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Out of the Spotlight: A 2020 Update on Film Tax Incentives in the U.S.

in Issues
on Mar 17, 2020


It’s an election year, and film tax incentives are in the news.

Among small government types, state government tax dollars in the form of tax credits and rebates for film and television production will always be controversial. A September 2019 report by Michael Thom, associate professor at the University of Southern California Price School of Public Policy, adopted a “quasi-experimental” research approach to throw doubt on the role that incentives play in improving a state’s employment rate. The report, noted David Robb in Deadline, was “funded by the Koch Foundation, whose billionaire brothers—Charles and David Koch—virtually destroyed the Florida’s film industry four years ago when they backed legislation that ended the state’s long-running tax-credit program.”

Despite the small flurry of business headlines produced by the report, which urged “policy makers to question the wisdom of targeted incentives conferred on creative industries,” film tax incentives in the United States are quietly going strong. “There will always be detractors who criticize these programs because they have their own agendas that compete for the same government support and dollars,” says Entertainment Partners Executive Vice President John Hadity, whose company is in the business of loaning against incentives. “At the end of the day, it’s about which programs are going to create jobs, train people and dump money into the local economy.”

New York’s state tax credit is one of America’s largest. In last year’s Filmmaker report on film incentives, Hadity noted with alarm the increasing “burn rate” of the program: Allocated funds ($420 million per year) were being spent faster than anticipated, indicating they could be depleted before the program is scheduled to expire in 2022. Additionally, New York’s program sets “allocation years,” and as they advance more rapidly, it takes productions longer to receive their funds. Says Hadity about the New York program, “The good news is that the burn rate has slowed down a bit over the last 12 months. We expect the allocation year to roll into 2020 any day now.”

The other New York concern has been that the program may end entirely. Indeed, last year, New York Governor Andrew Cuomo publicly mused about the idea of cutting or severely curtailing the credit—a proposal that Crain’s New York Business described as a bit of political gamesmanship targeting a Queens politician who opposed Amazon tax breaks the governor supported. In January of this year, Cuomo issued a budget proposal that extended the film and television incentives through 2025 at the same funding level. To adjust to the higher level of activity in the state, he’s proposing to reduce the credit from 30 to 25 percent.

Elsewhere in the States, there are “exciting developments” for filmmakers, says Hadity. In last year’s report, we noted the relaunch of New Jersey’s program; this year, it’s gaining steam. “New Jersey extended its sunset date from July 2023 to July 2028,” reports Hadity, “and upped its annual program cap from $75 million to $100 million. The digital credit of $10 million remains unchanged.”

The amount allocated by Oklahoma for its film and television incentive program, which rebates up to 37 percent of the qualified spend, has doubled in the past year, from $4 million to $8 million. (There are discussions to double it again, to $16 million, Hadity says.) Films To the Stars and Awake recently shot in Oklahoma.

California’s tax credit sunsets in June, but the state already approved its extension through June 2025. Among the minor changes in the law, which has a more complicated internal funding breakdown than other incentives, is an increase in the percentage of funds allocated to specifically independent productions, from 5 to 8 percent.

Among the states that have gone online since our last report is Montana, which, as of July 1, now offers a 20 percent production tax credit coupled with additional incentives that, depending on the nature of the spend, can take the number up to 35 percent. And with production flowing to Virginia, whose credit tiers up from 15 percent, neighbor West Virginia’s legislature is currently considering reinstating its incentive. 

Even Vice President Mike Pence’s home state of Indiana is showing interest in tax credits. Says Hadity, “Indiana has a bill making its way through the legislative process that we’re keeping an eye on since this would be a new incentive for that state. Clearly, they have seen the value by watching neighboring Illinois and Ohio thrive due to their respective programs.”

Whether Oklahoma and Indiana reap increased business from Hollywood and independent filmmakers may depend on factors other than incentives, though. Both states are labeled “most threatened” in an entertainment industry report on abortion rights issued to Variety by actress and activist Alyssa Milano. The report, writes the authors, is intended to “serve as a quick reference for actors, producers, directors, studios and other parties in deciding where it is safe for women to work.”

One of the country’s most-filmed states, Georgia, has been boycotted by some filmmakers owing to its “fetal heartbeat” law, scheduled to take effect January 1 but currently blocked by a federal judge pending court challenges. A number of high-profile series and films continue to shoot in Georgia because of its crew base and high 30 percent incentive, while most major production companies have pledged to reconsider shooting in George if the law is enacted.

And what about Florida, whose Koch-targeted incentive program expired in 2014? Well, the state legislature is now mulling over a bill that would reintroduce film incentives. Its sponsor, Republican State Senator (and early Trump ally) Joe Gruters, spoke about the bill’s economic efficacy at a state senate committee hearing: “This bill will set that framework up so Florida can compete long term for these good jobs, so that we can continue to market our state in a way that we could all be proud [of].”

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