Incentives Watch: Lights, Camera, Too Much Action?


I, for one, enjoy watching famous actors filming a scene down the street, but does it mean that states should continue to offer film tax credits, considering the tremendous budget challenges they face nowadays? 

Michigan recently enacted a new film production grant program to replace the film tax credit that was eliminated when the Michigan Business Tax was repealed last year. For details about the new grant program, check out Bloomberg BNA State Tax Law Editor Denise Ryan’s Weekly State Tax Report article here.

Michigan’s desire to so quickly replace the old film tax credit with a new program begs the often-debated question: Do the benefits of state film tax credits (or similar state incentive programs) really outweigh the costs of the credits?  

The Tax Foundation found that the various film tax credits only provide temporary jobs in each state and do not benefit local businesses; instead, the film industry appears to be the main beneficiary of these credit programs. Interestingly, the number of states with film tax credit programs is on the decline, from 40 state programs being available to 35 state programs. To learn more about the ineffectiveness of film credits, check out the Tax Foundation’s Fiscal Fact No. 272 by Joseph Henchman.

So it appears that the answer to whether the benefits of offering film tax credits outweigh the costs is an emphatic NO, based on the Tax Foundation’s testimony to the California Committee on Revenue and Taxation and the Committee on Arts, Entertainment, Sports, Tourism, and Internet Media last year. In fact, The Tax Foundation argues for the elimination of the film tax credit in California entirely.

Hooray, Hooray, Hooray for Hollywood . . .

It appears that California disagreed with The Tax Foundation’s recommendation, as the state extended its film and television production tax credit through July 1, 2015, according to a Weekly State Tax Reportarticle by Bloomberg BNA State Tax Law Editor Kathleen Caggiano.

­­­­­­ In other developments . . .

In a recent report issued in New York, the state’s $420 million in empire state film production tax credits that are provided annually is enough to meet the current demand for such credits by film and television production companies. For more information about the report, check out this Bloomberg BNA Weekly State Tax Reportarticle here.

By: Kathleen Caggiano