WHAT ARE MOVIE PRODUCTION INCENTIVES IN THE UNITED STATES? (In the Entertainment industry.)

Film Production Incentives / Photo Credit: Lenses

WHAT ARE MOVIE PRODUCTION INCENTIVES IN THE UNITED STATES? (In the Entertainment industry.)

Bruce Bisbey…please follow me at: https://dumbdogproductionsllc.blogspot.com or https://www.facebook.com/DumbDogProductionsLLC/ thank you.

WHAT ARE MOVIE PRODUCTION INCENTIVES IN THE UNITED STATES?

Movie production incentives are tax benefits offered on a state-by-state basis throughout the United States to encourage in-state film production. These incentives came about in the 1990s in response to the flight of movie productions to other countries such as Canada. Since then, states have offered increasingly competitive incentives to lure productions away from other states. The structure, type, and size of the incentives vary from state to state. Many include tax credits and exemptions, and other incentive packages include cash grants, fee-free locations, or other perks. Proponents of these programs point to increased economic activity and job creation as justification for the credits. Others argue that the cost of the incentives outweighs the benefits and say that the money goes primarily to out-of-state talent rather than in-state cast and crew members.

Studies of the costs and benefits of incentive programs show different levels of effectiveness.

Types

• Movie Production Incentives (MPIs): "Movie Production Incentive" is an umbrella term referring to any incentive states offer filmmakers to encourage film production in-state…
• Tax incentives are ways of reducing taxes for businesses and individuals in exchange for specific desirable actions or investments on their parts. Their purpose is to encourage those businesses and individuals to engage in behavior that is socially responsible and/or benefits the community…
• Tax Credits: Tax credits can remove a portion of the income tax owed to the state by the production company, but since most production companies are limited purpose business entities they often incur very little, if any tax liability. The use of the word "tax credit" or "tax rebate" often results in public confusion, as they layperson may think the program is a refund of taxes paid by the production, when it is actually based on a significant percentage of the production's actual spend and the amount is awarded regardless of whether the entity pays taxes (which they generally do not) (as explained by Louisiana's Chief Legislative Economist: “It’s got nothing to do with tax...We’re just using the tax-filing process and the Department of Revenue as the paying agent for a spending program. That’s what we’re doing.”) Production companies must often meet minimum spending requirements to be eligible for the credit. Of the 28 states that offer tax credits, 26 make them either transferable or refundable. Transferable credits allow production companies that generate tax credits greater than their tax liability to sell those credits to other taxpayers, who then use them to reduce or eliminate their own tax liability. Refundable credits are such that the state will pay the production company the balance in excess of the company's owed state tax…
• Cash Rebates: Cash rebates are paid to production companies directly by the state, usually as a percentage of the company's qualified expenses…
• Grant: Grants are distributed to production companies by three states and the District of Columbia…
• Sales Tax Exemption & Lodging Exemption: Exemption from state sales taxes are offered to companies as an incentive. Many states offer exemption from lodging taxes to all guests staying over 30 days, but these incentives are highlighted for production companies…
• Fee-Free Locations: An additional incentive states offer is to allow production companies to use state-owned locations at no charge… 

Pros

Proponents of production incentives for the film industry point to increases in job creation, small business and infrastructure development, the generation of tax revenue, and increased tourism as positive byproducts of the incentives. Supporters also maintain that MPIs are a net benefit to the states because they attract productions that would have gone elsewhere.

The immediate effect of a tax incentive is the direct production spend for the region in hotel rooms for visiting cast and crew, lumber for sets, food for catering, fuel for trucks and generators, to the secondary expenditures of crew members who go to local restaurants for dinner, the dry cleaners for their laundry, and the need for everyday sundry items from toothpaste to shampoo. These expenses average in the millions of dollars on a typical Studio feature which usually carries approximately a 100 traveling crew members and employs another 100 crew locally.

Second, if the area did not previously have an existing infrastructure, the production provides hands-on training for local employees to learn the stock in trade of filmmaking and helps to develop the experienced crew base that will make the area more valuable in reducing the number of crew a production will need to import the next time around.

Film tourism has become a significant multiplier of the initial investment by the region in providing increased tourism marketing opportunities at a fraction of the media buy necessary through taking advantage of the extensive marketing efforts by a studio. The impacts of film tourism have been met with skepticism, as examples of the phenomenon tend to be anecdotal and a reliable method for measurement is hard to come by. Academic study of film tourism points to key elements that are needed for film tourism: iconic locations (like the baseball field in "Field of Dreams"), commercial success and on-location filming in the places where the underlying story is set. Most films produced in leading incentive states do not meet these criteria.

Cons

Those who oppose movie production incentives offer arguments that refute those made by supporters of the programs.

• Movie production incentives do not necessarily result in the creation of jobs. Rather, the economic impact is that of a transfer of jobs from one location or state to another. Additionally, unless the state in question has a consistent stream of productions, the project-based nature of the film and television industry generates short-term jobs that eventually leave specialized laborers out of work…
• States have a tendency to use vague language and refer to successes in other states when advocating in support of production incentives. Critics maintain that information is selected to present positive results, and that states rely too heavily on perceived successes in other states without adequately considering how available resources within the state will impact their respective economies…
• States often incorrectly use economic measurements, such as a multiplier or an increase in different types of tax revenue, to promote film tax credits. When comparing multipliers across different projects, movie production incentive multipliers tend to be smaller than those for other investment projects (e.g. nuclear power plant, hotels). Revenue from alternate taxes not covered under tax credit policies do not always cover the original cost of the given film tax incentives…
• Grants require films to pass sensitivity tests in order to ensure a state is seen in a positive light, which may lead to censorship issues…
• Politicians focus on immediate, short-term projects because it is politically easier to change these incentive policies. However, a focus on improving baseline tax policies to incentivize long-term private investment in industry would lead to higher levels of job creation, productivity and economic development…

Critics propose that unilateral or multilateral moratoriums and federal intervention be used to solve these economic inefficiencies. For example, in a 2009 article, entertainment attorney Schuyler M. Moore proposed a federal tax credit combined with complete federal preemption of all state-level tax credits in order to halt the states' race into insolvency…

Sources, References & Credits: Bruce Bisbey, Google, Wikipedia, Wikihow, WikiBooks, Pinterest, IMDB, Linked In, Indie Wire, Film Making Stuff, Hiive, Film Daily, New York Film Academy, The Balance, Careers Hub, The Numbers, Film Maker, TV Guide Magazine, Blurb, Media Match, Future Learn, Quora, Creative Skill Set, Chron, Investopedia, Variety, No Film School, How Stuff Works, WGA, BBC, Daily Variety, The Film Agency, Best Sample Resume, How Stuff Works, Bright Hub, Career Trend, Producer's Code of Credits, Truity, Production Hub, Producers Guild of America, Film Connection, Variety, Wolf Crow, Get In Media, Production Beast, Sony Pictures, Warner Bros, UCAS, Frankenbite, Realty 101, Liberty Me, Careers Hub, Sokanu, Raindance, Film Connection, Cast & Crew, Entertainment Partners, My Job Search, Prospects, David Mullich, Gear Shift, Video University, Oxford Dictionaries’, Boredom Therapy, The Bold Italic, Meets the Eye Studio, The Guardian, Elliot Grove, Jones on art, Creative Plant, Studio Binder, Film Tool Kit, Still Motion, Film Under Ground, Steves Digicams, Improve Photography

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Film Production Incentives / Photo Credit: Lenses