Why Keep the Credits?
One of those states is Pennsylvania, where the legislature first passed a film tax credit bill in 2007 and currently offers a 25 percent tax credit to productions that spend at least 60 percent of their money in the state. Since the launch of the state’s tax credit program, film and TV productions have directly injected nearly $1.89 billion into the state’s economy and supported 21,700 jobs. Pennsylvania’s generous tax credits, plus the overall low cost of living compared to Los Angeles or New York City, have made cities like Pittsburgh highly competitive for both big-budget studio productions (“The Dark Knight Rises”) and independent films (“Me, Earl and the Dying Girl”).
That certainly makes sense in Bower’s home state of Ohio, where a Cleveland State University study declared the state’s tax credit program a success, drawing $1.20 return on every dollar spent in tax credits. In North Carolina, the legislature replaced the state’s existing program, which handed out $62.2 million in tax credits in 2013, with a competitive grant program capped at $10 million. Several fiscally conservative state legislatures and governors are already putting tax credit programs on the cutting block. What are the benefits of keeping the credits? Michael Goodman admits that by cutting tax incentive programs, states will undoubtedly lose some business. But what about states like Massachusetts, where the program is bleeding cash?
Even Louisiana, which pioneered the tax credit model in the U.S., is cutting back. “When the industry realized that the incentive was going to change, we did see a drop in production,” says Gaster. Some famous American movies shot in Canada include “Twilight,” “The Incredible Hulk,” “Capote,” “Good Will Hunting” and “Brokeback Mountain”. Guy Gaster of the North Carolina Film Office is already feeling the effects of his state’s decision to drastically limit its tax credits. In 2015, conservative governor Bobby Jindal signed a bill into law that would cap the state’s previously unlimited annual tax credits at $180 million annually.
Which is exactly how the system is designed to work. His clients might sell their tax credits to PA-based corporations like PNC Bank or Equitable Gas. When producers shop around for shooting locations, they carefully compare tax credits from different states to see where they’ll get the best deal. In almost all states that offer film tax incentives, companies are allowed to sell their unused tax credits for 80 to 90 cents on the dollar. The corporation can then turn around and pay its own taxes at a 10 percent discount. Kevin McQuillan runs a Pittsburgh-based accounting firm that helps film productions qualify for Pennsylvania tax credits. “The CFOs and comptrollers at the studios closely monitor these tax credits and build the expected refunds into their budgets,” McQuillan says.
Ohio is another state with a tax incentive program. They’re housing people in apartments and buying food to feed everyone on set. The state offers a generous 20 percent tax credit, plus a further 10 percent credit if the film puts the Georgia logo in its credits. “They’re hiring staff to round up actors and crew. “They’re hiring carpenters and electricians to build the sets,” Bowers says. In Georgia, where 248 productions were shot between over fiscal year 2014-2015, the economic impact of all those movies was estimated at between $3.1 billion and $6 billion, depending on which source you believe. Brian Bowers, the assistant director of operations for the 48-Hour Film Project, based in Cleveland, Ohio, has seen its transformative effect firsthand.
