Vancouver: About a dozen of the 864 applications for the new federal refundable tax credit have resulted in rebates for Canadian film and television producers even though the program went into effect 16 months ago.

The magnitude of the backlog came to light during a March 25 industry meeting about film financing in Vancouver at which cavco chief Robert Soucy said the rebating process is far behind.

But it’s Revenue Canada, not cavco, that is holding up the payouts, he maintains.

Soucy says that cavco has certified 376 applications and has another 488 in various stages of certification. That means that cavco has signed off on about 44% of current applications, convinced that they satisfy the Canadian content rules and have eligible expenses for RevCan to cover.

(About 10 applications have been rejected because they fall into categories outside the cavco mandate such as news, talk shows and pornography, he says.)

‘Yes, it’s taking longer than expected,’ says Soucy. ‘We’re hearing a lot of complaints from producers who want their money. But we have no influence over that.’

RevCan, he adds, has ‘not been fully ready’ to handle the rebate requests.

The rebating process, he says, is complicated with the volume of applications and the complex series of checks and balances required to ensure that a production is truly Canadian.

But RevCan maintains there is no backlog.

In a written statement to Playback, the Tax Incentive Audit Section states:

‘[RevCan tries] to complete the review of each claim within 120 days from the date when a claim can be considered as being a complete claim. Our review process has been currently operating for 135 days. The majority of the complete claims have been processed within the 120-day guideline, which falls under our objectives.’

RevCan auditors, the statement says, began reviewing claims in November 1996.

In order for a production company to access the tax credit, says RevCan, it must file the cavco certificate (one of the 376 certificates outstanding) with its T2 return.

By the end of March, 150 ‘qualified corporations’ had submitted multiple claims to RevCan for review, but 40% could not be processed because they were incomplete. At press time, 45 claims were under review.

The wait, meanwhile, is beginning to cost money. Carrying costs of interim financing begin to eat away at the payout with the delays.

Robert Morrice, head of the Royal Bank’s media and entertainment division, says carrying costs can amount to 0.5% per month, which over time begins to mount. And in dispelling concerns that conservative lenders like the Royal Bank might abandon filmmakers because of the rebate delays, he says cool heads are prevailing.

‘We continue to provide financing against the tax credit,’ says Morrice, estimating that 120 of the applications awaiting refunds have been financed through the Royal Bank.

Depending on the producer and the scope of the overall financing, the Royal Bank provides interim financing of between 50% and 90% of the expected tax credit, which can equal up to 12% of a production budget. ‘It would be easier if we had a track record of payments and knew what percentage of the original estimates were being paid out,’ he says.

Morrice adds that he’s meeting with the players from the various government agencies later this month ‘to increase his level of comfort’ with the tax credit program.

Other factors are reducing the value of the federal tax credit payout, too.

For example, b.c. producers who participate in British Columbia Film’s corporate infrastructure-oriented Market Incentive Program are seeing their potential rebates reduced because cavco considers the grant to be project-oriented. The mip, therefore, reduces the adjusted base of the film the company might be working on, which then reduces the eligible expenses.

The result, contends B.C. Film president Wayne Sterloff, is that the benefit provided by B.C. Film to give emerging filmmakers the capital they need to get companies – rather than just films – off the ground is neutralized.

‘[b.c. producers] are penalized to the point where it’s not worthwhile to hire a lawyer or accountant to file the [tax credit] application,’ says Sterloff. In fact, he contends the federal tax credit isn’t worthwhile for any Canadian producer other than the dozen large companies in Ontario and Quebec.

While the rebate bugs get ironed out, cavco’s Soucy, for one, is optimistic that the current problem will improve within the year as people become more familiar with the tax credit rebating system. He says the tax rebate program is much tighter than the old Capital Cost Allowance that provided financing for producers prior to January 1996.

And with the new producer control guidelines enacted last September, quasi-Canadian programs such as Poltergeist and Outer Limits, which are produced in Vancouver primarily for the u.s. syndication market, will no longer qualify for cavco financing after 1997 without considerable ownership and distribution restructuring.

RevCan has offices in Vancouver, Toronto and Montreal dedicated to processing the tax rebates.