Highs, Lows, backtracks, retracts, sidesteps, referrals… no, not a day in the life of a C-list movie star, but State Film Tax Credits. There has been a lot of news of late about these incentives, with each US state varying wildly with new schemes, tweaks to initial offerings, extensions and deadlines. Do movie jobs depend on them? Do they cost the taxpayer in the long run?
It was recently announced by the Los Angeles Economic Development Corp. that the tax credits in California were responsible for pumping $3.8 billion into the local economy since it’s launch in 2009 to slow runaway production. It also helped create over 20,000 film industry jobs. Perfect timing, as the California State Assembly has just approved a bill to extend these tax incentives for an additional five years, and if passed, another $100 million in credits will be handed out after July 1. The report by the LAEDC concluded that “for each tax dollar allocated the local and state governments get back at least $1.13 in tax revenue, while the total GDP in the state will increase by $8.48“.
The problem for Hollywood specifically is that California jobs aren’t guaranteed – CA is not the only state offering these incentives, and others offer a larger budget, and less restrictions for projects to qualify.
The Kansas Film Production Tax Credit is back after a two year hiatus, and offers a credit on “30% of the direct production expenditures made in Kansas that are directly attributable to the production of a film in Kansas“.
New York State Film Production Tax Credit Program has been extended and expanded, offering a whopping $420 million per year to production companies. Again, this incentive will be running until 2014, and offers 30% tax credit on qualified costs incurred in New York State.
“Gov. Gary Herbert signed into law HB99, bumping Utah’s motion-picture incentive from a 20 percent tax rebate to 25 percent“, reports The Salt Lake Tribune.
After lowing their minimum spend two years ago, Wyoming now has a five-year extension of the Film Industry Financial Incentive program, which, as Wyoming Film Office blog states, “will continue the cash rebate incentives for production companies of up to 15 percent on dollars spent in Wyoming during a film shoot“.
“Gov. Bob McDonnell signed legislation that establishes a film tax credit program in Virginia” tells Hampton Roads.com. With a minimum spend of $250,000, production companies can now seek tax credits from the state.
Leaving Los Angeles?
On the downside…
Got through the good news? The LAEDC report followed hot on the heels of a more damning review. The Tax Foundation claimed a couple of weeks back that “film tax credits fail to live up to their promises to encourage economic growth“. As a result, some states suspended or rejected any extensions of their incentive schemes, whilst many more reeled back the amount of credit offered or are questioning any continuation of their current system.
The new Connecticut budget places “restrictions on the film and television tax credit program” which “may make the state less appealing to Hollywood” claims the CT Post. Specifically, worries are regarding the reducing of ability to transfer these credits to other Connecticut based companies, and limiting the way that insurance companies can use the credits when bought.
Michigan, which has offered the most bountiful credits to film companies at up to 42% of production related expenses, is in the middle of plans to slash those levels drastically. The overall budget for film credits will likely be reduced from $100 million to $25 million, although, as WSJ points out, Gov. Rick Snyder would have liked to put an end to the idea completely.
After two years of operation, the Washington Film Works will be closed as state legislators decide to not offer any kind of initiative moving forward. The News Tribune reported that local representatives had been “questioning the worth of film incentives in particular”.
Earlier this year, New Jersey announced that they were suspending their Film Tax Credit program, with much deliberating from CSINJ along the way.
Arkansas, Idaho and Maine all appropriated no funds for their programs this year, and Wisconsin allocated just $500,000 after deciding that any movie productions would equal a net loss for the state.
The pros and cons are often being heavily debated. Check out this transcript from Boston’s WBUR, between Peter Enrich, “a law professor at Northeastern University who opposes the state’s film tax credit program”, and Vinca Jarrett, “founder of the Boston firm FilmPro Finance, which helps movie-makers get financial backing”.
Ultimately, the bottom line for studios is what it comes down to when dictating job locations… if they can make the same movie for less money in a different US state, then why wouldn’t they? Without various credits, will we see these projects move to Vancouver or Rio de Janerio?
Hopefully this post shares some new information with you, and here at Media Match we’d love to hear if you have any views on or experience with the film tax credits system in your state.
by Lee Jarvis.
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