Incentives Watch: State Film Tax Credits Receive Mixed Reviews

Are film tax credits a waste of taxpayer dollars or an effective means of attracting a lucrative industry to a state? The reviews on film credits are mixed. While a Louisiana audit noted that it had a negative fiscal impact on the state, Nevada recently enacted a film tax credit. Meanwhile, Connecticut recently opted to press the pause button on its film tax credit.

Critics of film tax credit, include the Tax Foundation, which concluded that “[f]ilm tax credits fail to live up to their promises to encourage economic growth overall and to raise tax revenue.”

Some states are beginning to sour on film tax credits, too. In Louisiana, the Legislative Auditor issued a performance audit on April 24, 2013 for the state’s motion picture tax credit program. The audit noted, among other things, that the state's tax credit program has a positive economic output but a negative fiscal impact on the state.

In terms of economic output, which includes factors such as local employment, taxes, and purchases of materials, for every $1 of credit issued, the output was $5.40. Yet, the impact on the state was not as positive. For the same calendar year, the Louisiana Department of Economic Development issued $196.8 million in credits, but the state received only $27 million back in total tax revenue, according to the audit.

Connecticut recently enacted a two-year moratorium on its film tax credit program. The legislation provides that, for tax credits issued on or after July 1, some motion pictures are no longer eligible for the state’s film, television, and digital media production tax credit.

Specifically, the legislation amends the definition of “qualified production,” so that it does not include motion pictures, for the 2014 and 2015 fiscal years, that have not been designated as a state-certified qualified production prior to July 1, 2013.

Nonetheless, Nevada recently enacted its own film tax credit. Starting Jan. 1, 2014, a transferable tax credit is available to producers of qualified film, television, and visual media productions that are produced in Nevada.

Each producer is limited to no more than $6 million in credits per production. The total amount of credits that may be approved by the Office of Economic Development must not exceed $20 million per fiscal year.

Only time will tell whether Nevada’s film tax credit is effective in bringing in revenue for the state.

For more information about the various state film tax credits and incentives, check out Bloomberg BNA’s Credits and Incentives Portfolios.

In other developments . . .

Pennsylvania recently enacted omnibus tax legislation that, among other provisions, creates a new credit that encourages investment in mobile telecommunications broadband, according to a Bloomberg BNA Weekly State Tax Reportarticle by State Tax Law Editor Rebecca Helmes.

By: Kathleen Caggiano

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