Film and TV production incentives in the United States – a Guide

 

In the United States, the entertainment industry is worth billions of dollars. It serves as a huge revenue generator and significantly contributes to the economic growth of the country.

When production activities begin in a region, they create a stream of jobs that span beyond the entertainment industry. Not to mention, their positive effect on the local hospitality and retail industry.

However, booking locations and setting up production sets in states like California incurs a huge cost to producers. Especially if they are working on a medium to small budget project.

Following the television boom in the ’90s, the Canadian government came up with a win-win solution to this problem.

They started offering production incentives to US entities to come to film in Canada. It was a move to drive the Canadian states’ economy while offering cheaper filming locations to US producers.

As a result, a huge number of productions took their operations across the border. According to a study, in 1998 the estimated loss to the US economy as a result of ‘runaway productions’ was around $10.3 billion.

This raised a lot of concern within the US and enticed the states to launch production incentives of their own. Louisiana was the first to adopt and see success with its incentive program with others following suit.

Right now, 31 US states offer Movie Production Incentives. As a producer, knowing which states offer which benefits can save you significant production costs. It is also a vital consideration while deciding the filming location for your project.

Now that you’re up on the history of US MPIs. Let’s dive into what these entail and what are the top states for film production.

 

What are Movie Production Incentives?

MPIs are state-provided benefits to productions that relieve some production costs. These can be monetary or come as free filming locations. They aim to encourage significant production activity of a project to occur within the state.

Here are the different types of incentives producers should know about.

 

Tax credits

Since filming locations vary, most of the time productions are operating in states where they are not liable for the tax.

This is why the terms tax credit or tax rebate don’t exactly fit the definition of this particular production incentive.

However, the Department of Revenue uses the tax-filing process to handle this incentive program.

Based on their project spend, the productions are eligible for credit whether they pay taxes within the state or not.

If the tax credit claimed is greater than the tax liability, productions can sell or ‘transfer’ their credits. These can be furthered to other taxpayers or companies that owe tax within the state.

However, whether the credits are refundable/redeemable, or nontransferable varies from state to state. Selling rates also differ across states.

It’s always best to get professional help to understand the intricacies of the credit process and state laws etc., to make full use of the production incentives.

 

Cash rebate

Cash rebate is a much straightforward production incentive as it involves direct cash payments from the state. The amount received is subject to a number of things like production time and money spent in the state.

 

Grants

These are cash awards offered to productions by the federal government or private entities like funds and foundations. Several states also offer grants as production incentives.

Free production location

Productions can use state-owned locations free of cost. It is a huge deciding factor when it comes to picking a state for filming.

 

Lodging and sales tax exemption

Lodging fees form a major chunk of the production costs. Any monetary relief, in that case, is welcomed by producers.

A lot of states offer lodging tax exemption to entertainment workers/production crew staying for over a month. Moreover, sales tax is also exempted for productions that qualify the criteria.

 

Tax incentive criteria

Project budget and minimum spend

Minimum budget requirements are often in place to qualify for tax incentives. It helps states attract larger budget productions and filter out small ones.

To offer production incentives, states need to make sure that productions are contributing to the local economy. They need a significant amount of money spent by the productions where they are operating.

This is why a minimum budget spend criteria applies to avail tax incentives.

 

Residential status

Apart from monetary investment in the economy, states also expect productions to create jobs for the local talent.

So they require different percentages (ranging from 25% to 50%) of production and entertainment workers to be hired from within the state.

 

Project duration

Time spent filming within the state is also an important consideration. The longer the time spent filming in a particular location, the more beneficial it is for the state.

Varying minimum project duration criteria apply in different states whereas others might not have one at all.

 

Type of projects

The nature and amount of production incentives also differ depending on the type of project. For instance, Texas has specific grant rebate criteria for Film and TV, commercials, video games, and reality TV projects.

 

Top states for film production

California

As of July 2020, California has initiated its Film and TV Tax Credit 3.0 program. Under this initiative, the state gets $330 million for production incentives.

Moreover, this program allocates separate credit pools for large and small or independent projects.

So California is set to become a production hotspot for independent films.

Louisiana 

The pioneer state of production incentives in the US still has a strong tax credit system. It offers a 25-40 percent partially refundable tax credit.

 

Montana

2020 has been a good year for Montana’s production incentives. It brought back its transferable film tax credits that, along with certain bonuses, chalk up to 30%.

Moreover, a $50,000 minimum spend criteria makes it an attractive filming location for smaller budget projects.

 

New Mexico

New Mexico is attractive to film and TV producers, especially independent productions, as it doesn’t have a minimum spend requirement.

It has a funding cap of $110 million and offers 25% refundable credit on any qualified-spend items bought from New Mexico vendors.

For TV productions filming, at least six episodes and spending $50,000 in the state per episode makes them eligible for 30% refundable tax credits.

 

Massachusetts

Massachusetts offers transferable tax credit at a rate of 90%. Producers can further their tax credits to state taxpayers or restore tax credit with the state for cash.

There is no cap on individual compensation if half of principal photography or production expenditures occur in Massachusetts.

Productions receive 25% on qualified expenditures, including nonresident rectification. Sales tax exemption for production expenditures is also offered.

 

Other states like Hawaii, Pennsylvania, and Georgia also have impressive incentive programs that producers can benefit from.

Keeping up with the intricacies of specific production incentives programs for all the US states is a monumental task. If you’re a producer looking for the most suitable tax benefits that allow you to cut maximum costs, get in touch with Revolution.

Our experts are well versed in the US tax incentive scene. From research and submitting the approval application to obtaining the tax incentive, we can help you at each stage of the process.