Maryland’s Brush with the World of House of Cards
- Sales Tax News
- Feb 20, 2014 | Gail Cole
Update, 5.1.14: Maryland Governor O’Malley and House of Cards Producer Media Rights Capital have jointly announced that the popular political Netflix series will film its third season in Maryland after all. After a lengthy period of uncertainty, an agreement was reached whereby “House of Cards will receive a total of $11.5 million in 2014….” In return, the state will “keep the 3700 jobs and more than 100 million dollars of economic activity and investment” generated by the series.
If we don’t all go weak at the knees in the presence of film, music or television stars, most of us find it kind of thrilling. At the very least, the encounter becomes a story to share with friends and family—our little brush with fame. It’s fun, too, to see the places we live on screen. An everyday experience for folks in southern California, perhaps, but less so for the rest of us.
Yet there are more concrete benefits from having a film or television series on location in a state, and they’re economic. Lodging and dining businesses benefit from the presence of production crews, of course, but that’s just the beginning. Production teams often rent vehicles. They use local camera, sound and lighting equipment and supplies. They employ locals in a host of ways. In short, they stimulate the economy.
No wonder states want filmmakers and other producers to set up shop in their state, so much so that they’re willing to entice them to do so. If architecture and landscape figure in to location choices, so do something less obvious to viewers—tax incentives.
Take Maryland, where for the past two years, the Netflix series House of Cards has been shot. A visit to the Maryland Film website reveals that “qualified feature, television, cable, commercial, documentary, music video, etc, project” may take advantage of an exemption from the Maryland 6% state sales and use tax for numerous sales, rentals, and services. Eligible items include camera equipment, costumes, film, props, scenery and storyboards.
According to the legislative intent, the tax exemption is “for the purpose of increasing the film production activity carried out in the State, bringing economic benefit to the citizens of the State, and generating increased employment opportunities in the State.” Sales tax exemptions are only part of the incentive package available to qualifying film production companies.
House of cards
A house built of cards is precarious; jostle one card and the whole structure could collapse.
At the conclusion of filming Season 1, the state of Maryland sent a check for more than $11 million to Media Rights Capital (MRC), the show’s California-based production company. Tax reimbursements for the second season “could reach $15 million.” But apparently that’s not enough (Washington Post).
Maryland Governor Martin O’Malley recently received a letter from Charlie Goldstein of MRC. It thanked the Governor for visiting the set of House of Cards last spring and for supporting the enhancement of the Maryland Film Production Employment Act, which “allowed… the production to remain in Maryland.” The letter goes on to acknowledge that legislation to “increase the program’s funding” must be introduced to the General Assembly now in session:
“MRC and House of Cards had a wonderful experience over the past two seasons and we want to stay in Maryland. We are ready to assist in any way possible to help with the passage of this bill. In the meantime I wanted you to be aware that we are required to look at other states in which to film on the off chance that the legislation does not pass, or does not cover the amount of tax credits for which we would qualify.”
Copies of the letter were sent to the Maryland Department of Business and Economic Development, the Maryland Film Office, and the Baltimore Film Office.
Filming of House of Cards has been pushed back to “ensure there has been a positive outcome of the legislation.” Meanwhile, Maryland lawmakers are wondering, “Is it possible that they would just leave after we gave them $31 million?”
Maryland isn't the first state to find itself in this position, and the film industry is certainly not the only industry seeking bigger and better tax incentives. Consider what Washington State has given--and promised to give--to Boeing, only to have Boeing reach out to other states in search of a better deal.
An end to tax incentives as we know them?
Meanwhile, House Ways and Means Committee Chairman Dave Camp (R-MI) is getting ready to release his plan for tax reform. It is time, he says, to "look special interests in the eye and say the game is up." In other words, it's time to seriously look at cutting "lucrative tax benefits for businesses and middle class voters" (Politico).
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