Earlier this fall, we described a controversy over the value of states’ tax incentives for film and television production. This particular dispute featured the Motion Picture Association of America fighting back against a pair of studies authored by two University of Southern California professors, concluding that such subsidies, for the most part, fail to deliver.
Since then, California’s Legislative Analyst’s Office (LAO) has issued a report addressing the state’s tax incentives for qualified film and television productions, as required by law. It reached the conclusion that the several hundred million dollars of additional state tax revenues related to the increased economic activity offset, while difficult to quantify, likely exceed the program’s direct costs of more than $800 million.
According to the report, as of March 2016, 35 states, Puerto Rico, and the District of Columbia offered some sort of financial incentive for film and television production. The states that do not have film incentive programs include Arizona, North Dakota, South Dakota, Nebraska, Kansas, Iowa, Wisconsin, Michigan, Indiana, New Hampshire, Vermont, New Jersey, and Delaware.
The report also explains that in 2015, more than half of all U.S. film and television production and post-production employment was located in California. The industry employs about 145,000 people in the Golden State, about 90 percent of which are in Los Angeles County. The states with the next four largest motion picture industry employment clusters are Florida, Georgia, Louisiana, and Texas, and each of these has about 5,000 jobs.
Variety revealed that in 2015, 19 of the 109 major feature film projects were made in the Golden State. The United States jurisdictions with the next largest output, as measured by numbers of projects, were Georgia and Louisiana, with a total of 12 projects. California’s other major competitors are outside of the U.S.; 15 projects, including Star Wars: The Force Awakens, were made in the United Kingdom, and 11 in Canada.
Georgia Film and TV Production characterizes the Peach State as “camera ready” because of its “highly desirable financial incentives, location diversity, production resources and professional support to make any size production a true success.” Georgia Film notes that in 2015, the business generated $6 billion of economic impact. The following movies have been made there in the past several years:
- Blended, with Drew Barrymore and Adam Sandler, in 2014;
- Anchorman 2: The Legend Continues, with Will Ferrell, in 2013;
- The Hunger Games: Catching Fire, with Jennifer Lawrence, in 2013;
- The Internship, with Vince Vaughn and Owen Wilson, in 2013.
Mr. Right and Pitch Perfect 2, Green Lantern, 12 Years a Slave and the television show Treme are among the productions made in Louisiana. In a June article addressing Louisiana’s film and television tax incentives, the National Conference of State Legislators (NCSL) noted that the Bayou State was the first to adopt these kinds of tax incentive programs, in 1992. By 2009, 44 U.S. states, Puerto Rico, and Washington D.C. offered production incentives. Since then, some have repealed their programs, as evidenced by the above-mentioned fact that now only 37 jurisdictions provide assistance. Budgetary deficits, economic uncertainty, and questionable results are the key reasons for the decline, even if some states, like Kentucky, Maryland, and California, have expanded or extended their programs to keep other states from encroaching on their business.
Historically, Louisiana has been known for attracting big-budget films because it had no production credit cap until fiscal year 2015-16, when lawmakers imposed a $180,000,000 limit. But the NCSL reported that lawmakers are now considering a per-project cap of $30 million.
The film incentive program is contentious. The author of a Forbes piece declared that “[w]hile [the program] might attract lots of sexy film work, it’s costing the state millions. According to the Louisiana Department of Economic Development, the tax breaks cost the state $168 million in 2012, money that could have gone to funding schools or businesses that have a higher likelihood of sticking around for the long term such as fishing or oil. Most people I talked to for my story freely admitted that if the tax incentive went away tomorrow, they would move production to the location offering the best deal.”
This discord in Louisiana did not stop the making of the film Deepwater Horizon, starring Mark Wahlberg, which opened on September 26, 2016. In a piece titled Amid Louisiana film downturn, 'Deepwater Horizon' sets new mark for state subsidies, The New Orleans Advocate noted that Louisiana issued tax credits of nearly $38 million to the film’s producer, Lionsgate, making it “the most expensive film ever made in the state, at least from taxpayers’ perspective.” Lionsgate received the same amount that the University of New Orleans, and Southern University at New Orleans, combined, did. “That amounts to $8 for every man, woman and child in Louisiana.”
Lionsgate spent $122.5 million on Deepwater Horizon. But since that movie wrapped, there has been a significant decline in film production – feared to be as much as 70 percent less in 2016 than in 2015 – to which insiders attribute the $180 million annual tax credit cap imposed in 2015, currently set to expire in 2018.
Even so, some are optimistic. WWL pointed out that the latest Tom Cruise movie, Jack Reacher: Never Go Back, released on October 21, 2016, was shot in New Orleans. And the Executive Director at Celtic Studios, the largest film and television production studio in Louisiana, told the station that he is seeing interest from those who want to film in Louisiana. He said, “[g]oing an entire year without a major production is a serious problem, and so it’s nice to know that we could be back in business very soon.”
Confidence exists back in California too. There, the Los Angeles Times reported that the California Film Commission (CFC) is spending increasingly more on television and film production tax incentives. Citing a CFC progress report for October 2016, the paper pointed out that during the latest fiscal year, which ended in June, $230 million in tax credits were awarded, up from $100 million last year. That amount will increase to $330 million for the current fiscal year, and stay at that annual amount through 2020. The fact that the beloved, award-winning HBO show Veep relocated from Maryland to California to take advantage of the tax incentives suggests that the gloomy results of the LAO and USC professors’ reports are not going to slow things down.