Video games get tax break

CARY -- The state's burgeoning video-game industry finally has a tax incentive of its very own.

Gov. Bev Perdue signed into law on Thursday an economic incentives package that gives a 15 percent tax credit for employers "developing interactive digital media."

It's an incentive the industry has sought for years to make North Carolina more competitive with other states that have targeted video-game companies.

The new law doesn't mention video games per se, but the connection was underscored Thursday afternoon when Perdue signed the bill at a ceremony held in the two-story lobby at Epic Games. The company behind the enormously popular "Gears of War" franchise employs about 140 people at its Cary headquarters.

"This is a real treat," Epic president Michael Capps said during his welcoming remarks. "I asked everybody to wear their best T-shirts."

The bill, which has the twin goals of attracting new companies to the state and retaining those already here, is especially relevant to the Triangle, which has become an industry hub in recent years. About 30 video-game companies employ an estimated 1,200 local workers.

"We think it's a great show of support," said Alexander Macris, president of the Triangle Game Initiative, an industry trade group that hired Raleigh communications firm Capstrat to lobby for the bill.

A major selling point: Video game developers earned an average of $79,000 in 2008, according to Game Developer, an industry publication.

Louisiana, Georgia, Florida and Virginia have adopted new incentives for the industry within the last 18 months, the Greater Raleigh Chamber of Commerce reports.

"Other states are beginning to circle around like vultures and steal our existing employers away from us," said Sen. Daniel G. Clodfelter, a Charlotte Democrat who championed the bill.

Last year Funcom, a Norwegian company with a presence in Durham, shifted the majority of its operations to Montreal, Macris said. At the time Funcom CEO Trond Arne Aas hailed Quebec's tax credit for making it "one of the most cost-effective locations in the world" for developing video games.

Although video games conjure images of gore and mayhem, the sales pitch to legislators stressed that the industry also produces so-called "serious games" - computer simulations used for training by the military, the health care sector and industry. Raleigh's Virtual Heroes, for example, is known for its development work on America's Army, a recruitment and training video game produced for the Department of Defense.

The new law also ups the tax credit to 20 percent for expenses incurred when companies collaborate with a North Carolina community college or university.

North Carolina's new 15 percent tax credit for video-game companies isn't as generous as what some states offer. For example, Florida and Georgia offer 20 percent tax credits.

Still, Wayne Watkins, project manager for the economic development arm of the Raleigh Chamber of Commerce, said that the new law will be an effective tool for recruiting and retaining video game companies.

"It's a huge, huge win," he said. "It can be a job-growth driver."

Staff writer Ben Niolet contributed to this report.