State likely to lift veil on film tax credits
By Sean Hao
Advertiser Staff Writer
The state is likely to release the identities of companies seeking newly adopted state film and TV production tax credits following a ruling by the state Office of Information Practices.
Hawai'i Film Commissioner Donne Dawson denied an Advertiser request for the information in September, saying the disclosure might discourage companies from filming in the state or discourage them from sharing accurate information with the state.
The Office of Information Practices reversed that decision this week.
Twelve productions have said they plan to apply for tax credits. The Hawai'i Film Office says it will release names of the productions by early next month.
The film office said the 12 productions have projected budgets of $79.5 million in qualifying costs and plan to hire 774 residents and 316 nonresidents. If all that money were spent on O'ahu, the amount of tax credits created would be $12 million.
To encourage more film production in Hawai'i, lawmakers increased the state's 4 percent production tax credit this year to 15 percent on O'ahu and 20 percent on the Neighbor Islands.
The Office of Information Practices, which administers the state's open records law, said the state can keep some information on the production companies confidential, including individual production expenses and employment levels.
The Office of Information Practices opinion means that the state cannot provide blanket protection from the state's open records laws to entities seeking state film tax credits. Now the film office must review all tax credit applications and decide what information can be legally withheld.
STAYING CONFIDENTIAL
In the past the state maintained the identities of those benefiting from the film tax credits was confidential. Such information can still be withheld, but "it is going to be the exception not the rule," said Office of Information Practices Executive Director Les Kondo.
To keep their names secret, tax credit applicants must show that such disclosure would result in "substantial competitive harm," according to the Office of Information Practices. That would apply if a large production wanted to film in anonymity to avoid increased security and other costs.
"They can't just say, 'Yeah this is going to cause competitive harm,' " if they want to keep their identities confidential, Kondo said. "That's not going to fly."
Movie and TV productions spend about $100 million in Hawai'i annually and create about 3,500 jobs. Credit proponents maintain that the cost of the credits is more than offset by the economic activity they create. In addition, movie and TV productions generate global exposure for Hawai'i, which benefits the tourism industry.
The amount of credits is capped at $8 million per production.
Dawson, the film commissioner, said she denied the Advertiser's request for the names of the companies seeking the new tax credits based on a verbal opinion by the state attorney general, which stated that tax credit registration forms were confidential taxpayer information. Until recently, the film office's application form for the new film tax credits specifically stated that the information would not be made public.
CASE-BY-CASE RULINGS
However, those forms were changed recently after the film office received a formal written opinion by the attorney general stating that the film office can only withhold information on the forms from the public under certain circumstances and only on a case-by-case basis. The film office sought clarification following a request from The Advertiser for the registration forms.
Dawson said she supports openness in government, but must balance the needs of the entertainment industry against the public's right to know.
"The most important information to the production companies is the financial information," Dawson said. "We need to, to a certain degree, be on par with what other jurisdictions are doing. The industry standard is to keep that financial information confidential."
The Hawai'i Film Office is reviewing all 12 tax credit application forms filed as of Dec. 6 and plans to respond to The Advertiser's freedom of information request late this year or early next year, Dawson said. The added time is needed to argue whether information on their applications should be kept confidential.
JUSTIFYING SECRECY
Ultimately, the film office's response likely will include the identities of those seeking film tax credits.
"Probably, but maybe not all because there may be productions that can justify keeping their identity out of the public," Dawson said.
The response probably won't include financial information for individual productions, which the Office of Information Practices said can remain confidential. However, that information can be released in aggregate.
State lawmakers were recently criticized by a commission of tax experts for giving out tax credits without requiring transparency and accountability.
However, the ruling is unlikely to result in increased transparency in Hawai'i's technology tax credit program, which also is shrouded in secrecy. That's because the tax credits, known as Act 221/215, are administered entirely by the state tax department and all related forms are considered confidential taxpayer information.
HIGH COST OF SUBSIDIES
The identities of film and TV companies that benefited from tax credits in the past were not made public. However, some local productions, including ABC TV's "Lost" and the films "The Big Bounce" and "Blue Crush," are known to have used state tax credits.
The estimated cost to the state of subsidizing "The Big Bounce" and "Blue Crush" was in the range of $30 million to $36 million over five years. The amount of tax credits for "Lost" is not known.
Lowell Kalapa, president of the nonprofit Tax Foundation of Hawaii, said the public should have access to information about who is claiming state tax credits, along with how much tax credits they're getting.
"We're entitled to this information as taxpayers," he said. "It should be treated like any other appropriation of state money."
Reach Sean Hao at shao@honoluluadvertiser.com.