Many people look forward to seeing a new blockbuster movie as holiday gatherings wind down. Few are probably wondering why the movie they are watching was made in a particular state.
Entertainment tax credits can cover a variety of a mediums, including movies, television, music, live performances, commercials, and digital entertainment, which includes gaming and mobile apps. Film makers and other entertainment industry producers can typically pick from numerous locations to produce content, so often financial incentives like state tax credits can be the deciding factor. Proponents of these credits claim they encourage companies to locate in a state which leads to new jobs, increased tourism, and local spending at restaurants and stores. Opponents point to studies that have shown that many of the benefits can end up going to out-of-state businesses and workers.
A number of states have ended the credits amid concern that the credit costs more than it generates for the state. For example, Alaska and Michigan stopped offering incentives in 2015, and Florida followed suit in 2016. States ending their programs have questioned whether the credit actually promotes job growth or economic development.
However, most states do offer some type of entertainment tax credit. Let’s take a look at a few of these states.
Georgia is one of the states encouraging entertainment companies to locate within its borders. Georgia offers a credit that can be used for films, television series, commercials, music videos, animation and game development. Over 30 television shows and movies where filmed in Georgia in 2017. The list of productions made in Georgia includes “The Walking Dead,” “Stranger Things,” and “The Hunger Games.”
Louisiana’s entertainment tax credits were the subject of debate in 2017. Critics argued that the investment returned less than pennies on the dollar, and an economic impact study was released in April 2017 countering the arguments for discontinuing the credit. Lawmakers in Baton Rouge voted to cap spending on the state’s motion picture production tax credit in an effort to address budget concerns. The law, Act 309, continues a $180 million limit on the amount of money taxpayers spend annually on the credits, which had been set to expire in 2018.
Massachusetts offers film incentive tax credits that include a production expense and payroll credit. Eligibility includes requirements such as spending $50,000 or more in the state on qualifying costs in a 12-month period and incurring production expenses in Massachusetts that exceed 50 percent of the total production expenses overall. The Massachusetts Legislature has debated whether film tax credits were promoting jobs and economic development. Objections to the credits include concerns that the tax benefit goes to out-of-state companies and that it supplements the salaries of highly-paid actors.
The Nevada Legislature approved, and the governor signed, a bill restarting the state’s film tax credits, effective July 1, 2017. A previous film tax credit was available in 2014 but was defunded. The current Transferable Tax Credit for Film and Other Productions covers pre-production, production, and post-production expenditures, including, but not limited to, compensation and wages to residents and non-residents. The credit also covers purchases of tangible personal property or services from an in-state business.
New York attempted to expand their television production credit program by introducing a bill linking production tax credits to diversity in hiring. The legislation would have created an incentive for television productions to hire women and minorities as writers and directors. Although the bill passed the state legislature, Gov. Andrew Cuomo (D) vetoed the bill.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: How can the tax credit be structured to ensure tax benefits for the state?
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