States use tax incentives to draw film work from Hollywood

(CNN) -- "The Blind Side" could have been filmed anywhere, says Tim Bourne, an independent producer who worked on the film. But there's a reason producers brought the project to Georgia: money.

"There's nothing in [the movie] that couldn't have been shot in any midrange urban setting. The reason, and the sole reason, it was shot in Georgia was the tax incentives," he said.

Georgia boasts one of the highest tax credits in the United States: a 20 percent base tax credit, with an additional 10 percent if a Georgia logo appears somewhere in the project. The Oscar-nominated "Blind Side" is one of many films that's taken advantage of the incentives to shoot in the Empire State of the South, incentives that also include a diverse set of locations, state-of-the-art facilities and large production crews.

Recently, another production, "Hall Pass," written by Peter and Bobby Farrelly ("There's Something About Mary"), started filming in the Atlanta area.

The film, starring Owen Wilson and Jenna Fischer, is about a woman who gives her husband permission to have an affair. It called for a New England location -- standard for the brothers, who are from Rhode Island -- but tax incentives led the production crew south, producers said.

Georgia is far from the only state offering filmmakers opportunities to leave Hollywood. Indeed, it's one of 44 states offering incentives in hopes of attracting projects that will help their economies, according to the Tax Foundation.

"No one is trying to compete with L.A. from a technical standpoint," Bourne said. "They're certainly competing from a financial standpoint, though. The name of the game is all about tax incentives. It's the sad truth.

"Films are made in a particular place strictly because of financial rebates," he continued. "If, tomorrow, Louisiana or ... any state with a crew base, rather, came up with a better incentive program, that's where the work would be -- overnight."

Incentives differ from state to state. In most cases, filmmakers are able to apply for a tax credit or rebate as long as they meet the state's minimum standards for expenditures and utilize local crews, some of whom don't belong to unions. However, Bill Thompson, deputy commissioner at the Georgia Film, Music and Digital Entertainment Office, said bigger production companies usually prefer to work with union workers.

Louisiana, one of the first states to develop an incentive program eight years ago, has found exposure in front of the camera with films such as "Ray" and "The Curious Case of Benjamin Button."

"Green Lantern," set for release in 2011, is one of many projects whose makers opted to film in Louisiana after the state increased its film production tax credit to 30 percent in 2009, said Chris Stelly, director of the Louisiana Office of Film and TV.

But Louisiana doesn't just attract projects because of the state's high tax credit, he said.

"No matter how big your incentive is, if someone doesn't have a good experience, they're not going to be back," he said.

Warner Bros. Entertainment is what Stelly calls a repeat customer.

Michael Walbrecht, vice president of Studio & Production Affairs at Warner Bros., said the company brings a lot of projects to Louisiana. It's the third most popular place the company films, behind Los Angeles and New York.

"So far, we've had great experiences in the [Southeast]," Walbrecht said.

There's no denying the tremendous impact the film industry has had on each state.

Hotels, rental cars, restaurants, equipment rentals, local crews, props, wardrobes and local extras are just some of the ways the industry gives back to the area it films in.

According to the Web site for Georgia's Film, Music & Digital Entertainment Office, TV networks, Hollywood studios, production companies and independent producers invested more than $521 million in Georgia in fiscal year 2008-09; the state estimates the economic impact of this investment at $929 million.

Louisiana has experienced economic success, as well. Its Economic Development department's Web site says the incentives have generated thousands of jobs and more than $2 billion since the program began in 2002.

"With some of the bigger movies, [there are] hundreds of extras on set," Thompson said. "Those people all get paid something per day. This is especially a big deal in small towns that have never had a film [shoot] there. To spend a few million dollars in a rural area [makes a big difference]."

Even California, the home of the business, has gotten into the act. The state recently introduced a 20 percent tax credit, though its incentives aren't as broad as in other states. For example, TV shows to air on basic cable qualify for the credit, whereas shows on broadcast networks do not.

