Posts Tagged ‘film tax credits’

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Tax Roundup, May 1, 2013: Brittannia gets behind filmmakers in a big way. Also: IRS power grab takes a new direction.

Wednesday, May 1st, 2013 by Joe Kristan

hh44.jpgNew U.K. film tax credit indictments.  It appears that the Brits are slowly moving towards the Iowa approach of jailing filmmakers instead of subsidizing them.  Ic.Scotland.co.uk reports:

Five people are to be charged in connection with a film industry tax relief fraud which cost the public purse around £125 million, the Crown Prosecution Service said.

The group allegedly abused a tax relief that allows investors in the British film industry to offset losses against other tax liabilities in order to cheat the public revenue.

“Around £125 million” translates to around $194 million.  And in Iowa film producers are serving time for stealing merely single digits of millions.  It just goes to show what you can accomplish with a national effort.

 

Boo.  House bill would give IRS authority to regulate tax pros (Kay Bell)  The power grabbers at IRS and their buddies at the national franchise tax prep firms have been thwarted by the courts.  Now they are using their congresscritter friends to put in the fix.

Kay sadly falls for it:

The quality independent tax professionals are following tax law changes, staying up to date and providing their clients with reliable tax services. Down the  street, however, an inept preparer is undercutting their prices and mucking up the system for all of us — the IRS, tax pros and taxpayers alike.

The IRS can’t regulate anybody into competency.  They can make people pass a “competency” test that really is a literacy test.  They can make people pay for CPE.  But they can’t make anybody competent who wouldn’t be otherwise.    What they can do is drive little preparers out of the business with nagging paperwork, red tape and hassles that the big boys can just assign to their compliance departments, and, when necessary, to their lobbyists.  This reduces the supply of preparers, increasing the cost of preparation for taxpayers.

The real problem with tax errors isn’t preparers; it’s the horrendous tax law and the inept legislators who make it happen.

 

Jacob Sullum on the Burden of Online Sales Taxes (Reason.com):

In a 2011 paper published by the Mercatus Center at George Mason University, Veronique de Rugy and Adam Thierer recommended “an ‘origin-based’ sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors.” Under that rule, which mirrors what happens when you buy something while visiting another state, each business collects sales tax on behalf of the state where it is based, no matter where the customer happens to be.

The beauty of this approach is that it treats all retailers equally, eliminates the daunting challenge of dealing with many different taxing authorities, and respects state policy choices while encouraging tax competition between jurisdictions. Evidently the idea makes too much sense for Congress to consider.  

 That would motivate online sellers to locate in low tax jurisdictions, which is why congresscritters from high-tax places will never allow it to happen.

 

Scott Drenkard,  California Considers Soda Tax in 2013, Forgetting Resounding Defeat in 2012 (Tax Policy Blog)

Joseph Thorndike, When Tax Reform Means Soaking the Rich (Tax.com)

Eric Toder,  How to Improve the Tax Subsidy for Home Ownership.  (TaxVox).  Maybe by eliminating it?

Jack Townsend,  John Doe Summons Issued to Wells Fargo for Records of CIBC FirstCaribbean International Bank Correspondent Account

Patrick Temple-West,  FATCA hurts Americans abroad, and more (Tax Break)

 

J.D. Tuccille, If High Cigarette Taxes Fuel a Booming Black Market, What Will High Marijuana Taxes Do?  (Reason.com).

David Brunori, Pancho Villa and Three Hundred Million Joints (Tax.com)

 

News you can use:  How Not to Deduct 85,491 Miles (Russ Fox)

 The Critical Question:  Has Microsoft Excel Ruined the World? (Going Concern)

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Tax Roundup, 3/15/13: Corporate return day! And: Can you audit a myth?

Friday, March 15th, 2013 by Joe Kristan

Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today.  If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.

 

If Iowa's tax law were a car, it would look like this.

If Iowa’s tax law were a car, it would look like this.

Joseph Henchman,  Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog).  Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):

I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.

