How Did QVC Get $5M in Tax Credits from Pa.?

By Melissa Daniels | PA Independent

HARRISBURG — One of America’s most popular home-shopping networks is getting a pretty good deal of its own from the commonwealth of Pennsylvania – more than $5 million in tax credits.

QVC, headquartered in West Chester, got about $3.7 million worth of tax credits in fiscal 2011-12 for 15 different shows. The state awarded the credits the previous year, and QVC received them post-production, as part of the Film Production Tax Credit Program.

Under the umbrella of the Department of Community and Economic Development, state officials promote the tax credit program as a way to create jobs.

Policy analysts from across the political spectrum see it a glitzy form of crony capitalism.

The QVC projects created a total of 227 full-time equivalent jobs and generated $976,312 in state and local taxes. That same year, QVC was authorized for an additional $2.5 million in tax credits for 48 productions, which had not been completed by the year’s end, according to state data.

Whether such taxes are a prudent investment — the proverbial “good deal” — is the question. The progressive-leaning Center on Budget and Policy Priorities says no.

“Some makers of movie and TV shows have close, long-standing relationships with particular states,” a 2009 report says. “Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway.”

A 2010 report  from the market-minded Tax Foundation said such incentives “create mostly temporary positions with limited options for upward mobility.”

QVC is a unique study. The international company with 100 million U.S. viewers has kept its foothold in Pennsylvania since the mid-1980s, long before the tax credit program began in 2004.  But film tax credits are also criticized for promoting transient jobs by drawing a temporary production, even though QVC has more than 4,000 employees in Pennsylvania.

The company is an active economic driver to the region, said Diane Zappas, QVC’s director of corporate communications. Productions are sometimes shot on location — in Philadelphia or Hershey, for example — and QVC has multiple affiliations with Chester County charities. The company offers studio tours packaged with local attractions.

“QVC hosts approximately 60 on air guests per day from around the world, many of which frequent local hotels and dining establishments as part of their stay,” Zappas said in an email. “This is in addition to the various vendor representatives and business owners who travel to the QVC campus regularly for meetings.”

Tax credits are given to QVC, like any other production, on a case-by-case basis. Janice Collier, the film tax credit manager with DCED, said QVC  receives film tax credits, in part, because it’s stable.

“They continue to employ Pennsylvanian employees,” she said. “They have increased their workforce, they have increased their infrastructure.”

QVC’s awards vary based on the production’s size and overall expenses, the same way other films or television productions would receive them. A $1.1 million production of “Electronics Today” received an award of $222,857; a $1.5 million production of “Diamonique Jewelry” got a $311,409 tax credit.

Pennsylvania gives out $60 million every year to film and television productions spending at least 60 percent of their budgets in the state, awarding tax credits up to 25 percent of production expenses. It’s often sold as way to draw in filmmakers, to shoot the scenic Alleghenies or the Philadelphia skyline.

“Welcome to a rare state that has the best of all worlds,” boasts FilmInPA.com, the landing page for the program.

The program bars news, sports or weather productions from applying, but there is no such exemption for other in-studio productions.

Overall, state figures say the film tax credit program is $300 million investment, translating to $2.7 billion in economic activity and nearly 18,000 jobs. Indirect benefits to local businesses from crews filming on location are counted as proof the tax credits are working.

The state has no minimums for in-state spending or job creation when it makes its awards, but the tax credit is not actually given to the company until its production expenses are audited.

Mike Wood, a policy analyst with the Pennsylvania Budget and Policy Center, said Pennsylvania’s film tax credit program is actually more transparent than other incentive programs. That’s because the productions don’t get the tax credit until they’ve reported their spending and job numbers, and then those numbers are available in an annual report.

“You woudn’t be able to find that information on a number of other tax credit programs the state has,” Wood said.

Still, because they aren’t a specific line item, tax credit programs aren’t always subject to harsh inspection.

“These programs need the same level of scrutiny that we have for programs that get expenditure line items,” he said. ”Unless the Legislature specifically wants to look at those, it doesn’t get looked at it.”

Senate Majority Leader Dominic Pileggi, R-Delaware, whose southeastern district is adjacent to the borough housing QVC studios, has sponsored legislation to “uncap” the program, allowing the program’s budget to be allocated for multi-year productions without restriction.

“The film tax credit has created an industry in Pennsylvania,” Pileggi said earlier this year while announcing his plans. “Establishing an ‘uncapped’ program here, as about a dozen other states have done, will allow us to take full advantage of the program’s potential.”

In 2011, Pennsylvania was the fifth highest-ranking state for film-related employment, behind California, New York, Florida and Texas, according to the Independent Fiscal Office.

This, though, does not impress those who disapprove of the giveaways.

Leo Knepper of the Citizens Alliance of Pennsylvania, a pro-taxpayer, limited government advocacy nonprofit, said the film tax credit is just one example of how government giveaways create an unfair tax system.

Pennsylvania would do better reforming its corporate tax structure to benefit all business, he said, rather than individual businesses here and there.

“You’re forcing industries to subsidize other industries who just happen to have better lobbyists,” Knepper said. “You have government picking a winning industry.”