Walbrecht said the amount of larger movies and TV shows filming in smaller states will continue to rise, which is one reason California was prompted to create incentives. "They realized their iconic industry was moving elsewhere," he said.

Meanwhile, away from Hollywood, the competition is getting stiffer.

North Carolina became a major player in the filmmaking business thanks to such productions as the TV show "Dawson's Creek," which filmed in the coastal city of Wilmington and helped create a thriving film industry there. So when "The Last Song" -- set in Wilmington -- began filming in seaside Savannah, Georgia, hard feelings were inevitable.

"You can't dwell on what you lost; you have to keep going and move forward," said Aaron Syrett, director of the North Carolina Film Office. "It happens all the time, to every state."

Legislation to raise the 15 percent tax credit was proposed before "The Last Song" chose not to film in North Carolina. The state's new refund, 25 percent, went into effect January 1.

"We're not trying to [have] the highest refund. We're trying to be the smartest," Syrett said.

In other words, offer a hefty tax rebate -- and roll camera.

NEW YORK TOUTS INCENTIVE

NEW YORK (Reuters) - New York state's film tax credit has generated about $7 billion in economic activity since 2004 and become a key economic driver, the state's comptroller said on Tuesday.

Lawmakers are considering extending the program through 2015 to help New York compete with similar tax incentives on offer in 42 other U.S. states, Washington D.C. and 11 Canadian provinces, Comptroller Thomas DiNapoli said in a statement.

"There's also an intrinsic added value that's difficult to measure but very real," he said. "Visitors from all over the world come to New York because of the iconic movies and TV shows shot here."

The credit helped New York employ 63,000 workers in 2008 and pay $5 billion in wages, he said. That makes it the second-biggest film industry in the nation after California.

New York City was the main beneficiary with two-thirds of all film and TV production in the state located within the five boroughs, he said.

The largest film and TV facilities in the state -- 90-year old Kaufman Studios and Silvercup Studios in the borough of Queens and Steiner Studios in Brooklyn -- have all recently unveiled plans to expand.

Silvercup is the location for the "Gossip Girl" TV series, while Steiner Studios is location for the recent film release "Brooklyn's Finest."

Florida House of Representatives


PRESS RELEASE CONTACT: Kelsey Wohlman
January 20, 2010 (850) 488-2056

Rep. Steve Precourt and Sen. Mike Haridopolos Unveil “Entertainment Industry Economic Development Act”
Tax Credit Would Lead to Immediate Job Growth, Increased Revenue

Tallahassee, FL – Rep. Steve Precourt (R-41) today introduced the Entertainment Industry Economic Development Act (HB 697), an innovative proposal to stimulate job growth and generate millions in revenue at zero cost to the taxpayer. The tax credit program, also sponsored by Senate President-Designate Mike Haridopolos, levels the playing field for Florida to once again compete in the emerging economic cluster of film and digital media production.

“With Florida’s unemployment rate now higher than the national average, this program is a critical tool to expand an industry poised to bolster future economic growth,” said Precourt. “We have an opportunity to immediately create new jobs and generate new revenue without burdening the taxpayer and we need to seize it.”
In recent years, Florida’s existing film incentive program has been cut dramatically, resulting in a sharp decline in production projects lost to competing states. The bill creates a film and digital media tax credit that has a proven track record of attracting and growing the industry in other states. The production company will only receive the credit after all its payments have been verified. With the investment occurring before a credit is issued, this is a true performance-based credit.

