• State Motion Picture Tax Credits
  • July 24, 2013 | Author: David Brown
  • Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
  • With Cleveland becoming the new “Hollywood” for film production, including the likes of “The Avengers,” “Draft Day,” and “Captain America: The Winter Soldier”, it seems appropriate to examine the topic of state movie production incentives and how they benefit states. In general, film production incentives are tax benefits offered on a state-by-state basis throughout the United States to encourage in-state film production. The structure, type, and size of the incentives vary from state, but usually include tax credits, cash rebates, grants, sales tax exemptions, lodging exemptions or fee-free locations.[1]

    Tax credits eliminate a portion of the corporate franchise tax or personal income tax owed to a state by movie production companies and individuals. Often times, a minimum spending requirement must be met to be eligible for the credit - $300,000 in Ohio.[2] Typically, the tax credits offered are either transferable or refundable. Transferable credits allow production companies that generate tax credits greater than their tax liability to sell those credits to other taxpayers, who then use them to reduce or eliminate their own tax liability. Refundable credits are such that a state will pay the production company the balance in excess of the company’s owed state tax.[3]

    Cash rebates may be paid to production companies directly by a state, usually as a percentage of the company’s qualified production expenses. Qualified expenses may include: the production script and synopsis; set construction and operations; wardrobe, accessories and related services; lease or rental of real property as set location; photography, sound synchronization, lighting and related services; editing and related services; rental of equipment; vehicle leases; food; and accommodations.[4]

    Sales tax and lodging exemptions are often offered to production companies as a way to further reduce their costs. Many states, including Ohio and Pennsylvania, offer exemption from lodging taxes to all guests staying over 30 days.[5] Finally, some states, like Pennsylvania, allow production companies to use state-owned locations at no charge.[6] These fee-free locations may be particularly appealing to movie companies looking to film in a natural setting, such as a state park.

    Like all tax credits, motion picture tax incentives reduce the amount of revenue that states would otherwise receive from movie production companies that choose to film within their boundaries. Obviously, the production companies benefit by paying lower taxes than they would in a state without any such incentives, but the states offering credits also benefit by attracting productions that would not have otherwise set up shop in their states. After all, these productions are still producing additional - although it’s reduced by the amount of the credit - corporate franchise taxes for the states where they are filmed. This additional tax revenue increases the general funds of participating states and can be used to finance a wide variety of state costs. Additionally, states and cities benefit from the increased economic activity generated by these productions such as pop-up vendors, increased sales tax revenue and tourism.

    Here’s a look at the incentives our firm’s footprint states offer movie production companies and how each state has fared in attracting the film industry and sustaining employment in related areas.

    Florida Film & Entertainment Industry Financial Incentive Program

    Florida’s production incentives include a cash rebate program on in-state expenditures. There are 4 queues: 1) films, TV, commercials, or music videos with expenditures in excess of $650,000 receive a 15%-22% rebate: 2) multiple commercials or music videos with minimum combined expenditures of $500,000 and a $100,000 per project minimum receive a 15%-20% rebate; 3) indies spending $100,000-$625,000 receive a 15%-17% rebate; and 4) digital media projects receive a 10% rebate.[7]

    The motion picture and television industry is responsible for 27,537 direct jobs and $1.3 billion in wages in Florida, including both production and distribution-related jobs. Nearly 8,000 of the jobs are production related. During the course of 2010 and 2011, 28 movies and 24 TV series filmed in the state, including Magic Mike, Step Up 4, Alvin and the Chipmunks: Chipwrecked, Dolphin Tale, I am Number Four, Burn Notice, Charlie’s Angles, Basketball Wives and Animal Cops: Miami.[8]

    Illinois Film Production Tax Credit Act

    Illinois offers a tax credit of up to 30% of the qualified Illinois Production Spending and 30% on Illinois salaries up to $100,000 per worker. Tax credits can be carried forward 5 years from when they are originally issued. Applicants will receive an additional 15% tax credit on salaries of individuals (making at least $1,000 in total wages) that live in an economically disadvantaged area (at least 10.5% unemployment).[9]

    The motion picture and television industry is responsible for 20,946 direct jobs and $969.2 million in wages in Illinois, including both production and distribution-related jobs. Over 6,100 of the jobs are production related. During the course of 2010 and 2011, 34 movies and 19 TV series filmed in the state, including Man of Steel, Lincoln, Source Code, Contagion, Bad Teacher, Colombiana, Judge Mathis and The Oprah Winfrey Show.[10]

    Indiana Film and Media Production Tax Credit

    Indiana does not presently provide tax incentives to production companies. The Indiana Film and Media Production Tax Credit is a proposal currently being kicked around the legislature, but it is not expected to be considered until at least 2014. Indiana does currently waive its county innkeeper’s tax and sales tax for any accommodation that is rented for a thirty 30-day consecutive stay.[11]

    The motion picture and television industry is responsible for 9,111 direct jobs and $248.1 million in wages in Indiana, including both production and distribution-related jobs. Over 2,300 of the jobs are production related. During the course of 2010 and 2011, 6 movies filmed in the state, including Transformers: Dark of the Moon and Revenge of the Fallen.[12]

