Last summer, during the furor over Spike Lee’s title for the movie he was making about gun violence in Chicago, the Illinois Film Production Tax Credit popped briefly into the spotlight.
The movie was Chi-Raq; the tax credit is the result of a law that says Illinois taxpayers will kick in at least 30 percent of the money spent locally to make it and other productions.
No one had seen the film at that point, and little was known about the script (which turned out, in my opinion, to be an impressive adaptation of the ancient Greek source material, Aristophanes’s bawdy antiwar satire Lysistrata). But a lot of people didn’t like the title—a mashup that compares the loss of American lives in the Iraq War to shooting deaths in Chicago during the same period.
It didn’t seem like a good label for a city working to establish itself as a global tourism destination. Even Mayor Rahm Emanuel let Lee know he didn’t like it.
But Lee wasn’t giving it up.
Which is why the state’s Film Production Tax Credit came to mind—specifically to the mind of Fourth Ward alderman Will Burns. If Lee was hell-bent on sticking that title on his film, Burns figured, there was no way the public should be funding it.
The Illinois Film Production Tax Credit is, as it happens, a good example of the power of proper naming—a glaze-over moniker that pretty much conceals the fact that this “credit” amounts to a healthy subsidy for the film industry—and a nice little tax break for some completely unrelated businesses.
Here’s how it works: The state issues a transferable tax credit of 30 percent of local expenses, including wages paid to Illinois residents, for any qualifying project. The threshold for qualification is a minimum expenditure of $50,000 for commercials and short films, $100,000 for longer films. And there’s a bonus: wages paid to residents living in areas of high unemployment qualify for an additional 15 percent.
If a film eventually makes a profit, the credit could be used to reduce its state tax liability. But since bottom-line profits are notoriously scarce in the film business, most moviemakers don’t wait for that. They simply sell this “transferable” credit to a more conventional business, which will buy it at a little discount (say 10 percent), deduct the full amount from its own tax bill, and pocket the difference. How does the filmmaker find such a buyer? The state film office provides a list, dominated by brokers.
Unfortunately for Alderman Burns, the City Council has no control over the film subsidy, and the state legislators who made it a law back in 2008 neglected to add a requirement that any portrayal of Chicago must be positive. Burns did what he could, introducing a resolution asking the state to nix Chi-Raq‘s credits. It was debated, but never came to a vote.
Still, the tax credit, developed in response to similar programs in some other states and administered by the Illinois Film Office, has spurred production. According to the office’s annual reports, direct spending hit an estimated $294 million in 2014, but is down since, coming in at $170 million in fiscal year 2015, which ended June 30. (The film office changed its methodology that year, reporting actual rather than estimated expenditures, which might account for some of the drop.)
In February, Governor Bruce Rauner replaced film office head and seasoned film professional Betsy Steinberg (now at Kartemquin) with Christine Dudley, a former executive director of the Illinois Republican Party and a novice to the film business. And for a while, it looked like the tax credit might fall victim to the state budget crisis: it was put on hold in June, then given a shaky reinstatement in November, when reports circulated that credits would only be honored if a budget was passed. Dudley told me last week that’s not the case: the program is in full force, she said.
According to Dudley’s staff, the total value of tax credits issued from July 2008 through December 2014 was just under $204 million. The rationale for this largesse is a combination of job creation and city/state branding. But the job-creation argument has always been wobbly, with the state locked into paying a hefty share of earnings for temporary workers in short-term assignments. It’s generally agreed that if the subsidy goes away, so will the jobs—to wherever production costs are lowest.
Which almost brings us to the glamorous part of the rationale. Almost, because a sizable chunk of the film tax credit supports something more mundane: commercial production, as in TV commercials. It accounted for $37 million of the total spent here last year.
The rest is Hollywood on the Lake, where we show off our gorgeous skyline and sophisticated urban culture in popular films seen all over the world, with a great big payback in tourism and an influx of new businesses.
Enter Chi-Raq, with the blood in the street. Spike Lee reportedly expects to collect $3 million in Illinois tax credits. v