“House of Cards: has delayed filming its third season until Maryland lawmakers approve legislation that would allow the show’s production company to collect millions more in tax credits. So how exactly do these credits work?
I had Jack Gerbes, director of the Maryland Film Office, walk me through how this happens and the numbers behind the tax credits House of Cards has received:
Step 1: Television or movie production companies express interest.
The first question companies ask is not, “Tell us about this location or that location.” Nope, Gerbes says, the first question is usually: “What tax credits do you have?” Making a hit series or blockbuster movie is a business, and producers are easily enticed by the idea of saving millions of dollars.
Step 2: The production company applies.
Company executives say what they plan to do, how long they plan to work and how much they plan to spend, as the state will reimburse them for a chunk of production expenses incurred in Maryland. The Maryland Film Office reviews this application and will then reserve some tax credits for the company. Most years, the office has $7.5 million to divvy up, although last year it had $25 million thanks to legislators approving a bump.
Step 3: Filming begins and ends.
This is the fun part: Locals help build and decorate sets, Kevin Spacey spottings happen and the governor is invited to visit the set. During the filming of Season 2, the Maryland House of Delegates chamber was transformed into a faux U.S. Senate chamber, much to the delight and amusement of lawmakers. When the show finally airs, it’s required to include this closing credit:“Maryland Film Office, Maryland Department of Business & Economic Development.”
Within 180 days of wrapping, the production company has to give the film office closing documentation — including numbers of Maryland residents who were hired to work, businesses impacted, payroll sheets and receipts — along with an auditors report.
Step 4: State determines the final tax credit amount.
Within a month or two, the film office finishes its review of that mountain of documentation and determines the exact amount for a refundable tax credit. The production company receives that money when it files its Maryland taxes, so often there is a lag of time between the show being filmed and the production company getting its refund. Typically, companies are reimbursed for about a quarter of qualified expenses — and the film office has a detailed list of what is qualified or not.
“House of Cards,” Season 1: The production company received a final tax credit of more than $11.6 million, with that money coming from the state’s budget for fiscal years 2012, 2013 and 2014. Production expenditures topped $63.6 million, and the Department of Business and Economic Development estimates that the season had a $138 million economic impact. More than 1,800 Maryland businesses were involved and nearly 2,200 Marylanders were hired as cast, crew or extras.
“House of Cards,” Season 2: The production company could receive a tax credit of up to $15 million, as it spend more than $55.5 million in Maryland and had an estimated economic impact of $120.5 million. Nearly 2,000 Maryland businesses benefitted and more than 3,700 Marylanders were hired. The money for that tax credit will come from the fiscal year 2014 budget, which has a burst of extra funding for film tax credits.
“House of Cards,” Season 3: The show has filed a letter of intent to film in the state and plans to spend about the same amount in production costs and have about the same economic impact as it did in Season 2. About 2,150 Marylanders would be hired. Under the current formula, the show would qualify for up to $15 million in tax credits, but so far the state can only guarantee $4 million.
Oh, and “Veep”: The HBO show “Veep” — also set in D.C. but much more light-hearted than “House of Cards” — has also filmed in Maryland. For its first season, it received a tax credit of $3.4 million and was estimated to have an economic impact of $30.6 million with nearly 1,000 Marylanders hired. For the second season, the tax credit could be up to $5.5 million with an impact of $44 million and more than 1,000 jobs. For its third season, it could receive up to $6.5 million with an impact of nearly $52 million and more than 2,000 jobs. “Veep” has sent a letter of intent and an application to film Season 4 in Maryland, for which it has been promised $7.4 million in tax credits, slightly less than what state economic development officials hoped to give.