Getting a piece of the movie action

Kentucky film talent hoping for more work

By Rich Copley - rcopley@herald-leader.com

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.

Photos from the 'Unrequited' set
Scenes from the set of 'Unrequited'
What Kentucky's neighboring states offer as incentives
Illinois: 30 percent income tax credit for production expenditures on projects that spend at least $100,000 in state; additional 15 percent credit for labor for employing residents of impoverished areas; sales tax exemption for photo processing used in film and hotel stays of 30 days or longer.
Indiana: 15 percent refundable tax credit of qualified expenses for films and TV productions that spend more than $100,000 in state, capped at $2.5 million; hotel tax exemption for stays more than 30 days.
Missouri: Income tax credit up to 35 percent on in-state expenditures for features longer than 30 minutes that spend at least $100,000 and productions shorter than 30 minutes that spend $50,000; hotel tax exemption for stays more than 30 days.
Ohio: Film incentive legislation with 25 percent credit pending.
Tennessee: Tiered rebate program starting at 13 percent with additional 2 percent if 25 percent cast and/or crew are Tennessee residents or if $20,000 of music is created by Tennessee residents or recorded in state. Out-of-state companies must spend minimum of $500,000 in-state to qualify. Sales and use tax refunds available for minimum $500,000 spend.
Virginia: Cash rebate at governor's discretion. Exemption from state sales and use taxes and hotel taxes for stays more than 30 days in many places. Free use of state-owned locations.
West Virginia: Tax credit up to 27 percent with minimum $25,000 spent in state. Additional 4 percent if 10 or more full-time employees are West Virginia residents.
Source: Motion Picture Association of America.

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."