Although the film office can begin issuing credits upon adoption of the program, credits cannot be claimed until tax returns for 2012 or later, ensuring not $1 of credits will be claimed or issued in the upcoming budget. This will generate substantial amounts of new tax revenue, create thousands of jobs and boost ancillary businesses.
“On the heels of last week’s Jobs Summit where the film and digital media industry was highlighted as a key player in Florida’s economic recovery, this proposal will allow us to hit the ground running,” said Haridopolos. “It’s my hope that the days of Florida consistently losing film production and digital media projects to other states will soon be over.”
The proposal is also supported by Speaker Designate Dean Cannon, who said, "The film and digital media industry presents exciting new opportunities for job creation at a time when Florida needs it most,” said Cannon. “I look forward to working with Rep. Precourt and Senator Haridopolos to position Florida as a national leader in this dynamic, growing industry.”
Other key provisions include an annual cap on total credits of $75M, an increase in the base incentive amount from the 15% to 20% for major film, TV and digital media productions and an increase in the “family friendly” project enhancement from 2% to 5%. Only Florida expenditures such as hiring local residents and contracting with Florida-based companies qualify.
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New TV tax incentive disappoints

By By Miriam Kreinin Souccar

Published: March 30, 2009 - 3:17 pm

The stalled film and television tax incentive program received a $350 million cash infusion in the new state budget to keep it going for another year. But the stop-gap measure fell short of industry expectations, and could jeopardize New York’s lucrative television business.

The new funding will help keep most of the shows that are already produced here, like Ugly Betty and 30 Rock, at least for another year. But the program’s uncertainty in the future is sure to scare away new series, which are budgeted for multi-year runs.

“This is very disappointing to us,” said Alan Suna, president of Silvercup Studios in Long Island City, Queens. “While it’s good as a bridge, it doesn’t really address the most important problem. It doesn’t enable New York to attract any new television series at all.”

New York received a flurry of production work when Gov. David Paterson tripled an existing tax break to 30% of production expenditures last April to compete with similar offers in other states. In 2008, a record 19 pilots were produced here. The state allocated $685 million to fund the program through 2013, but the incentive was so successful that it ran out of money in less than 10 months.

Uncertainty over the incentive program has already cost New York its entire pilot season and the hit show, Fringe. Warner Bros. Television decided to relocate Fringe to Vancouver last month, when executives there heard the tax credits were in jeopardy. Even with funding now available for another year, the show’s producers are sticking with the decision to move.

“(The commitment to fund the program for one year) sends a message from the state that they are with us today, but may not be tomorrow,” said Alex Zablocki, a candidate for NYC Public Advocate, who collected over 14,000 petition signatures to save the program. “During uncertain times, the last thing workers and small businesses need is more uncertainty.”

Such uncertainty over the future of the program has put the breaks on a number of expansion plans at Silvercup. Mr. Suna said he had plans to build additional studios at a few different locations. “Had the tax credits become permanent as we had asked, Silvercup would have expanded immediately.”

Kaufman Astoria Studios doesn’t have the luxury of halting its expansion. The Astoria, Queens-based facility is building a new 18,000-square-foot stage with 22,000-square-feet of dressing rooms and offices, scheduled for completion by the end of the year.

“I might have given a second thought to investing $22 million into this stage,” said Hal Rosenbluth, president of Kaufman Astoria.

Mr. Rosenbluth plans to go after feature films to fill his other stages right now, because he doesn’t think TV shows will come to New York until an incentive program is either made permanent, or has more longevity.

Not everyone was disappointed with the budget. Union members who work on the productions felt relieved. “From a crew standpoint, this is a positive,” said Beth Kushnick, set decorator on Fringe. “New York will be busy with film and television for another year and we’ll have jobs. In this economy that’s a positive.”

Still the fight isn’t over. Industry officials will continue their lobbying efforts to make the program permanent. The tax incentives have been wildly successful in bringing productions to New York. According to a 2007 Ernst and Young study, the state and city combined have issued $690 million in tax credits and collected $2.7 billion in taxes from movie and television productions. In 2007, it helped create more than 7,000 jobs directly and over 12,000 jobs indirectly.

LEGISLATURE

California budget includes tax relief for film, TV shoots

By Richard Verrier

February 20, 2009

Gov. Arnold Schwarzenegger, a former movie actor, has been trying for years to get tax credits to keep California's signature industry at home.

