Iowa court mulls Clean Out case

Minds Eye Entertainment has taken the State of Iowa to court over its frozen tax-credit program.

The Regina production company was set to shoot the $18.7 million movie Clean Out in Iowa in October and, in July, had been approved by the Department of Economic Development to receive $6.5 million in tax credits.

But in September, Iowa Governor Chet Culver suspended the program over allegations of misspent money and abuse, including tax credits claimed for the purchase of luxury vehicles not used directly on film sets. A criminal probe is underway.

Minds Eye and Clean Out are not part of the criminal probe. But the tax-credit freeze has forced Minds Eye to postpone production of the film.

‘Iowa issued what we thought was the final contract, which was executed by both parties on July 29, 2009,’ Minds Eye’s president and CEO Kevin DeWalt tells Playback Daily. ‘The program was suspended on Sept. 18. We had begun preproduction prior to the announcement of the suspension.’

Minds Eye’s lawsuit alleges breach of contract and the company is asking the court to order the Department of Economic Development to honor the tax-credit contract agreed to prior to the suspension.

‘We are confident on our position based on the evidence and arguments our legal team presented,’ says DeWalt

Kevin DeWalt

According to local press reports, the state says that the confirmation letter sent to DeWalt means only that he was eligible for a contract. The Attorney General’s office also argued that DeWalt’s company, Iowa Eye, was not incorporated in the state until a day after it received approval. Under the Iowa Film Office guidelines, only Iowa companies, registered with the state, are eligible for the tax-credit program. DeWalt testified he was in the process of incorporating.

Clean Out is set to star Timothy Dalton, Elliott Gould and Harvey Keitel.

The production was planning to spend $13.4 million in the Hawkeye State, as well as shooting in Winnipeg, Zurich and Cannes. The internationally financed project has 15 funding partners from four countries, including private and public sources. There is no Canadian public money in the film.

Iowa’s lucrative incentive granted filmmakers tax credits valued at 50% of the cost of production in Iowa, including payroll, lodging, food, entertainment and transportation.

‘The tax-credit program was the most attractive in the world and I was encouraged by the Iowa stage government to apply, which we did,’ says DeWalt. ‘I was also attracted to the state as it reminded me where Saskatchewan was 20 years ago. Anybody who knows me understands I am an industry builder, which keeps the business exciting.’

A court hearing was held on Nov. 9. The judge will decide on the case in the coming weeks.