…

Hence, I’m impressed by a bill passed yesterday (House File 478)  by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”

I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

 

It’s a myth, so they’re cracking down on it!

Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.

Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes

If they feel have to “crack down” on something, maybe there’s something to that myth.

 

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Janet Novack,  Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do!  From the article:

Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least  initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.

But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding  “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer,  let alone for whether they do enough good to justify their cost and the economic distortions they create.  A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.

Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful.  Yet Congress still sees the tax law as the Swiss Army Knife of public policy.

 

Jim Maule,  Tax Depreciation: Do the Math:

No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.

So was the Tax Court.

 

Tony Nitti,  Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.

 

William Perez,  Delays in Issuing Tax Refunds Related to Education Tax Credits

Going Concern,  IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund.  Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.

Trish McIntire, Don’t Lose Your 2009 Refund

 

Paul Neiffer,  Will Large Farmers Be Able to Use Cash Method in the Future?!  Farmers should get the same tax rules and breaks everyone else does, no less and no more.

Kay Bell,  Will a relationship neutral tax code save traditional marriage?.  Not every problem is a tax problem.

Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets

William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)

 

Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation

Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection

Brian Strahle, State Tax Revenues:  Corporate Income Tax Not That Important?

Oh, Goody.  Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)

 

Argo pay your taxes.  It turns out Iowa isn’t the only government whose film tax credits attract scammers.  From London comes this via Boston.com:

In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.           

What made it special is that it was created solely to cover up a huge tax fraud.

…

In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.

No word on whether Leo Bloom prepared the fraudulent returns.

 

News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).

Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”

I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted.  I haven’t brought myself to open it; it seems too much like reading about my job.

 

TaxGrrrl,  Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight

He should have hidden the cash across the pond.  Opening statements underway in Beavers tax evasion trial (WGNtv.com)

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Tax Roundup, 11/14/2012: So what about the other $8.4 trillion?

Wednesday, November 14th, 2012 by Joe Kristan

Tell me when they get serious about the budget.  The federal budget deficit is running about $1 trillion annually.  So how does the President propose to address it?  Primarily by increasing taxes by $1.6 trillion — over 10 years.  And, of course, no real spending cuts.  The TaxProf links this:

Wall Street Journal:  Obama Sets Steep Tax Target: President to Seek $1.6 Trillion More in Revenue, Double Level From 2011 Talks:

President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. …

Kevin Smith, a spokesman for House Speaker John Boehner (R., Ohio), dismissed the president’s opening position for the negotiations. He said Mr. Boehner’s proposal to revamp the tax code and entitlement programs is “consistent with the president’s call for a ‘balanced’ approach.” …

In negotiations between Messrs. Boehner and Obama in mid-2011, the two sides neared agreement on a plan to cut the deficit by $4 trillion over 10 years, including $800 billion in new revenue. The deal fell apart after Mr. Obama asked to raise the revenue component to $1.2 trillion, and to this day each side blames the other for the collapse. Based on that history, some senior GOP aides said they believed a likely compromise would call for about $1 trillion in new tax revenue, possibly from capping deductions for wealthier taxpayers.

As noted here, a straight dollar cap on itemized deductions would still be a tax increase on pass-through businesses.  Taxpayers who report business income on their personal returns have to deduct the state income taxes as itemized deductions, rather than as “above-the-line” business expenses.  A straight deduction cap would eliminate the deduction for state income taxes on business income.

How would you be able to tell if they are serious?  When they admit that to have government benefits for everybody, you have to increase taxes for everybody, and that cutting spending by cutting “fraud, abuse and waste” never happens.  The rich guy isn’t buying.

Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.