He got his wish early Thursday when the Legislature approved tax credits for film and television productions as part of an economic stimulus provision of the new state budget.

The credits -- capped at $500 million over five years -- are modest compared with those offered by other states.

Still, the announcement was welcome news to many in Hollywood who were skeptical that the Legislature would help the entertainment industry given the enormousness of the task of plugging the state's $42-billion budget gap.

"We applaud the passage of this incentive, which will help make California competitive and not only save jobs that are being lost but generate much-needed revenue for the state," said a joint statement from Hollywood's actors and directors unions and the Motion Picture Assn. of America, which have been lobbying for the credits for a decade.

Previous attempts by Schwarzenegger to secure such credits have been torpedoed by lawmakers who viewed them as a handout to Hollywood. But those arguments weakened amid mounting evidence that other states were poaching jobs from Southern California.

More than 30 states now offer tax credits and rebates to lure production crews to their locales. New York, New Mexico, Louisiana and Michigan have seen a surge in production and jobs since implementing incentive programs, contributing to historic lows in L.A. shoots.

"So much has disappeared, anything we bring back will be a boon," said Paul Audley, president of FilmL.A., which processes filming permits.

The tipping point came last summer when ABC moved production of its sitcom "Ugly Betty" to New York from Los Angeles, creating an uproar among hundreds of crew members.

Attracting such shows back is the primary aim of the new incentives, which offer a 25% tax credit for TV series that relocate to California. Low-budget independent films with budgets of $1 million to $10 million will also be eligible.

Producers of new films and TV shows can claim a 20% credit that they can use to offset their income and sales tax liabilities. However, the deduction can be applied only to so-called below-the-line costs such as crew members' wages and not to the salaries of actors, writers or directors. The credit would exclude movies that cost more than $75 million.

The program caps annual funding at $100 million, a relative drop in the bucket considering the average cost of a studio movie is about $70 million.

By comparison, New Mexico offers a 25% rebate on production costs and does not have a cap. Neither does Michigan, where filmmakers get up to 42 cents back for each dollar they spend on filming.

"It's hard to understand how [California's tax credits are] going to be competitive with states that actually have incentives where the credits are much higher," said attorney Peter Dekom, who helped craft New Mexico's rebate program.

Jean Prewitt, chief executive of the Independent Film and Television Alliance, also questions how effective the program would be, but added: "This is the first time the California Legislature has recognized what an important economic driver film production is, so in that sense it's important."

Supporters said the tax credits, however, were a step toward more comprehensive incentives and would have an immediate effect. Culver Studios Chief Executive James Cella, who worked on the proposal, estimated that the credits would shave up to 13% off the budget of a $2.5-million TV series. "That's enough to make us competitive," he said.

States woo Hollywood with tax breaks

Thu Feb 19, 7:43 PM EST

Hungry to prop up their ailing economies, U.S. states are locked in a fierce competition to lure Hollywood filmmakers to their gritty cities and picturesque towns with tax breaks and other incentives.

The movement remains intense despite state budgets facing near crisis, largely because the movie and TV industry has emerged as a tough survivor in hard economic times. California, facing a $42 billion budget deficit, nevertheless approved a film tax credit Thursday.

The film industry's economic health has pushed some states like Ohio to take a second look at tax breaks for filmmakers and TV producers after years of viewing such financial incentives as luxuries the state couldn't afford. The state shuttered its film commission for five years in 2002 because of budget cutbacks.

Ohio lawmakers are poised to approve film industry tax breaks soon, once they work out whether to offer to make the breaks big or bigger.

Gov. Ted Strickland vetoed the bigger tax breaks favored by legislative Republicans in December, saying he wanted to weave the breaks into discussion of his proposed two-year operating budget. Republican lawmakers were eager to continue the recent momentum from "Spider Man 3," parts of which were filmed in Cleveland.

