada contributed to this story.