    Kentucky Film Production Incentives

    Kentucky’s incentives to movie production include a 20% refundable tax credit for qualifying production and post-production related expenditures, including payroll with a minimum in-state spend of $500,000. As an alternative, productions can take a sales and use tax refund for purchases made by a motion picture production company in connection with filming in Kentucky if the company films or produces one or more motion pictures in the state during any 12-month period.[13]

    The motion picture and television industry is responsible for 4,532 direct jobs and $124.8 million in wages in Kentucky, including both production and distribution-related jobs. Nearly 500 of the jobs are production related. During the course of 2010 and 2011, 9 movies filmed in the state, including The Ides of March, Lands of Tomorrow and Tan Lines.[14]

    Michigan Film Production Credit

    Michigan boasts an assignable tax credit of up to 42% of the amount of a production company’s expenditures (depending upon type) that are incurred in producing a film or other media entertainment project in the state.[15] The motion picture and television industry is responsible for 14,285 direct jobs and $485.3 million in wages in Michigan, including both production and distribution-related jobs. Nearly 4,700 of the jobs are production-related. During the course of 2010 and 2011, 56 movies and 7 TV series filmed in the state, including The Five-Year Engagement, The Ides of March, Alex Cross, Scream 4, Transformers: Dark of the Moon, A Very Harold & Kumar Christmas and Hardcore Pawn.[16]

    New Jersey Tax Credit Program for Filmmakers

    New Jersey’s production incentives include a 20% tax credit instituted in 2006. The tax credit is available to producers who spend 60% of their budgets in New Jersey, exclusive of post-production costs. The credit is both saleable and transferable and may be carried over to subsequent tax years.[17]

    The motion picture and television industry is responsible for 10,397 direct jobs and $724.5 million in wages in New Jersey, including both production and distribution-related jobs. Nearly 6,700 of the jobs are production related. During the course of 2010 and 2011, 26 movies and 20 TV series filmed in the state, including Bad Parents, Turnabout, The Grand Theft, The Real Housewives of New Jersey and Jersey Shore.[18]

    Ohio Motion Picture Tax Credit

    Ohio offers a refundable tax credit that equals 25% off in-state and non-resident wages, and 35% in Ohio resident wages on eligible productions. In order to be eligible for the tax credit, productions must spend a minimum of $300,000 in the state of Ohio. Additionally, Ohio waives the state bed tax after a 30-day consecutive stay.[19] The motion picture and television industry is responsible for 12,899 direct jobs and $417.2 million in wages in Ohio, including both production and distribution-related jobs. Over 2,300 of the jobs are production related. During the course of 2010 and 2011, 20 movies and 4 TV series filmed in the state, including The Avengers, Fun Size, The Ides of March and The T.O. Show.[20]

    Pennsylvania Film Tax Credit

    Pennsylvania offers a 25% tax credit to films that spend at least 60% of their total production budget in the state. Additionally, like Ohio, no hotel tax is incurred after a 30-day consecutive stay. Pennsylvania also offers free use of state-owned property.[21]

    The motion picture and television industry is responsible for 16,395 direct jobs and $732.9 million in wages in Pennsylvania, including both production and distribution-related jobs. Over 5,000 of the jobs are production related. During the course of 2010 and 2011, 24 movies and 13 TV series filmed in the state, including The Dark knight Rises, The Avengers, I Am Number Four, Limitless, Kitchen Impossible and Parking Wars.[22]

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    [1] Movie Production Incentives in the United States, http://en.wikipedia.org/wiki/Movie&under;production&under;incentives&under;in&under;the&under;United&under;States.
    [2] Ohio Film Office, Incentives, http://www.ohiofilmoffice.com/Incentives.html.
    [3] Movie Production incentives in the United States, supra.
    [4] Kentucky Film Office, Film Production Incentives, http://filmoffice.ky.gov/incentives/.
    [5] See Ohio Film Office, supra; and Pennsylvania Film Office, Incentives, http://filminpa.com/incentives/.
    [6] See Pennsylvania Film Office, supra.
    [7] Florida Film Commission, Florida Film & Entertainment Industry Financial Incentive Program, http://www.filminflorida.com/ifi/incentives.asp.
    [8] Motion Picture Association of America, State-by-State Statistics, http://www.mpaa.org/policy/state-by-state.
    [9] The Illinois Film Office, Illinois Film Services Tax Credit, http://www.illinois.gov/dceo/whyillinois/Film/FilmTaxCredit/Pages/default.aspx.
    [10] Motion Picture Association of America, supra.
    [11] Indiana Media Production Alliance, Proposed Legislation, http://www.indianamedia.org/joomla/the-legislation.
    [12] Motion Picture Association of America, supra.
    [13] Kentucky Film Office, supra.
    [14] Motion Picture Association of America, supra.
    [15] Michigan Film Production, Michigan Film Incentives & Michigan Production Incentives, http://www.michiganfilmproduction.com/michigan-film-incentives/.
    [16] Motion Picture Association of America, supra.
    [17] New Jersey Motion Picture & Television Commission, Incentives, http://njfilm.org/Incentives.htm.
    [18] Motion Picture Association of America, supra.
    [19] Ohio Film Office, supra.
    [20] Motion Picture Association of America, supra.
    [21] Pennsylvania Film Office, supra.
    [22] Motion Picture Association of America, supra.