Director Jason Epperson makes his way up the basement stairs into the living room of a secluded Scott County home.

The muted sunlight of a cloudy July morning fills the room from the vaulted ceiling to the fluffy, long couches where a lone young man sits — a guy whose mere presence would break the silence if you let a few teenage girls in the room.

He is actor Michael Welch, a star of Twilight, one of the hottest film franchises now in production. For the past three weeks, he has been filming Epperson's Unrequited in the relative quiet of the Kentucky film world.

But Kentucky filmmakers hope the state's movie industry is about to make some noise.

"We're proving what we can do here," says Epperson, a Winchester native and the first runner-up in Fox's 2007 film director competition series On the Lot. "With the film incentives, it's going to get a lot bigger."

As cameras started to roll on Unrequited, a special session of the General Assembly passed House Bill 3, which included tax incentives for filmmakers who shoot movies in the state.

"We have so much to offer for the world to see and so much to attract the film industry," said Gov. Steve Beshear, who, along with his wife, Jane Beshear, championed the legislation. "But we have been in a position the last few years of being on an unlevel playing field because so many other states had put together various kinds of incentive programs to attract the film industry. We felt like it was very important to create that level playing field for Kentucky."

Feature filmmakers who spend at least $500,000 in Kentucky will be eligible to receive a 20 percent refundable tax credit for production and post-production expenses. The credit is also available for commercials that drop at least $200,000 and documentary filmmakers and Broadway producers who spend at least $50,000 here.

Beshear said he hopes the incentives will help create jobs in Kentucky, which has an unemployment rate of 10.9 percent. Still, the incentives come with a price tag for taxpayers.

The tax credit is expected to cost Kentucky $15 million in its first year and $13.4 million the following year, according to the Legislative Research Commission.

The credit is applied against a film company's corporate income tax, but it's possible for a company to garner credits that are worth more than its tax bill. If that happens, the state must cut a check for the difference.

Also, there's no guarantee that tax revenue from the additional jobs spawned by the tax credit will pay for the program.

In Massachusetts, a recent study found that the state got less than $1 in additional revenue for every $5 it spent on film tax breaks.

Fletcher paved way

If film incentives sound familiar, that's because Gov. Ernie Fletcher championed them during his term after Kentucky saw a flurry of film activity with Seabiscuit (2003), Dreamer: Inspired by a True Story (2005) and Elizabethtown (2005).

"Part of the reason we are where we are today is he put an emphasis on it and kept pushing in this direction," Beshear said of Fletcher, who even traveled to Hollywood to meet with film industry executives.

Kentucky Film Office director Todd Cassidy said other productions expressed interest in the Bluegrass State after Dreamer and the others. But at the same time, other states were enacting tax incentives, and Kentucky didn't.

"Any interest we generated dropped as soon as they saw other states' incentives," Cassidy said.

According to the Motion Picture Association of America, 39 states offer tax incentives to filmmakers from things as simple as sales tax exemptions and hotel tax exemptions for stays of more than 30 days to promises as big as 42 tax percent rebates.

"Kentucky's new film/television tax credit is a welcome addition to the numerous states offering incentives and should serve to bring additional productions to the commonwealth," said Vans Stevenson, the MPAA's senior vice president of government affairs. "Competitive film and television production tax credits have proven to be a positive economic stimulus that create new and continuing employment opportunities."

Louisiana turned filmmakers' heads in 2002 with incentives that launched a thriving in-state film industry. Kentucky filmmakers and officials were chagrined as Dreamer, a film set entirely in Lexington and Versailles, moved part of its production to Louisiana because of its incentives.

Chad Gundersen, Unrequited's co-producer, said the latest example is Michigan, which allows film companies a 40 percent tax credit — 42 percent in some areas of the state. Film production shot up from three movies in 2007 to 28 last year.

"It can happen here," he said, as his crew started to arrive for a day of filming on the first of what producer Jeff Day hopes will be many projects for Lucky Day Studios, which he co-owns with 13th District Commonwealth's Attorney Tom Lockridge.

Lots of jobs

Proponents of film incentives note that when a production comes to town, visiting artists and crew occupy hotel rooms, eat at area restaurants and partake of other services. Also hired are local crew members and others, such as caterers, gardeners and construction workers.

An April report by the MPAA said that in 2007, the film industry paid $41.1 billion in wages nationwide and "$38.2 billion to U.S. vendors and suppliers, small businesses and entrepreneurs." The report said the film industry supports 2.5 million jobs nationwide and 115,000 businesses, 81 percent of which employ 10 people or less.

Arthur Rouse, director of the 21/2-year-old film certificate program at Bluegrass Community and Technical College, cautions not to expect the film industry to single-handedly revive the state economy.

But he does say it will help build a filmmaking community in the state because there will be more opportunities for work on everything from small, in-state films and independent projects to major Hollywood productions.

After tax credits, Gundersen and others say, building a crew base is the next goal for a budding state film industry.

"If you have the tax incentives, but then you have to fly everyone in, it kind of defeats the purpose of the incentives," Gundersen said.

Top talent such as actors, directors and cinematographers will almost always come from out of state. But filming on location, away from film studios in places like Hollywood, is considerably cheaper if there is a local, professional crew base for hire.

"We have graduated 75 students from our program ready to work on film sets," said Rouse, who is also active with the Kentucky Film Lab, which is part of Louisville's Idea Festival.

Now that Cassidy has long-desired film incentives, he said he can get out and sell the state's diverse landscapes — from the mountains of Eastern Kentucky to the rolling farmland of Western Kentucky — and the revitalized small towns like Versailles, which attracted director Cameron Crowe to use it as a location for Elizabethtown.

"They need to exploit what is unique about Kentucky," says Gundersen, who is based in Texas. "Kentucky will be new and fresh to the studios, so they'll want to take a look."

Gundersen has to speak quietly now as the lights and cameras are set, Welch and co-star Sarah Habel are miked and filming is under way. The once quiet living room is loaded with technicians who have put down cardboard to protect the cedar floor from equipment such as monitors, lights and sound boards.

The hope among Kentucky filmmakers is that the movie industry will become as busy as this room in a few years, and "action" and "cut" will become familiar words here.

If Kentucky filmmakers need ambassadors, Welch could be one of them. After three weeks here, the Twilight star observed, "It's a great place to work."