 

TaxProf,  Democrats Embrace Romney’s Tax Plan to Limit Deductions

Patrick Temple-West,  Essential reading: Democrats like a Romney idea on income tax, and more (Tax Break)

Tell me when they get serious about the budget II: Branstad, Grassley push for extension of wind tax credit (Radio Iowa, via The Beanwalker)

So much for that deficit solution.  ‘Fat Tax’ in Denmark Is Repealed After Criticism (New York Times)

Howard Gleckman,  Congress Can’t Avoid Tax Rate Hikes By Closing “Loopholes” (TaxVox)

 

 

Meanwhile, this upcoming tax season is likely to be horrible.  Acting IRS Commissioner Steven T. Miller tells the IRS that many taxpayers may have to wait until late March next year to file, depending on whether and when an “AMT Patch” is enacted (my emphasis):

Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected.

Tax season has become more compressed into the last few weeks before April 15 because 1099s and K-1s are issued later every year as a result of tax law complexity.  It looks like it could get much worse.

 

You Gotti like it.   John A. Gotti, son of the convicted organized crime figure, scores a legal victory, convincing the Tax Court not to grant summary judgment for the IRS in a tax case involving a corporation he controls with his wife.  It involves a dispute over whether IRS correspondence mailed to a jail address was a proper notification at the taxpayer’s “last known address.”

 

Another sign of the apocolypse.  There is now on online exchange for trading transferable film tax credits.  Tax Analysts reports ($link)

The newly launched Online Incentives Exchange LLC (OIX) purports to be the first “truly national, transparent, liquid exchange for the trading of state tax credits,” competing against direct brokerages in the trading of transferable and/or refundable state tax credits.

…

Right now, only Louisiana tax credits are trading on the exchange. Organizers plan to enable trading of California and Georgia credits in December and to eventually list on the exchange transferable and refundable tax credits in the 45 states where those incentives are available.

I prefer Iowa’s new practice of imprisoning filmmakers, myself.

 

Richard Morrison,  What Canada Can Teach Us about Corporate Taxes (Tax Policy Blog)

William Perez,  TIGTA Reveals Cause of Refund Delays that Occurred in Early 2012

Kay Bell,  Superstorm Sandy tax considerations; California cities’ soda tax falls flat

Paul Neiffer,  IRS Announces It Does Not Like Fixed Dollar Gifts

Jason Dinesen,   No to Additional Preparer Testing, Yes to CPE Requirements. I say no to the entire preparer regulation scheme.

Brian Strahle,  What Are Your Year-End State and Local Tax Needs?

Robert D. Flach has an exasperated Buzz.

 

Worse than a computer virus?  McAfee On The Run: Murder and Mayhem (But Few Taxes) In Belize  (TaxGrrrl)

In these troubled times, it’s good to know there are still things we can believe in.  Sixth Circuit Agrees That Cliff Claven Is Not A Thief (Peter Reilly)

x

 

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Tax Roundup, 10/25/2012: Extra services at the post office. And there’s no such thing as a free sandwich.

Thursday, October 25th, 2012 by Joe Kristan

Opportunities with the postal service.  A mail carrier in Alabama has been accused of picking up more than letters on his route.  A Department of Justice press release says Mr. Harrison, a postman, served as a courier for a tax refund ID-theft ring:

Members of the conspiracy filed false tax returns using stolen identities from various locations including the Northern District of Alabama. The fraudulent tax refunds were directed to debit cards that were mailed to addresses on Harrison’s postal route in Montgomery, Ala. Harrison retrieved the debit cards from the mail and, for a fee, provided them to a co-conspirator.

The moral?  When it absolutely, positively needs to get there, be the top bidder for your mailman.

 

Richard Morrison,  Chart of the Day: The Demographics of Income Inequality (Tax Policy Blog):

Russ Fox,  Nevada Business Tax Initiative Ruled Invalid

My new post at IowaBiz.com:   Payroll taxes: Once is enough

Keep firing.  Hollywood tax incentives come under fire (NBCnews.com)

Patrick Temple-West, Essential reading: For some of the wealthy, a 0 percent tax on capital gains, and more (Tax Break)

Trish McIntire,  Basics of Retirement Tax Planning

 

Brutal Assault on Reason Watch: 

Anthony Nitti,  President Obama Releases Agenda For A Potential Second Term: Dissecting the Tax Aspects

Kay Bell,  We think Congress is doing a better job.  Since they went home, coincidentally.

