Over the past decade, the state of Illinois has given nearly $420 million in tax breaks to companies that came to the state to make television shows such as “Chicago Fire,” movies like “Transformers” and dozens of commercials.
What did those 1,817 productions do to earn those tax breaks? State officials won’t say.
Nor will they say how many of them got tax breaks for using Cinespace Chicago Film Studios, the taxpayer-subsidized West Side home that bills itself as the largest movie production facility east of Hollywood. According to federal prosecutors, studio president Alexander S. “Alex” Pissios made $325,000 in extortion payments to longtime Chicago Teamsters boss John T. Coli Sr., whose union members provide services for movie and TV productions. Coli is awaiting trial.
The state never has audited the bills and receipts those productions submit to get the tax breaks, which are given for hiring Illinois residents and buying goods and services from Illinois businesses.
“That defies logic that the state would be providing a tax incentive and would not recognize the benefit of auditing a program . . . which has resulted in almost a half billion dollars in foregone tax revenue in exchange for activity that hasn’t been verified by independent auditors,” says Laurence Msall, president of the Civic Federation, a government watchdog group. “Why wouldn’t they be making sure they’re receiving the benefits?”
The Illinois Film Production Tax Credit Act provides a tax break of at least 30 percent for specific expenses. The law is set to expire in three years unless it’s renewed.
Gov. Bruce Rauner, the Republican seeking a second term in November, and his Democratic opponent, venture capitalist J.B. Pritzker, both say they support renewing the tax credit to help Illinois stay competitive with states like Georgia that offer more lucrative tax breaks to attract filming.
Rauner thinks the state sufficiently monitors the bills, Rauner’s spokeswoman Patty Schuh says. “Every production and expenditure is vetted through a rigorous, five-step process per administrative rule that has been in place since 2008,” according to Schuh. “In addition, random audits are carried out by the Illinois auditor general.”
But a spokesman for Illinois Auditor General Frank Mautino says: “To the best of my knowledge, we have not conducted audits on this issue of film credits.”
Pritzker says the state should hold annual hearings to assess “the efficacy of the tax credits. We need to make sure there’s transparency” so taxpayers know what they’re getting for the tax breaks.
“We need to create a bipartisan review board that would regularly assess whether the tax credit is viable,” Pritzker says. “Better oversight by [the Illinois Department of Commerce and Economic Opportunity] and also public hearings in the legislature are exactly the forums to make sure what those answers are.”
Productions can receive a 30 percent credit for purchases made in Illinois as well as any residents they hire. They get an extra 15 percent tax credit for hiring Illinois residents who live in neighborhoods with high unemployment. And they don’t have to pay the state’s 11.9 percent hotel occupancy tax on any room that’s occupied for at least 30 days by someone working on the production.
Three years ago, the state released some of the records companies submitted to document their spending. They showed, for instance, that one TV show, “Mob Wives Chicago,” had gotten $636,327 in tax credits after reporting it spent $2 million shooting in 2012. That spending included payments to the daughter of reputed mob hitman Frank “The German” Schweihs to have his body exhumed and $66,000 payments to her and four other women with alleged connections to organized crime.
Since then, the state has refused to release spending records, saying they contain trade secrets — a stance Illinois Attorney General Lisa Madigan upheld two years ago.
An industry executive says the film and TV productions negotiate with vendors, including studios, and that it would hurt them if such information were revealed to competitors.
Many of these TV shows and movies film at Cinespace, which opened in 2011 on the site of a former steel mill, renovated with $17.3 million in state grants issued under then-Gov. Pat Quinn.
Coli — who helped the studio get those grants — now stands accused of extorting $325,000 over more than three years from Cinespace’s Pissios. To avoid prison for bankruptcy fraud, Pissios secretly recorded conversations with Coli for several months, leading to the indictment of the union boss last summer by a federal grand jury, the Chicago Sun-Times reported in June. Coli has since been ousted from the union.
Under Coli, the Teamsters negotiated deals with individual productions filmed at Cinespace, with the production companies getting tax breaks for hiring those workers. The companies also got tax breaks for rent they paid Cinespace.