Incentives Watch: West Virginia Ousts Film Tax Credit


Movie

On Jan. 26, West Virginia enacted legislation eliminating its film production tax credit. The credit can no longer be claimed for expenditures made after Jan. 26, the effective date of the bill. The bill also shuts down the West Virginia Film Office, the branch of the West Virginia Tourism Office responsible for the administration of the credit.

Prior to repeal, West Virginia offered a film industry credit for direct production and post-production expenditures made in the state for a qualified film project. The credit was equal to 27 percent of these expenditures. Taxpayers could also receive an additional four percent if they employed 10 or more West Virginia residents as part or full-time employees. The total amount of this credit that could be granted in any fiscal was limited to $5 million.

West Virginia’s elimination of the film credit followed an audit of the program, which revealed the credit disappointed in terms of economic benefits. The study found that the state handed out $15 million in credits to film producers, who in turn spent over $49 million on direct and postproduction costs over the last decade. However, after subtracting wages received by out-of-state residents, amounts spent on unqualified projects, and the costs to administer the program, the total economic stimulus produced by the credit was found to be only $6.1 million over the 10-year period. These findings led the auditors to conclude that West Virginia’s “opportunity cost of the Film Tax Credit Program does not justify the program’s continuation and recommends termination of the program.” The legislature soon followed with the credit’s repeal.

West Virginia may not be the only state to eliminate their film credit. New York allocates $420 million per year for its film production credit, the most of any state in the country, while facing a $4.4 billion deficit. This prompted New York State Sen. Robert Ortt (R) to introduce a bill that would repeal the Empire State’s film credit. However, this legislation may face an uphill battle, as just last year the credit was extended through 2020 and has the support of New York Gov. Andrew Cuomo (D).

The efficacy of film production credits can be hard to determine, but when the numbers indicate they may not be working, these credits run the risk of getting eliminated. West Virginia is the most recent state to come to this conclusion, but more states may follow.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should your state provide film production credits to incentivize investment?
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