Strickland said Thursday an incentive program capped at $20 million every two years, rather than $100 million each year, is all Ohio can afford.

"I could not and I do not support the larger commitment on the part of the state," he said.

Ohio is one of only a handful of states left that don't already offer a state-level tax break to filmmakers or a giant pot of cash that producers and directors can tap for incentives.

Lawmakers in Indiana overrode a governor's veto of film industry incentives there a year ago.

Vans Stevenson, who oversees state government issues for the Motion Picture Association of America, said the incentives states offer are more than offset by the economic benefits that result from film and TV production.

"The perception that this is a giveaway in inaccurate," he said. "States have recognized that show business is an economic development engine, and they want to get on board."

In Maryland, state officials realized just how important such incentives were to a state's economy in 2004, when they lost the film "Annapolis" — a story set in the Maryland city — to neighboring Pennsylvania.

Karen Hood, a spokeswoman for the Maryland Department of Business and Economic Development, which houses the state film commission, said production crews were ready to roll when Pennsylvania officials drove into town touting their freshly minted film incentive program.

"They literally parked their trucks outside and said, 'Maryland can offer you two or three million? Well, we'll offer you 10,'" she said. "That was our 'Omigod moment.'"

The rush of states to offer movie incentives began about six years ago when U.S. film-making was going increasingly out of the country — to places like Canada, Bosnia, Romania or France that offered low costs and cash rebates or payouts.

For many states, the investment paid off.

A study conducted for New Mexico, where films such as the Oscar-winning "No Country For Old Men," "The Book of Eli" and "In Plain Sight," showed positive results. The review by Ernst & Young, released earlier this month, found that 30 films produced in 2007 in that state generated about $253 million in spending and directly created 5,989 jobs.

New Mexico Gov. Bill Richardson boasted in his recent State of the State speech that the state had "created a new industry" over the past six years through its film industry incentive program.

An analysis by the nonprofit group Film Wisconsin released in December, for example, found that new breaks and incentives in that state had brought in more than $9.2 million and created at least 850 jobs. That state was home to production of the upcoming film "Public Enemies" starring Johnny Depp and Christian Bale.

Despite such positives, Wisconsin and some other states are beginning to rethink their incentives amid the national economic meltdown.

Wisconsin Gov. Jim Doyle proposed eliminating the film tax credits in his budget introduced on Tuesday, to the dismay of the state's fledgling film industry as well as the lieutenant governor.

Doyle wants to replace the year-old program, which gives back 25 percent of qualified film production expenses, with a $500,000-per-year grant program that gives awards only to projects that create permanent jobs in the state.

Connecticut recently drew back support for its program, which had offered 30 percent tax credits for the production of digital media and motion pictures in the state, or more for productions exceeding $50,000, since 2006.

The Maryland Film Industry Commission, a coalition of businesses and film producers that includes Maryland-born director Barry Levinson, is pushing a proposal for filmmakers to receive a "post-expenditure rebate" of about 28 percent of their qualified spending on in-state film production.

Hood said that, while the administration recognizes the value of film production to the state's economy, such aggressive incentives are tough to swallow during this time of fiscal distress.

"It's been a battle of incentives. Of course, Hollywood's saying, 'This is great,'" she said. "The debate going on right now is, if you're facing a fiscal crisis in your state is it fiscally responsible to subsidize Hollywood?"

The Motion Picture Association's Stevenson said movie production can't be viewed simply as flowing to Hollywood — it also helps local communities.

"You're not subsidizing Hollywood. You're creating jobs for carpenters and electricians and plumbers and Wanda the costume designer," he said.

He estimates the average movie production spends $225,000 a day and the average TV show $175,000 a day.

According to the association, copyright-based businesses such as movies, home video and television programming were among the nation's fastest-growing industries in the country, contributing about 6 percent to total gross domestic production.

The industry employs roughly 750,000 people, and grows at about 3 percent a year.

Government incentives to moviemakers and TV producers appear to coincide with an increase in the industry's political generosity.

