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Tax breaks for 'House of Cards' fall short

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The breakdown in Annapolis over boosting incentives for films and television series shot in Maryland has left the state without enough money to give Netflix's "House of Cards" what it was seeking to produce its next season here, officials acknowledged Tuesday.

House and Senate members failed Monday night to reach agreement on legislation that would have provided $3.5 million in additional tax credits for the coming year — money intended to cover the gap between what "House of Cards" is seeking and what the state will be able to spend.

"House of Cards," the popular series about an unscrupulous Washington politician played by Kevin Spacey, has filmed much of its first two seasons in Baltimore and in Harford County, including renting space from The Baltimore Sun.

The series producer, Media Rights Capital of Beverly Hills, Calif., has warned state officials that if it can't get sufficient tax credits for the third season — scheduled to start filming this summer — it would have no other choice but to break down its sets and move the production to another state.

A spokesman for MRC declined to comment Tuesday. But the company's lobbyist in Annapolis said it didn't look like legislators had put enough in the state's film tax incentive pot to accommodate the company's request.

"Needless to say they're disappointed," said Gerard Evans, who had sought to charm lawmakers by inviting them to meet Spacey at a reception in Annapolis last month. Evans added that the producers "haven't given me a signal yet" about the series' future.

The General Assembly's failure to work out a deal left E. Scott Johnson, chairman of the Maryland Film Industry Coalition, shaking his head in dismay.

"We are grappling with what this will mean for Maryland's film industry, both for the productions that are here and those we hope will come in the future," said Johnson. "The message this sends to producers considering Maryland is not good."

State officials said Tuesday they still hoped to find a way to keep "House of Cards."

"We will keep working with them to try to reach an agreement," said Gov. Martin O'Malley's press secretary, Nina Smith. "The state continues to support creating film industry jobs through both large and small productions."

Senate President Thomas V. Mike Miller defended the film tax credit and expressed confidence that O'Malley would negotiate a deal to keep the productions here.

"We're going to keep them," he told the audience at a bill-signing ceremony Tuesday.

Film industry supporters contend that movie and TV outfits pump money into the state's economy, more than offsetting any tax breaks given them. Though "House of Cards" has received or been pledged more than $26 million in tax credits for its first two seasons, it spent nearly $155 million in the process, buying goods and services from more than 1,800 vendors, according to testimony presented to a House committee in Annapolis.

Forty-two states now offer rebates or tax credits to woo film and TV productions. According to testimony by state officials, Maryland's incentives ranked 20th last year compared with others, such as Georgia, Louisiana, New York and Pennsylvania, which either provided larger incentive pots or put no caps on them.

Some lawmakers were not sold, however, on giving away so much taxpayer money.

"I am a bit skeptical about the promised massive financial benefits," said Del. C. William Frick, a Montgomery County Democrat. He questioned the need to earmark $18.5 million for film and television incentives, as the Senate proposed. "At a time when we're not able to cover all the things we need to cover in the budget," he said, the funding seemed disproportionate.

Legislators did agree to set aside $15 million in the budget for the film industry incentives. With $4 million left in this year's allocation, that brings the total available to $19 million. But that's short of what's been applied for by "House of Cards" and another TV series, HBO's political satire, "Veep," according to Jack Gerbes, director of the Maryland Film Office.

Based on a letter of intent submitted to the state, "House of Cards" would qualify for up to $15 million in tax credits if it films its third season in Maryland, Gerbes said. Another $7.5 million has been committed to "Veep." That leaves a shortfall of $3.5 million.

Senators had pressed to cover that shortfall. But House members balked, some viewing Media Rights' threat to leave as a shakedown. In a budget vote, the House proposed directing state officials to use "eminent domain" to seize the property of any production company that got tax credits and then left the state.

Under pressure from the Senate, House members dropped the talk of "eminent domain" and agreed to go along with $15 million for the coming year. But still chafing over the "House of Cards" letter, delegates insisted on adding a condition in the bill that would have provided the final $3.5 million. It would have ordered state officials to seek to take back any credits pledged to a production that later left the state.

Senators bridled at the clawback language, which they believed would discourage any film or TV producer from wanting to work in Maryland. In a tense negotiation late Monday night, they insisted the provision be dropped, But House members stood firm. And despite a frantic scramble in the waning minutes, the bill failed to pass, leaving many wondering what happened.

"I've been down here since 1976," said Evans, the "House of Cards" lobbyist. "I've never seen anything like it."

Miller defended the Senate's decision not to accept House language. "It sent a horrible message to the business community," he said. Senators also received advice from an assistant attorney general that the "clawback" language the House insisted on was of questionable legality.

But Frick, who had proposed the "eminent domain" language, remained unmoved.

Frick called it "nuts" for senators not to want to protect the state from being pressured to come up with bigger and bigger incentives by threats to leave. And he said he didn't think such a provision would dissuade other producers from wanting to work here. "They're getting free money, they'll come," he said.

The other TV series that has filmed in Maryland issued a reassuring statement Tuesday.

"HBO has had a long history of shooting long form projects in Baltimore dating back to 'The Corner,'" said Cecile Cross-Plummer, a spokeswoman for "Veep."

"It's a fantastic place to realize 'Veep,'" she added, "and we know the producers look forward to returning to Baltimore."

Some think "House of Cards" is unlikely to leave even if the state can't offer all the incentives producers hoped for, because it would be costly to set up elsewhere.

"Once you're rooted, at least from my perspective, it would make more sense to stay," said Bryan Deehring, a Maryland-based producer who said he's filming out of state now.

Big-name productions like "House of Cards" and "Veep" help attract others, he noted.

"Selfishly I want them to stay," Deehring said.

Baltimore Sun reporter Michael Dresser contributed to this article.

tim.wheeler@baltsun.com

david.zurawik@baltsun.com

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