Film industry wins tax-break support
By Kelly Yamanouchi
Advertiser Staff Writer
After hearing from tax-credit supporters yesterday, a House committee plans to advance a bill to expand tax breaks for film productions.
Film industry executives said movies shot in Hawai'i such as "Jurassic Park" and "Pearl Harbor" bring more spending into the state. They supported Senate Bill 359, which in its latest version calls for tax credits equal to 15 percent of the first $25,000 of employee wages and salaries.
They also want commercials to be made eligible for the tax credits, saying commercials can contribute to a steady stream of business to support a sustained production industry in the Islands.
The push for expanded film tax credits comes as the Legislature is taking a closer look at the cost and benefits of such tax incentives.
The film industry's support of a broader tax credit is also part of an effort to separate itself from the controversy of movie producers using the Act 221 technology investment tax credit. The proposed legislation would prohibit anyone from getting both in the same year.
But the state Taxation Department opposes broadening the film tax breaks, saying the proposal could amount to more than $800,000 annually. The state Department of Business, Economic Development and Tourism also opposed the expanded credits.
The film industry contends their legislation would make Hawai'i more competitive with other locations jockeying for film production projects.
"Today more shows are choosing Hawai'i because in this post-Sept. 11 world it is safer to shoot in America," said Chris Lee, founding co-director of the University of Hawai'i's Cinematic and Digital Arts Program. "It is incumbent on us to build on this momentum."
Hawai'i's tax credits are less competitive than those offered by other jurisdictions, including Oklahoma, New Mexico, California and Canada, according to a Senate committee report.
"Other states have passed aggressive tax legislation," Lee said. "Hawai'i must not be left behind."
Lee also said film producers can re-create Hawai'i-like backdrops in the Philippines, Thailand and Australia if they decide it is too expensive to film here.
The House committees on tourism and economic development deferred a decision on the expanded tax credit bill until Tuesday. Tourism Committee Chairman Jerry Chang said he planned to recommend passing the bill with amendments, although he said he had not yet decided on the changes to be made.
Motion-picture and television projects can get a 4 percent tax credit for production expenditures, including purchases and payroll, and a 7.25 percent credit on the hotel room tax while filming in Hawai'i.
There are conditions that apply to qualify for the full 4 percent production credit, including a requirement for a Hawaiian name or word in the title of the project. Projects such as the surf movie "Blue Crush" receive a partial credit.
Supporters hope the credits will be extended to commercials, "the bread and butter of our industry," said Walea Constantinau, city film industry development specialist. She said producers of commercials use more local equipment and pay more. "(Commercial production) also levels out the peaks and valleys of the employment cycle," she said.
She said commercial production expenditures in the state have eroded over several years. That's a problem, she said.
Films and television production may not produce business that is steady enough to support vendors serving the film industry, which makes it more expensive because producers need to bring in their own equipment.
More tax credits would help to defray the higher cost of filming in Hawai'i, she said.
"People want to come here, particularly now," Constantinau said. "It's all about increasing the opportunity for a production to be here."
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