Data compiled by the nonpartisan Center for Responsive Politics shows that the entertainment sector gave $5.9 million to federal political campaigns and causes in 1990, $7.2 million in 1998, and $45 million last year. State-level giving between the 2002 and 2006 gubernatorial cycles more than doubled, according to figures compiled by the National Institute on Money in State Politics.

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OHIO GOVERNOR VETOS INCENTIVE

Ohio Governor Ted Strickland VETOED HB 196 which would have created a 25% nonrefundable tax credit for investments in motion pictures produced in Ohio.  In vetoing the bill, the Governor declared, "The experience of other
states suggests that the return on investment with a film tax credit is a weak 14 to 20 cents on the dollar, making the credit a very expensive means of creating jobs.  Given the uncertainties in our economy and revenues, I do
not believe an expensive, new, and difficult-to-administer tax credit should be adopted outside the context of budget deliberations."

The sponsor of the bill, Tom Patton, is now a Senator and is expected to introduce a new bill from the Senate later this month.

HOLLYWOOD REPORTER

Commentary: Economic swoon jeopardizes production credits

By Borys Kit

Nov 12, 2008, 07:00 PM ET

The credit crunch and the crumbling economy has put the nation's many film tax incentives under the microscope as states debate their overall effectiveness.

At the locations panel Saturday at the American Film Market, the question of how long states can maintain the present course of tax rebates and credits in the face of mounting job losses and bleeding 
state budgets took center stage. (A refundable tax credit, instituted in such states as Michigan and New Mexico, acts more like a rebate and sees states issue a check to production companies. A transferable tax credit, like the ones in Louisiana and Rhode Island, sees states issue credits that the production then sells via brokers to those 
looking to offset tax liability.)

Some states are even questioning this "subsidization" of the film industry after reports like that one that claimed Louisiana gave more than $27 million in credits to "The Curious Case of Benjamin Button."

The scrutiny has local film commissioners and those involved in local film production on the defensive.

"We're not giving away money," says Tony Wenson, COO of the Michigan Film Office. "We're really incentivising new business growth and job creation in the state."

Adds Jeff Spillman, who runs production-services firm S3EG: "They are not a subsidy for film, they are a subsidy for the development of the economy."

Michigan instituted its program -- which includes the possibility of an eye-catching 42% credit -- in April. Since then, it has seen an explosion in production: A dozen movies have wrapped, and four are in production. That's up from the previous year, when the state hosted one film.

The forecast is for about $100 million of direct spend in the state, a figure that does not include ancillary spending, like the money film crews spend after work.

According to insiders, Clint Eastwood's upcoming "Gran Torino," one of the high-profile movies shot entirely in Michigan, will receive about $5 million in credits once its audit is complete. "Youth in Revolt" received $4 million.

Wenson declined comment on the numbers but points out that when all is said and done, the final credit outlay will look more like 35%, not the much-ballyhooed 42%. A production receives 42% credit if it shoots in select cities; in the rest of the state, a production gets 40%, though that's only if it uses a Michigan crew. Since almost all 
productions have been importing crews -- Michigan is only beginning to create its infrastructure -- the credit is only 30%.

"That number is not going to kill the budget," Wenson says.

Some states are hearing a growing call to cap credits. That idea was brought up in Michigan but quickly quashed.

West Virginia, on the other hand, capped its incentives at $10 million a year. The limit was instituted to prevent the state from being overrun by productions as well as to maintain control over growth.

"Ten million dollars is a very manageable number for us," Jamie Cope of the West Virginia Film Office says.

Louisiana, meanwhile, is standing by "Benjamin Button," supporting the film after it pumped millions into the New Orleans economy, which is still recovering from Hurricane Katrina. Jennifer Day of the New Orleans Office of Film & Video said the production helped refurbish the city by sprucing up, restoring and fixing the locations it used.

"They were helping to rebuild this city by location by location," she says.

