Incentives Watch: New Film Credit Study Examines Benefits and Costs of State Programs

The effectiveness of state tax incentive programs requires the attraction of film productions that would have not otherwise been filmed there, according to a recently released study by Ernst & Young, which was commissioned by the Motion Picture Association of America.

The study looks at how to measure and evaluate the various benefits and costs of a film credit program while also providing a case study of a typical film production. The study suggests that when states seek to determine the costs and benefits of a film credit program they must look beyond the film productions themselves by considering the program’s ancillary benefits, such as increased tourism and studio investments.

Some people believe that the costs of a film credit program vastly outweigh the benefits. The Tax Foundation’s Joseph Henchman noted that “[t]he fact that E&Y's report is unwilling to call these programs successful, but rather limit itself to listing possible benefits, is telling. Their tepid conclusion should alert officials that even a paid-for study by a reputable firm can't prove something that's not true.”

Tax incentive programs aimed at film production are offered in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin, according to the Bloomberg BNA State Tax Portfolios.

The short-term impact of a particular film credit, which focuses on whether the credit pays for itself in terms of revenue generated, often contradicts the long-term goals of a program, which are to develop an in-state film production industry so that more and more films are produced in the state over time, the study found. The focus should not be on whether a film credit pays for itself, but whether there is a good return on investment for in-state residents, according to the study.

In other developments . . .

An excise tax credit was enacted for a taxpayer that invests more than $100 million in a qualifying project that eliminates mercury from the manufacturing operations of one or more existing chlor-alkai facilities in Tennessee, according to a recent Bloomberg BNA Weekly State Tax Report article by State Tax Law Editor Denise Ryan.

By: Kathleen Caggiano 

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