Updated marked with
strikethroughs and bolded new.
Back in March, the Oregon Film and Video Office acknowledged the “leakage” in the film production tax credit the office administers. That “leakage” — or built-in inefficiency — means that Oregon pays out at least $100 of tax revenue for every $95 that comes in from the sale of film tax credits to fund a subsidy program.
The next round of leakage gets under way on July 1, when the Oregon Film and Video Office puts up for sale the remaining $2.5 million in film subsidy tax credits (PDF) for tax year 2011. These are on top of an additional $5 million in tax credits that were “previously reserved” and will go on sale to the public on July 25 if not paid for in full by July 15.
“These tax credits have historically sold out very quickly and are available on a first-come, first served basis,” a marketing email from the Film and Video Office to CPAs recently explained. The credits will be sold to the public starting at 8 a.m. at the Film and Video Offices in Salem and Portland, where there will be sign-in sheets for those who get in line early. The agency will only accept cash or a cashier’s check with the application. (The marketing materials and email to CPAs do not explain that the Oregon treasury will take a 5 percent loss on the sales, for a net loss of $125,000).
Last July the tax credits sold out in less than 15 minutes, according to the Film and Video Office. If the film tax credits sell like hot cakes again, it begs the question of why the Film and Video Office hands out such a sweetheart deal to the tax credit purchasers. They could trim some of the loss to Oregon taxpayers by amending their own rules and sell the credits for more than 95 cents on the dollar.
is seriously considering a measure in these final days of session (PDF) that would lower the yearly total of film tax credits that can be sold from the current $7.5 million to $6 million despite the Governor’s call to expand the subsidy and would sell the credits at auction, with a 95 cents on the dollar floor ("reserved bid") on the price.
For now, you too can get in on the action and grab your share of the leaking revenue. You will earn 5 a percent guaranteed return on your money by next tax season. Here is the application form (PDF) that you will need to fill out.
To figure out how much it will cost you to invest and how much you will profit, first decide how much you want to lower your tax liability (the tax credit is a subtraction from your net tax liability). Then multiply that tax credit amount by 0.95, and that's what you'll pay for the tax credit. Your profit will be the difference between the two. But remember, while the Film and Video Office’s subsidy fund operates on an IOU from taxpayers, the Film and Video Office won’t take an IOU from you -- only cash or a cashier’s check.
Show up early if you hope to beat out the well-heeled. It is they who historically grab the lion’s share of the profit made at the expense of Oregon taxpayers and vital public services.
It’s true that if you manage buy some of the tax credits at 95 cents on the dollar, your 5 percent gain will be pocketing revenue that otherwise could have gone to fund schools, health and human services and public safety.
But, hey, you didn’t cause the leakage. Legislators did by creating the scheme. Buying the tax credits will just make you one of the lucky ones with a bucket collecting the leaking revenues.