An inside look at the how state tax credits help companies film their productions

By: Steve Mathie
Staff Writer

With the state tax incentive phenomenon that has swept across the film industry in recent years, production companies have put a much greater emphasis on where they are going to film their production.

When a location scout is looking at two very similar locations in different states, you can be sure that one of the most heavily weighted reasons for the final decision on a filming location will be the tax incentives. Which states’ is greater, and is it a credit or a rebate?

States are passing laws with these rich incentives because it becomes a boon for the economy, and looking at what states like New Mexico and Michigan have done for their economy, state officials should be aiming to maintain their incentives.

While many states have similar incentives, there is a difference between a tax credit and a tax rebate. Both credits and rebates cut down the final cost of production for a company, but a rebate is better of the two when looked at by a production company.

So whether you’re a property owner or an entertainment professional, these incentives affect you in some way. As a property owner you may feel that because of your states’ incentives you are more likely to get filming at your property, and want to write your state representatives to encourage the retention of the bill.

Let’s take a look at some of the fundamental differences between the credit and the rebate.

A tax rebate, sometimes referred to as a tax refund, is cash that is paid directly to the company from the state for reimbursement on qualifying expenses related to production. This is the best incentive a state can have, and New Mexico (25%), Michigan (40-42%) and Hawaii (15-20%) are states that currently fall into this category.

A tax credit is processed as part of a tax return. They reduce a company’s income tax, meaning less money back than a rebate, but still a very lucrative and respectable form of incentive.

There is a transferable tax credit, in which a production company can use their tax credits to sell them to someone from that state. For example, if a production company from Florida films a movie in Pennsylvania, after receiving their tax credits for production expenditures, a Pennsylvania resident could purchase these credits from the company and use them on their tax bill. The production company then has the cash in their pocket.

Then there is the non-transferable tax credit, a credit that essentially reduces a production company’s tax liability.

The tax incentive has become an integral part of states attracting filming, and the few states that do not offer any current incentive are pro-actively lobbying to have some type of incentive passed.

Filming or production of any kind helps a state’s economy by promoting tourism and creating more jobs. Any citizen can help a state retain its incentives or improve them by writing their government officials and explaining why they support the bill, and why they are personally invested in the idea of attracting more production.

With this type of feedback and action from film fans and entertainment professionals alike, the United States can maintain a highly respected, productive and economical entertainment industry for years to come.

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