Daniel Shaviro,  Paul Krugman on the worst case scenario if Romney wins

Linda Beale,  Tax Questions about the Romney-Ryan Ticket–from Romney’s Tax Returns to Ryan’s Vouchercare

 

Attention is great, but links are better.  Amy Hamilton at Tax Analysts quotes my post from yesterday extensively ($link)

 The governor is suggesting “a new tax plan that would exist side-by-side with Iowa’s current complex and loophole-ridden mess,” Kristan said, adding that the plan would require taxpayers to compute their taxes under each system and file whichever return produced the lowest tax.

Thanks!  But two quibbles.  First – no link?  I link to you, you link to me — manners!  Second, you didn’t even mention The Quick and Dirty Iowa Tax Reform plan in a discussion of Iowa Tax Reform.   Isn’t that like talking about the World Series without mentioning the Giants?

 

Expensive free sandwiches.  From Going Concern:

A St. Louis accountant has allegedly been taking the cheap thing just a little too far by scamming unsuspecting restaurateurs in the area for free sandwiches. Yup, you read that right: free sandwiches.

They call him the Scamwich Artist and it seems he’s been making the rounds, complaining about getting bad food in exchange for gift cards and, well, more food.

The story quotes restaurant personnel as saying the accountant was caught red-handed, and the guy’s picture, taken by a restaurant manager with a smart phone, is now all over St. Louis and the Internet.  It will make for interesting conversation at his next client meeting.

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Tax Roundup, 7/23/2012: Chasing smokestacks, catching smoke. Also: final film credit trial starts; 1040s and summer homes.

Monday, July 23rd, 2012 by Joe Kristan

So the guy who swindled customers in his commodity brokerage in Cedar Falls also swindled Iowa “economic development” smokestack chasers.  From QCTimes.com and AP (via State 29):

Even before its dramatic collapse last week, an Iowa-based brokerage implicated in a $200 million fraud scandal had defaulted on the terms of a $1.24 million state incentives package that helped the firm build a state-of-the-art headquarters, newly released records show.

The Iowa Economic Development Authority warned Peregrine Financial Group, Inc. in March that it had violated its contract by paying employees lower salaries than promised and must pay back some of its aid immediately, according to a letter released in response to a request from The Associated Press.

It’s yet more evidence for what I’ve long said about “economic development incentives”:

When Iowa tries to pay other businesses to come here, it’s like a guy who brings his wife’s purse into a bar to buy drinks for the girls. The girls aren’t impressed, and any he does pick up aren’t worth much.

That’s something Iowa should ponder before it signs the check to bribe a fertilizer plant to locate in Iowa with tax money paid in part by competing fertilizer plants that are already here.

Who pays the bills? The Tax Foundation has a map showing the Percentage of Federal Income Tax Revenue from Filers Making Over $200,000:

Airball. The former owner of a Kansas City minor league basketball team will go away for 51 months for crimes that included not remitting payroll tax withholidngs, reports CJOnline.com:

James Clark, 53, of Overland Park, a former owner of the Kansas City Knights basketball team, pleaded guilty to one count of tax fraud and one count of bank fraud. Clark admitted that he withheld payroll taxes from employees of his company, SWISH Holding Corp., while failing to pay more than $502,000 to the Internal Revenue Service. He diverted the funds and used them for his own purposes, including the operation of the basketball franchise.

Many people think that they are just “borrowing” money when they fail to remit withheld taxes.  It can be tempting when suppliers are howling for cash.  This case shows that failure to remit withholdings can have consequences much more serious than cash late penalties and interest.

 The last scheduled trial of an Iowa film tax credit fiasco figure is slated  to start today.  Chad Witter, an accountant who worked as a middleman in obtaining and marketing film credits, will go on trial in Polk County District Court on charges of theft, fraudulent practice and ongoing criminal conduct.  Dennis Brouse, a producer who worked with Mr. Witter, was sentened to ten years in prison earlier this year on charges arising out of the disastrous program to bribe filmmakers to come to Iowa with transferable tax credits.

