Incentives Watch: States Continue to Grapple with Film Tax Credits

What shows or movies have you been watching lately? Are they any good? While you were watching, did you ever wonder about where they were made?  

One contributing factor to where films are made is film tax credits. Whether you’re a movie buff or a reality TV junkie, chances are you have watched something recently that was the beneficiary of a state tax credit or incentive for film production. 

When people think about where films and television shows are made, many of them are thinking about California. However, as recently as last year that perception was beginning to diverge from the reality of where films were being made. That is why California recently revamped and increased their film tax credit.

So, keeping in mind that the revamped credit’s goal is to increase film production in the state, how has it worked so far?

Pretty well, actually. The increased credit helped entice the television and film industry to spend $1.5 billion in California since the summer of 2015, according an article in the Los Angeles Business Journal. For comparison, the film industry spent just over $1.11 billion in California in 2014, according to Variety. That is nearly a $400 million increase.   

Another state hoping to see an increase in spending from the film industry is New York, where Gov. Andrew Cuomo (D) recently signed legislation effectively increasing the credits from 30 percent to 40 percent of qualified expenses in certain areas, according to an article in The Daily Freeman.  

But California and New York aren’t the only states where film credits are in the limelight.  

Louisiana, long known as “Hollywood South” and one of California’s primary competitors for the film industry, is trending in the opposite direction. Faced with ongoing budget constraints, the Louisiana legislature passed a number of tax provisions over the last two years meant to raise revenue. Among those provisions was a cap on the state’s generous film credit. 

The early results of the cap appear to be in now. Film spending in New Orleans has dropped by about 33 percent, according to an article in The Times-Picayune. However, these bad box office results may have a silver lining. In addition to the drop in film spending, New Orleans has experienced an increase in television showing filming, the article states.

Which brings us to Oklahoma. 

Oklahoma recently brought in a consulting firm to evaluate a number of the state’s credits and incentives, according to Oklahoma Watch, a non-profit investigative journalism organization. Only the state’s film incentive and one other credit were recommended for repeal out of all of the programs reviewed, according to the article. 

Their reason? A lack of evidence showing that the film incentive had increased production in the state. 

With all of this drama surrounding film tax credits, they might just be the most interesting thing you could be watching.  

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are films, and by extension film tax credits, an effective way to generate revenue for a state?

For more information about tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.