State officials have just released an auditing firm’s review of the state’s tax credit program for film makers — a review which found a variety of “questionable” actions in the Iowa Film Office. The Attorney General has issued a statement, saying a criminal investigation is underway, as there are “several” instances when state law was not followed.
Supporters of the program hoped the tax credits would help Iowans find jobs in the film industry and lead to economic activitity in areas where filming was underway. But the auditing firm found “the majority of purchases of property and labor appeared to have originated from out-of-state sources” on some of the productions which got tax credits. According to the auditing firm, “some of the purchases listed on the report clearly indicated an out-of-state address, however, they were included as qualified Iowa expenditures” eligible for the tax credit.
It appears new companies were established with an Iowa address to qualify for some of the tax credits, but the money “passed through” those companies to out-of-state interests.
In some instances, the tax credits were sold to out-of-state investors and the brokers’ fees for those transactions were included in the expenses for the films. The auditing firm identified half a million dollars in brokers’ fees — earning a quarter of a million dollars in tax credits.
The report from the Clifton Gunderson auditing firm and the statement from the Attorney General are posted here.
At 12:30 p.m., the governor issued a written statement.
“The Clifton Gunderson report is an important preliminary step in reviewing Iowa’s film tax credit program, providing clear examples of how it has been both mismanaged and abused over the past several months. This report also underscores why quick action had to be taken, including the departure of staff; appointing Fred Hubbell as interim Director of Economic Development; asking for a complete review by the Attorney General, Auditor, and Department of Revenue; and temporarily suspending the program. To let this program continue without significant changes and appropriate oversight would have been unfair to Iowa taxpayers,” Culver said.
“Given the serious issues identified in this report, I have directed Public Safety Commissioner Gene Meyer to assist with the criminal investigations. In addition, after reviewing this report, the film tax credit program should not move forward until interim director Hubbell and the Economic Development Board have received clear direction on the appropriate interpretation of the film program statute and the proper controls and oversight that must be followed.
“Finally, I will work with legislative leaders on any changes that should be made in the law so the program is an effective investment in our state’s economic development and is creating real jobs for Iowans.”