How Government Limits Upward Mobility (Howard Gleckman, TaxVox):

True, social welfare programs provide a valuable safety net for the very poor. For instance, the Earned Income Tax Credit and the Child Tax Credit are important income supports for low-income families.

But because these safety net programs phase out as incomes rise, some people face marginal tax rates as high as 80 percent for getting a better job or even a raise.  A new Urban Institute calculator shows how this works.

Related:  Taxing the heck out of the top 400 taxpayers won’t help the bottom 20 million

Will your 1040 help pay for your vacation home? My latest post at Iowabiz.com, the Des Moines Business Record group blog for entrepreneurs.

WSJ: IRS Audit of Romney Donor Raises Questions About Presidential Enemies List (TaxProf Blog)

Jana Luttenegger, Summer Camp Tax Credits (DavisBrown Law Firm Tax Blog)

Or somewhere darker: The IRS Art Advisory Panel Has Its Head In The Clouds (Janet Novack)

Kay Bell, Bicycling commuters, you might qualify for a tax-free workplace benefit

Russ Fox, Two Sets of Books Aren’t Better than One.  At least when  one set doesn’t include the skimmed receipts.

Jason Dinesen, Medicare Part B and Same-Sex Married Couples

Jack Townsend, Form 8938 Resource

Peter Reilly wades into the swamp of the tax treatment of Scientology.

TaxGrrrl, Saban Suggests Penn State Tickets Should Be Taxed To Pay For Scandal.  I read that as “Satan” at first.

News you can use: The General Crapiness of Your Life Does Not Relieve You of Your Tax Obligations (Anthony Nitti)

Robert D. Flach will save $11,000 in taxes annually by fleeing New Jersey.  He’s getting paid to do something most of us would be happy to do for free.

Help Wanted: The Hunt for a New Going Concern Freelancer Goes On.  If you have a Big 4 bad attitude, what are you waiting for?

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Iowa House votes to increase EITC while chasing Harold Hill out of town

Tuesday, May 8th, 2012 by Joe Kristan

The Iowa General Assembly is in a frenzy of legislation.  Yesterday the Iowa House passed its version of property tax reform (HF 2475).  It differs from the Senate bill in several important ways.  The House bill imposes a limit on tax increases based partly on the Consumer Price Index.  Its increases the Iowa Earned Income Credit to 10% of the federal credit, vs. the 20% proposed by the Senate (SF 2161).  The increase would be retroactive to the beginning of this year.

The House also approved a bill modifying the Iowa trust code and making minor changes in the Iowa inheritance tax, but without the controversial repeal of Iowa’s rule against perpetuities — a repeal supported by Iowa bank trust departments who have been losing trusts to neighboring states with looser rules.

Both houses yesterday approved HF 2337, a bill that among other things formally repeals the Iowa Film Tax Credit.  While the disastrous credit was originally enacted over three dissenting votes, the repeal drew 14 no votes in the Senate and 15 in the house.

Lest we think the repeal of the film credit shows that the legislature finally understands the unwisdom of corporate welfare through the Iowa tax code, the Iowa House signed off on SF 2342.  This bill provides tax credits for 20% of the cost of “geothermal heat pumps” and 50% of the federal tax credit for “solar energy systems.” The House passed the bill 82-14; the Senate version passed over only one dissent.

Related:

Governor to buy property tax reform by doubling earned income credit?

Harold Hill gulls the House

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Is ‘Harel Goldstein’ Harold Hill’s real name?

