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November 03, 1999 04:05pm
Film Tax Credit Dropped
Source: AP
by: CURT ANDERSON AP Tax Writer

WASHINGTON (AP) - A tax credit for independent film productions was dropped from tax packages drafted to accompany a House minimum wage bill because of concern it could unintentionally benefit makers of X-rated movies.

The credit aimed to give U.S. productions an incentive not to move to Canada where they can get generous tax breaks. That problem is a top concern of the Screen Actors Guild, some directors and officials in cities frequently used to film movies.

But aides to top Republican and Democratic lawmakers said Wednesday that because the original version was limited to independent films with budgets of $10 million and under, there was concern that could wind up being a boon to pornographers.

``It may help the people on the margins, but it will certainly help the adult film industry,'' said Trent Duffy, spokesman for House Ways and Means Committee Chairman Bill Archer.

Archer, R-Texas, dropped the movie credit - equal to 20 percent of the first $20,000 earned by people working on the sets - from a revised version of the tax package. Democrats also considered including the credit in their alternative, but left it out over the adult film issue, according to a House aide who spoke on condition of anonymity.

The X-rated concern is considered an unintended possible consequence of the tax credit legislation, which has bipartisan support in Congress because an estimated 20,000 U.S. film jobs left for Canada in 1998.

``We must do everything possible to preserve American jobs in the film production industry,'' said Rep. Xavier Bacerra, D-Calif.

Also in limbo on the minimum wage bill were tax items that benefit alcohol retailers and small bus lines. All were originally in a bipartisan bill that would raise the $5.15-an-hour minimum wage by $1 over three years and provide nearly $35 billion in tax breaks for small businesses.

Convenience stores and alcoholic beverage wholesalers are lobbying for a repeal of the ``special occupational tax'' on sellers and producers of beer, wine and liquor. The tax, which is over a century old, amounts to $250 a year for a retail establishment and $500 for wholesalers.

``It's a particularly onerous tax on small businesses,'' said Mark Katz, vice president for government relations at the National Association of Convenience Stores. ``We think it's unfair because you don't get anything for the tax. It's just additional revenue for the government.''

One proponent of repeal, however, is the 7-11 store chain, which has about 5,600 outlets nationwide. While not exactly a small business, government affairs manager Ronnie Volkening argued that 7-11 still deserved the repeal.

``We are a large corporation, yes, but we operate neighborhood stores, particularly in the case of franchises,'' he said. ``We would be impacted by an increase in the minimum wage.''

The bus item is a credit to helping small bus lines, tour operators and charter companies that earn less than $1 million in annual gross receipts equip their vehicles with wheelchair lifts as required under the Americans with Disabilities Act. Each lift costs about $35,000, said American Bus Association chief Pete Pantuso.

House Republican leaders say they won't permit a floor vote on the overall bill unless Democrats can deliver 40 to 50 votes in favor because a large bloc of conservative GOP lawmakers is adamantly opposed. But there is pressure from other Republicans for the measure, some for the wage issue and some who want another chance to pass tax cuts.

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