CHARLESTON, W.Va. — The Senate Finance Committee has agreed that West Virginia’s film tax credit should be discontinued.
Members of the committee passed legislation that would do so to the Senate floor. The bill would also have to be passed by the House of Delegates and signed by the governor.
Tourism Commissioner Chelsea Ruby, whose department began to oversee the film tax credit last year after the Legislature dissolved the state Film Office, said she agrees with eliminating the tax credit.
“I realize this is a little unusual for me to come before you and say I agree that we should discontinue this program and return this money,” Ruby said. She said she was persuaded by a report by the Legislative Auditor, which recommended eliminating the film tax credit.
The Legislative Auditor, in an interim hearing earlier this month, said the film tax credit has produced minimal economic benefit to West Virginia.
Legislative Auditor staff cited some questionable expenditures that were allowed to count as qualifying expenditures. Some egregious examples include the depreciation of paint and paper towel holders.
“I can tell you their findings are consistent with what I routinely find in these applications,” Ruby told lawmakers on Tuesday.
The West Virginia Film Industry Investment Act was established in 2007 to encourage economic development through motion picture and other commercial film and audio projects.
The act allows eligible film production companies to receive nonrefundable tax credits for direct and
postproduction expenditures made in West Virginia or incurred with a West Virginia vendor. The credits also may be transferrable.
The economic impact of the film tax credit program has been about $8.6 million over its 10-year existence, or less than $1 million annually on average, auditors wrote. The Legislative Auditor concluded the economic benefit of the program to the State to be minimal.
“What we’ve really seen over the course of the last decade with these programs is a classic race to the bottom,” Ruby said Tuesday.
“I don’t think it’s a secret to anyone we’re not getting major productions.”
She said many other states now offer film tax credits. She said the productions that are especially motivated by the tax credit go where the breaks are the steepest, particularly Georgia.
“We just can’t compete with these states that are offering hundreds of millions of dollars,” Ruby said.
Senator John Unger, D-Berkeley, said the Eastern Panhandle has seen significant activity from the film industry.
Unger acknowledged not knowing, though, how much film producers were motivated by the tax credit versus the appeal of other aspects of the Eastern Panhandle, such as its appearance or its proximity to Washington and Baltimore.
“I’m wondering in the sense of, we’re looking at imaging, and the films that were in our area were positive imaging,” Unger said. “Would you have any way of working with these companies if you didn’t have this tool?”
Ruby said that if a film opportunity arose, her office could work with other state agencies to take advantage.
“If this credit goes away, it doesn’t mean all assistance to film efforts goes away,” she said. “We can work with the Development Office and see what other types of programs would help.”