Wednesday, January 25th, 2012 by Joe Kristan

20110629-2.jpgIowa achieved another economic development milestone with a guilty plea by imprisoned California filmmaker Harel Goldstein on charges arising out of Iowa’s film tax credit program. Thegazette.com reports:

Prosecutors said during filming of

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Wheeler: what happened to me can happen to other state employees

Monday, December 26th, 2011 by Joe Kristan

The former head of the Iowa Film Office says that his prosecution and conviction for misconduct in office sends a bleak message to state employees, reports The Des Moines Register:

Interviewed for the first time since his conviction in October, Tom Wheeler told The Des Moines Register last week that he believes the verdict in his high-profile case means any state employee could wind up being charged criminally “through no fault of their own.”
Wheeler said he had no training, no employee handbook and no legal coaching on the ramifications of screwing up when he was drafted to run Iowa

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Massachusetts follows where Iowa leads

Tuesday, December 13th, 2011 by Joe Kristan

Iowa shows the way in enabling film tax scams, but now Massachusetts is catching up. The Hollywood Reporter says a director has been charged with scamming the Bay State’s film tax credit program. The scam purportedly used the same tools used in scamming the Iowa program: inflating film expenditures to fraudulently obtain tax credits, which could then be sold for cash. From the report:

The first four charges could carry prison sentences of up to five years. The three tax related charges could lead to prison terms of three years for each. Adams would also likely be forced to make restitution of at least $3.6 million of the $4.7 million in tax credits he has already received, which represents the amount the authorities believe was false.
…
Among the items they allege was false was a claim that actor Richard Dreyfuss was paid $2.5 million for Lightkeepers, when in fact (per their investigation) he was paid only $400.000.

Of course the film office enablers are undaunted:

Lisa Trout, head of the Massachusetts state film office, said as far as she knows this is the first such case involving an alleged fraud in the program. She said the program has been successful for the state and is funded to continue through 2022.

Successful? The Massachusetts Department of Revenue isn’t so sure, reports the Tax Policy Blog:

A new report on film industry tax incentives, conducted by the Massachusetts Department of Revenue, was released this month. The report finds that the state’s $82 million film tax credit program generated $10 million in new state tax revenue in 2009. That is equal to about 13 cents of incoming tax revenue per dollar of tax credit awarded, an unimpressive number which even includes tax revenue gained from the increased economic activity as money spent by the film makers makes its way through the local economy (known as the “multiplier effect”).
The report also finds that the credits brought 222 net jobs for Massachusetts residents in 2009, at a cost of nearly $325,000 per in-state job.

At least Iowa wised up and stopped the film gravy train. Massachusetts is sadder, but as yet no wiser.

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Borchers indictment: investigation by other means?

Thursday, December 8th, 2011 by Joe Kristan

The Iowa Attorney General’s Office yesterday moved to dismiss charges it had filed against Donald Borchers arising out of the Iowa Film Tax Credit Program. The Des Moines Register reports:

State prosecutors had accused Donald Borchers, 55, of Beverly Hills, Calif., of defrauding the state of at least $75,000. Charges were filed in October after Borchers declined to provide more information to explain his actions.
Purchases made by Borchers and another filmmaker eventually led to firings in the Iowa

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Film incentives bomb at box office

Monday, November 28th, 2011 by Joe Kristan

While supporters of film tax credits, like Iowa’s failed tax credit program, often say they create so much development they pay for themselves. The Tax Policy Blog says it didn’t work that way in Massachusetts:

The Massachusetts Department of Revenue recently released a report detailing that $14.6 million in tax credits were given to filmmakers in 2010, yet the film tax-incentive program only generated $800,000 in new state revenue.

But I’m sure the intangible benefits were spectacular.

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Benz-buying Borchers busted

Thursday, October 27th, 2011 by Joe Kristan

UPDATE, 12/8/11: Charges dropped. Original post below.
The director of the remake of Children of the Corn, who famously bought a Mercedes with Iowa taxpayer dollars through the Iowa film credit program, has been charged with bilking the program through allegedly inflated costs.
The State Auditor Report on the film program says that the Children of the Corn project was rewarded tax credits for over $1.9 million in ineligible or unsubstantiated expenses. It doesn’t appear that the car is among them.
The Des Moines Register contacted Donald Borchers:

