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Credits Where Credits Are Due

Scott Macaulay looks at the state of film tax incentives in 2024.
May 7, 2024
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As seen in Filmmaker Magazine.

Tyler Perry believes that generative AI could soon drastically reduce location filmmaking. He recently announced plans to pause an $800 million expan­sion of his Atlanta-based studio complex, telling The Hollywood Reporter, "I no longer would have to travel to locations. If I wanted to be in the snow in Colorado, it's text .... If I wanted to have two people in the living room in the mountains, I don't have to build a set in the mountains." But state legislatures and film offices haven't gotten that memo. As we take our annual look at film tax incentives around the country, the overall landscape is sunny, with new states implementing credits—or at least debating them. With one possible and prominent exception, states are increasing the amounts allocated towards their incentives, and state film commissions are working more closely with filmmakers to persuade them to not fake specific regional locations elsewhere. (See, for example, Oklahoma's work making sure Killers of the Flower Moon shot in the state.) 

"If I can give you a state of the union," says Joseph Chianese, SVP & production incentives practice leader at Entertainment Partners, "in the [United States] things are quite good. If I include Puerto Rico, the U.S. Virgin Islands and Washington, D.C., there are 41 U.S. jurisdictions with incentives, and that's not including local incentives."

"The hot issue of the moment," continues Chianese, "is Georgia. Along with New York and California, Georgia is one of the busiest U.S. jurisdictions, mainly because of their incentive pro­gram: a 30 percent incentive covering both above- and below-the line, applying to both resident [workers] and nonres­idents. And there's no cap, so it's quite attractive." Chianese goes on to note that a bill currently before the Georgia legis­lature, House Bill 1180, will add some re­strictions to the program but calls these "not a huge deal," given industry worries that more drastic changes could have been implemented by cost-conscious legislators.

The 30 percent Georgia credit combines a 20 percent base credit with a 10 percent uplift if the film or TV production includes a title card with the state's peach logo in its credit roll. The proposed legislation adds additional criteria having to do with items like the number of days shot in a studio, the percentage of local vendors and participating in a workforce development program. But, as drafted, the new requirements aren't that onerous, although, if the new bill is passed, smaller budget independents may have a tougher time, as the minimum spend would be raised to $1 million from $500,000, and the amount of tax credits sold to companies in state would be limited to 2.5 percent of Georgia's revenue in any given year. In the 2024 fiscal year, that would amount to an estimated $902 million, according to Variety. In an article about the proposed legislation, Danny Kanso, a fiscal analyst at the Georgia Budget and Policy Institute, told the trade, "I think this is viewed as a first step. It's a way to put a cap into law without maybe having to say that in such clear terms." Under the new proposed rules, if the state's cap is reached, credits needing to be monetized could be rolled over into the following years. For studios, that's manageable, but independents more sensitive to borrowing costs could feel a squeeze. 

Georgia's current lack of a cap is part of its appeal to studios—there's currently no danger of the state running out of funds for the program. California, on the other hand, has a considerably smaller annual allotment—currently, $330 million. Upcoming changes in the state's program won't raise the cap, unfortunately, but will make terms easier for both studio and independent productions. 

Currently, for larger producers, the state's credit is nontransferable and nonrefundable, meaning that it has to be credited against a company's California income tax or sales tax. Beginning in 2025, it will be refundable for all, and it will be transferable—meaning a credit can be sold—for independent producers that aren't publicly traded and for projects less than $10 million. That should mean more competition for the capped California credit, which, as Chianese points out, "is the only major production jurisdiction  in the [United States] that still does not allow above-the-line [costs]." 

New Jersey began its credit program in 2005 with a $10 million allotment. After the program was suspended in 2010, it was restarted in 2018 at $50 million, and now it's up to $100 million; the state, says Chianese, "is definitely giving New York a run for its money." New York based producer Jamin O'Brien has been working steadily in New Jersey the past several years, calling it "my second home" in an email. Most recently, he shot Chiwetel Ejiofor's Sundance 2024 selection Rob Peace there, a natural location for the true story of Newark-born academic researcher and marijuana dealer Robert Peace. But O'Brien also shot the New England set NEON release Eileen in New Jersey, as well as the Amazon Original Chemical Hearts, which, the producer says, was set in "Anywhere, USA." "I enjoy filming there," O'Brien explains. "The New York crews can find it a challenge (the commute can be tough on the Brooklynites), but at this point, I'm hiring mostly NJ-based crew."

New Jersey offers a 30 to 35 percent transferable tax credit with a two to four percent diversity bonus. It's also a credit that is returned more quickly than that of its neighboring state, New York. Says O'Brien, "If you're lending against the New Jersey tax credit, you're getting an advance of about 70 to 75 percent, whereas in New York, you're getting about 50 to 60 percent of your qualified spend, as New Jersey's disbursement is much quicker. That's a big chunk of money and can mean more days of filming."

