Thursday, September 29, 2011

What's Wrong With This Picture? Ohhhhh, Pretty Much Everything.

If you don't live in my neck of the woods, you can be forgiven for not being aware of The State of New Jersey Vs. MTV's Jersey Shore (which is totally figurative at the moment but - I predict - will become a real-live court case in the foreseeable future).  New Jersey, like many other states enacted a Tax Incentive a few years ago to bring film and TV projects to their state.  The various programs are all different, but the general shape of them is, if you come spend money in our state, we'll give you a break on taxes you incur while you're here.  Predictably, I think this is a fine idea (especially in places close to home like NY, NJ and CT).  YMMV.

The short version is that Jersey Shore applied for the credit for their first year of production and they qualified. A couple of weeks ago, NJ finished their review of Jersey Shore's submitted accounting and announced that the show had qualified for a $420,000 tax credit.

The State promptly succumbed to a cranial aneurysm, e-bola, and arrhythmia. News cameramen who usually have to chase politicians down the courthouse steps suddenly required crowd control so they could keep their shots limited to one bloviator at a time.  Everybody wanted to be the first to denounce the tax credit.

Where to start?

Fine, we'll start with the way the story was reported. WPIX's headline was, NJ Taxpayers Paying $420,000 to cover Production Costs for 'Jersey Shore'.  The clear inference was that NJ was, somehow, partnering with MTV or footing the bill for the honor of having them shoot in the state.  Every other news story I ran across used some variation on that theme.  The problem is that that's a completely inaccurate depiction -- it just makes for a more sensational story.

If you spend just, oh, 30 seconds running around the internet, you can find the actual statute for NJ's tax incentive.   The high points are:

New Jersey offers a tax credit in an amount equal to 20% of qualified production expenses, available to production companies meeting certain criteria, chiefly:
At least 60% of the total expenses of a project, exclusive of post-production costs, will be incurred for services performed and goods used or consumed in New Jersey (emphasis mine).

In short, to qualify for a BIG tax credit, you have to spend BIG money in the state.

How did Jersey Shore spend money?  I don't have the details for that season, but according to the the NJ Film Commission, here is part of what they spent money on during the summer of 2011:

-4,000 hotel room-nights for 125 crew members
-50 local construction jobs
-10 police officers hired daily for several months (the bill for this usually covers the officers' time PLUS an administrative fee paid to the department or municipality.)
-45,000 meals purchased in local restaurants
20% increase in paid beach fees and parking revenues.

That's $6 million spent directly in Seaside Heights, NJ and surrounding towns.

Now, you may find yourself saying, why bother giving a credit to Jersey Shore?  I mean, where the hell else are they gonna shoot the Jersey Shore, HUH?  Oh, I don't know...maybe they could shoot in Italy.  The entire idea behind State tax incentives is an acknowledgment that shows can shoot whatever they want, pretty much wherever  they want.  Revenge is set in The Hamptons and it's shot in North Carolina. The Good Wife is set in Chicago -- and it's shot in New York.  You win some; you lose some.

More importantly is an understanding of exactly what the tax credit entails.  Contrary to the way it's portrayed, the state doesn't have some guy show up and deliver bags of money to the production office.  Once again, the particulars vary from state to state, but in NJ, here's how it works:

-The production submits records of its qualified expenses (i.e. money spent in NJ to the benefit of NJ companies and individuals - which, by the way, will be taxable income for those businesses and individuals).
-The state agency gives them a certificate for the amount of the credit they've qualified for. (That happens a couple of years after the production should have already paid the state any incurred tax liability.)
-In order to realize any actual benefit, the production must now sell their tax credit certificate to a  company in New Jersey -- typically a company that has a massive tax liability already (and probably delinquent, as well).  Also:
               1.) To find such a company, the production will need to go through a broker -- another
                     company doing business in the state who will charge a fee.
                2.) The law stipulates that the purchasing company must pay the production at least 75%
                      of the value of the certificate -- why would they pay more; they're trying to pay they're
                     back taxes.
                3.) Whatever amount the production actually gets paid for their certificate is taxable
                      income  in the state.

There's no question that the state is generating income for businesses, individuals and itself, in return for discounting the tax owed.  It's money that could have easily gone somewhere else and generated zero income at home.

But discovering these details and conveying them to the public is hard (not so much), so why would a news outlet bother.  Much easier to make it sound like that guy with the bags of money ran around paying Jersey Shore's bills for them.

Let's get back to the politicians. I'm not going to bother going back and looking for all of the names, but one State Assemblyman, who supported the tax credit program, demanded that Gov. Christie veto it in this case.  Even though the statute is blind to content (aside from porn - "We'll know it when we see it"), he expected to have the tax credit bring in only quality shows.  Dude, it's about economic impact, not about having New Jersey be a latter-day  Medici Family leaving an artistic legacy.  If you want to sponsor worthy art, you should be having some kind of grant program with a completely subjective set of criteria (in which case, incidentally, you will be sponsoring art without regard to economic impact).

Gov. Christie, who to be fair, has always bitched about what a festering piece of crap Jersey Shore is, and has always hated the tax incentives and killed the program when he came into office, first said he didn't have any power to rescind the $420,000 tax credit.  A few days later, he decided he could veto it...and promptly did.  However you feel about this tax credit specifically, or tax credits in general, the fact is that Jersey Shore followed all the rules, spent all of that money and qualified for it.  I have no idea what grounds Christie used for vetoing it, but I'd be shocked if MTV doesn't initiate a lawsuit to get it back.

I've never seen Jersey Shore and I'm fairly certain I'd hate it if I did.  But that's not the point.  I have no problem with a state deciding they don't think tax incentives for film are a good idea (I disagree, but I'm only a citizen of NY), but if they have a statute, they need to follow it while it's in effect.   And if they're going to have an incentive program, it ought to be strictly mercenary.  You can measure actual money spent by a production, but the side benefit of added tourism is a lot more fuzzy. So leave out the subjective part about a film being required to "portray the state in a good light".  That's just bullshit.

P.S. I know that I'm guilty of being a little lazy in reporting this; something I've called WPIX and their colleagues to task for.  But they're supposed to be legitimate news sources.  I'm just a blabbermouth with a blog.  They should really do better than me.


Gristle McThornbody said...

Oh c'mon. Just wait until Vito, Vinnie and Frankie Fingers go and ask nicely to get what's owed them. Of course, if they have to make the good Mr. Christie swim with the fishes, expect the Jersey Shore to be under a couple extra feet of water.

vince said...

Yeah, let's have a business follow all the rules to get a tax credit, then tell them to fuck off when they ask for it.

Oddly, I'm not shocked that any media that has maybe two minutes to do a story and depends on ratings would fuck up in the accuracy department. :-)

Nathan said...

OK, let's see how much time this takes.

New Jersey Taxpayers paying $420,000 to cover production costs for 'Jersey Shore'.


'Jersey Shore' qualifies for $420,000 tax credit under State statute.

Holy Crap! An accurate version saves them four syllables. Damn those news anchors and their limited available time!

WendyB_09 said...

Seems to me there was similar whining, wringing of hands and rending of garments when folks realized that cinematic gem The Real Housewives of Atlanta qualified for similar fundage.

It just beats all that we, as a state spent all this money luring filmmakers here only to slap them on the wrist (pull the rug out from under them) when they actually try to use the promised incentives. Great way our politicos have of biting the hands that feed them!