Reached Wednesday, Borchers declined to comment on the new charges filed Friday against him. Rather, he voiced frustration with the Des Moines Register for saying he could not be reached for comment in September 2009 for an article focusing on when Iowa’s former economic development chief knew about potentially abusive expenditures within the program.
Borchers said he tried to reach the newspaper. Had he been interviewed, he would have said that former film chief Tom Wheeler approved the purchase of the Mercedes as a way of stimulating Iowa

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Saints win on the field, but lose in the film business

Thursday, October 6th, 2011 by Joe Kristan

It looks like the New Orleans Saints football team had the same sort of luck with film tax credits as the State of Iowa. From NOLA.com:

Wayne Read, who hoodwinked more than two dozen members of the New Orleans Saints organization out of nearly $1.9 million by selling them bogus film tax credits, was sentenced Wednesday to four years in federal prison.

That’s different from Iowa, where the taxpayers, rather than the credit buyers,were the fraud victims.

Read, the former chief executive of Louisiana Film Studios LLC, told The Times-Picayune in 2009 that he spent the Saints’ money on studio rent and development. But he never applied for the credits from the state, and the film studio project ended in bankruptcy.
Several other players blame former Saints long snapper Kevin Houser, who is also in the securities business, for the bad deal. One lawsuit alleges that Houser paid the money for tax credits directly to Read instead of using the money to obtain “shares of stock, membership units, or promissory note establishing the nature and terms of the ‘investment.’”

The moral? Whether the film tax credits are being peddled by the long snapper or Hollywood, somebody is getting robbed.

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The Snooki veto

Tuesday, September 27th, 2011 by Joe Kristan

New Jersey Governor Christie has vetoed tax credits for the TV show “Jersey Shore,” reports TaxGrrrl. Fine. But why should his taxpayers be funding Hollywood at all? Isn’t the Iowa example enough to show how foolish it is to give tax money to the film industry?
Related: Auditor report: millions of real taxpayer dollars paid for imaginary film expenses

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Film credits buy Iowa ridicule

Friday, September 23rd, 2011 by Joe Kristan

Today’s Wall Street Journal has some fun at Iowa’s expense, courtesy of our Film Tax Credit program:

Take Iowa. A start-up called Polynation Pictures came looking for backing for a sci-fi flick so lame it would have embarrassed Ed Wood. With a financing scheme worthy of Max Bialystock, the con these folks pulled was nearly as inept as the film they made, but Iowa’s film office was too starry eyed to notice.
…
The $767,250 production Polynation Pictures proposed eventually came in at $3.7 million. This was achieved in part with preposterous expenses. Producers claimed they paid $1,350 to rent six orange road cones. The use of two 6-foot ladders supposedly cost the company $900 (a bargain, as Polynation claimed to have spent another $900 to rent a single 8-foot ladder). Among production necessities was a new Mercedes. The partners set up an array of separate companies and used them to bill themselves extravagantly for work supposedly done on the picture. These were presented to Iowa as “deferred payments”

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Paying taxes to fund Snooki

Friday, September 16th, 2011 by Joe Kristan

Iowans got to buy a Benz for a producer under it’s now-moribund film credit program. New Jersey taxpayers get to help pay for new episodes of Jersey Shore. There is a move afoot to block the Snooki credit, but there apparently is no “bad taste” provision in the New Jersey film law, so there may be no stopping the giveaway.
It just shows how much we can trust the government to use our taxes to encourage fine culture.
Related:
Let them eat Canapes
Complete Tax Update film credit coverage

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Iowa gets its goat

Tuesday, September 6th, 2011 by Joe Kristan

They threw nine counts at former Iowa Film Office Director Tom Wheeler. One stuck.
A Polk County jury this afternoon cleared Mr. Wheeler of eight charges arising from his role administering the disastrous Iowa Film Tax Credit program, but they convicted him of one count. KCCI reports:

The jury found Wheeler guilty on the first of nine counts — misconduct in office. Wheeler was found not guilty on the remaining eight counts.
The verdict was read at 1:22 p.m. The jury has been deliberating since Thursday.
Misconduct in office is a class D felony that is punishable up to five years in prison. A sentencing date has yet to be set.