New Jersey's success at luring producers "might have been one of the reasons New York upped [its] game," says Chianese. The Empire State made significant changes in its film tax credit last year, increasing the funding allotment from $420 million to $700 million and the credit from 25 to 30 percent (and an extra 10 percent for eligible productions shooting upstate) and allowing a certain amount of above-the-line costs. The much-complained-about timeline for receiving the New York credit last year in this space Filmmaker reported on producers who waited as long as five years from the start of principal photography to receive their credits has been shortened, although, says Chianese, "There's still a pretty long timeline in terms of getting your money back from .the state, anywhere from 18 to 36 months." And, contra this article's lead, New York is one state that has gotten a memo about AI—or at least about its potential impact on the film and television labor market. Proposed Senate Bill S7422A will exclude "a production which uses artificial intelligence in a manner which results in the displacement of employees whose salaries are qualified expenses from the definition of qualified film for the purposes of the empire state film production credit." (The bill is currently in Senate committee.)

While Georgia has raised its minimum spend to qualify for a credit, other states, such as Montana, are more hospitable to lower budget indies. The state requires a $350,000 spend to receive its transferable credit of between 20 and 35 percent. Colorado's minimum spend is even lower, only $100,000 for a local company and $1 million non-local company. 

Missouri reinstated its transferable tax credit of 20 percent (up to 42 percent with qualifying uplifts) last year; the state hadn't offered a film tax incentive since 2013. The minimum spend for features is only $100,000, but the state has only allocated $16 million to the program. Illinois's base credit of 30 percent of qualified state spending, with a 15 percent uplift credit, is now open to above­the-line. Michigan is another state whose credit was terminated. There are currently two bills before the state legislature to reinstate the credit, a transferable one of up to 30 percent and with only a $300,000 minimum spend for features. 

Then, there's Arizona. Arizona's credit was shut down in 2015 but returned in legislation effective December 31, 2022. "It's back pretty strong," says Chianese. "It's $75 million a year and is going to go up to $125 million over the next couple of years. And it's one of the jurisdictions that has the longest sunset date—the legislation doesn't expire until 2043." 

Incentives being strong at the moment is especially welcome given last year's strikes, which left much economic pain in their wake. But with possible new strikes from IATSE and Teamsters on the horizon, below-the-line crew are already feeling anxious about work drying up again or moving overseas. "The strikes really brought a lot of concern to producers, who became interested in potentially moving more productions outside the [United States], just to protect themselves, if they can," says Chianese. He goes on to discuss the incentives offered by Canada and the U.K., which are national. "I'd say one disadvantage of the U.S. is that our legislation, because it's state specific, is always at risk of changing, if not every year, every couple of years. So, that's a bit of uncertainty." 

Among the international destinations offering tax incentives to international producers is India, which announced a 30 percent credit last year at Cannes, a credit since upped to 40 percent. Spain offers a 30 percent credit, while the Canary Islands offer 50 percent on the first million euros, with 45 percent after. Saudi Arabia's credit for domestic and international productions is 40 per­cent with a minimum feature spend of $200,000. 

Eastern Europe is an increasingly popular location for both American independents and larger budget studio films. Rian Johnson and Ram Bergman's T-Street production company lensed Chloe Domont's New York-set Fair Play in a studio in Belgrade, Serbia, where they also filmed parts of Glass Onion. New York-based producer Lucas Joaquin has been shooting regularly in Eastern Europe. "I produced a film called Mayday that shot in Croatia in the fall of 2019," he writes in an email, "and recently my company, Secret Engine, has produced two upcoming features—House of Spoils with Amazon and Blumhouse, and Death of a Unicorn with A24-in Budapest, Hungary. I've had really positive experiences shooting in both places—wonderful crews, very reliable tax credits, and it's always good to get a feel for how other cultures approach and structure the film production process." 

About shooting American independents abroad, Joaquin continues, "If the exterior scenes of a project can convincingly be shot in a given country, then we'll begin to consider it an option and weigh all of the other pros and cons (access to good crews, good facilities and equipment, a reliable tax credit, etc.). There's a tradeoff of shooting so far from home that definitely has to be taken into account when making the decision to shoot in countries in Central and Eastern Europe, as it can be a strain on U.S.-based cast and crew. In general, we always work with a local production service partner when we film abroad, and 

they will handle the administrative work of applying for and collecting the tax credit since that process is handled in the local language and currency. The process of applying for and collecting the tax credit has been straightforward and timely in both Croatia and Hungary."

But if there's one trend working against any uncertainty in individual U.S. states' credit planning, it's that of tying the credits themselves to new infrastructure. The trend started in New Mexico, which allows productions that own or lease a studio facility in the state to receive credits above the state's cap. Netflix purchased the ABQ Studios there and now has even bigger plans for New Jersey: a sprawling $903 million, 12-stage complex at the former Fort Monmouth army base, which would be the largest studio facility in the Northeast. The state currently has $100 million allocated annually to its incentive program, says Chianese, "but beginning in 2024 there will be an additional $100 million available to productions that film on what they call 'real estate partners,' meaning stages that have been approved by the state as certified facilities," such as the Netflix stages. 

With such huge facilities existing or underway in states around the nation, it's clear that infrastructure will be in place for continued growth in the U.S. film business—growth that augurs well for continued state support for film production, studio and independent. 

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