Mr. Wheeler seems to be designated as the sacrificial goat for the sins of the entire Iowa political establishment that set up the film fiasco. 143 of the 150 members of the Iowa General Assembly voted to establish the program so poorly written that one agency thought it provided 50% tax credits, while the Attorney General thought it provided a 25% credit. It was signed into law by a Governor who turned administration of the multi-million dollar corporate welfare cash pinata to a single mid-level bureaucrat with no staff and whose prior administrative experience seems to have been as a film processor at Walgreens. It was overseen by a supervisor who didn’t pay attention to the cash bleeding until he found out taxpayers had bought a Mercedes for a filmmaker. Some of the worst abuses were greenlighted by other agencies. The program got only glowing coverage from an embarassingly credulous local news media.
Yet only Tom Wheeler faces prison.
The moral? Don’t be the bottom bureaucrat. They’ll sell you out in a heartbeat.
Related: Iowa’s film credit program: what we know now
Also: Des Moines Register coverage, which indicates that the plea deals with Wendy Runge and her partners at Polynation pictures were key to the one conviction.
UPDATE: More from O. Kay Henderson.

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Sadder but (slightly) wiser

Friday, August 26th, 2011 by Joe Kristan

The Iowa City Press-Citizen was an early pusher of tax credits for the film industry. Millions of dollars and a bunch of plea deals later, they have second thoughts:

But the film scandal did draw some needed attention to a fairly non-sexy subject: Iowa’s tax credit system. And the film scandal turned out to be just the tip of the iceberg for identifying credits in which the state not only forgives all taxes owed but actually writes out a check to cover additional expenses. Our state leaders — along with newspaper editorial boards — need to continue to realize that such deals are usually too good to be true.

Well, I tried to tell them, but a tax blogger just doesn’t have the gravitas of a newspaper editorial board or a bunch of state legislators.
So what have they learned?

The scandal has been a painful lesson for everyone who agreed with the original intent of the legislation — including us. The film tax credit deserved to have proper oversight – not to be left largely in the hands of a single state employee who originally was hired for marketing the state and not for overseeing contracts and calculating tax liability. The program also deserved to have state officials higher up the political food chain making sure that someone was watching the watchers.

So, close, Press-Citizen editorial board. It’s not just the program’s oversight was flawed. The real flaw was the very idea that the state should take money from the rest of us and give it to Hollywood. It’s worth noting that the Press-Citizen had lots of company among Iowa media in its wide-eyed gullibility. So they’re learning. Too bad the tuition is so expensive.

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Former Economic Director: the Benz tipped us off to the looting

Thursday, August 25th, 2011 by Joe Kristan

While his underling at the Iowa Film Office was giving away millions of taxpayer dollars to fund pretend expenses, the Iowa Director of Economic Development was oblivious. Then Mike Tramontina heard about the cars. Rod Boshart reports at EasternIowaGovernment.com:

The former head of the state Department of Economic Development said Wednesday he was not aware of brewing problems in the agency

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Iowa Department of Revenue takes the stand in film trial

Wednesday, August 24th, 2011 by Joe Kristan

The Iowa Department of Revenue made its appearance at the trial of former Iowa Film Office Director Tom Wheeler yesterday, in the form of its tax policy guru, Jim McNulty. The testimony shows that there were clues to the ongoing Film Office disaster available in other parts of the state government that weren’t picked up.
From Lee Rood’s Des Moines Register piece:

Jim McNulty exchanged numerous e-mails with Wheeler in 2007 and 2008, giving him advice on a wide range of questions regarding what was acceptable under the new program. McNulty said he based his opinions on what he knew about existing tax law and from consulting others.
…
For example, McNulty confirmed he sent an email to Wheeler saying that films that were registered with the state by July 2007 were eligible for tax credits, contradicting others in state government who contended after problems erupted that films did not qualify unless they had signed contracts.
He also told Wheeler in emails that services-in-kind, or services provided in which no cash changed hands, were eligible to qualify for tax credits if certain criteria were met. That

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