As for its tax-credit scheme, which includes a 25% motion picture credit, film heads point out that if there are no buyers for the credits in these recessionary times, the state will buy them. The current price is 72 cents on the dollar, rising to 74 cents in 2009.

"It's important to stress that the economy has its issues, but there is a fail-safe -- and that fail-safe is the state of Louisiana," says Bill Hess, from the city of Alexandria's office of economic development.

October 12, 2008

Incentives for Filming Cause Jitters

By MICHAEL CIEPLY

LOS ANGELES — Already on the hook for billions to bail out Wall Street, taxpayers are also finding themselves stuck with a growing tab for state programs designed to increase local film production.

One of the most shocking bills has come due in Louisiana, where residents are financing a hefty share of Brad Pitt’s next movie — $27,117,737, to be exact, which the producers will receive by cashing or selling off valuable tax credits.

As the number of movies made under these plans multiplied in recent years, the state money turned into a welcome rescue plan for Hollywood at a time when private investors were fleeing the movies. But the glamour business has not always been kind to those who pick up the costs, and states are moving to rein in their largess that has allowed producers to be reimbursed for all manner of expenditures, whether the salaries of stars, the rental of studio space or meals for the crew.

Louisiana, one of the most assertive players in the subsidy game, wound up covering that outsize piece of the nearly $167 million budget of Mr. Pitt’s “The Curious Case of Benjamin Button” — the state’s biggest movie payout to date — when producers for Paramount Pictures and Warner Brothers qualified the coming movie, a special-effects drama, under an incentive that has since been tightened. Separately, Louisiana’s former film commissioner is set to be sentenced in January to as much as 15 years in federal prison for taking bribes to inflate film budgets (though not that of “Button”) and, hence, pay higher subsidies.

Michigan, its own budget sagging, is in the middle of a hot political fight over a generous 40 percent rebate on expenditures to filmmakers that was carried out, with little opposition, only last April. Producers of films for studios like Warner Brothers and the Weinstein Company rushed to cash in, just as homegrown businesses were squeezed by a new business tax and surcharge. Rebellious legislators from both parties are now looking to put a cap on the state’s annual film spending, which some have estimated could quickly hit $200 million a year.

In Rhode Island, meanwhile, the rules have toughened considerably. That happened after The Providence Journal reported in March that producers of a straight-to-DVD picture called “Hard Luck” — which starred Wesley Snipes and Cybill Shepherd — had picked up $2.65 million in state tax credits on a budget of $11 million, even though it had reported paying only $1.9 million of the total to Rhode Islanders.

“With this much money involved, there’s going to be a temptation to hype budgets,” said Peter Dekom, a veteran entertainment business lawyer who is an adviser to New Mexico’s incentive program.

The vogue for state film subsidies appears to have started in Colorado early this decade, with a briefly financed Defense Against Canada law that was designed to win production back from Vancouver and Toronto. Louisiana and New Mexico soon came on board.

By this year, about 40 states were offering significant subsidies, turning the United States into what the Incentives Office, a consulting firm in Santa Monica, Calif., has called the New Bulgaria. It is a reference to what was once the film industry’s favorite low-cost production site.

Virtually all of the programs use a state tax system to reimburse producers for money spent on movies or TV shows shot in the state. Some, like Michigan’s, simply refund a percentage of expenditures to the producer. Others, like Louisiana’s, issue a tax credit that can reduce the taxes a production pays or be sold to someone else. Either way, the state gives up revenue that otherwise would be collected to put money in the producer’s pockets.

Advocates, of course, argue that these programs create jobs.

One of the country’s most successful programs is in New Mexico, which has backed movies like the Oscar-winning “No Country for Old Men” and next year’s “Terminator Salvation,” the latest sequel in the action series, with a reported budget of $200 million. New Mexico officials boast of having used a 25 percent production cost rebate to build a local film industry that has attracted more than $600 million in direct spending since 2003, and an estimated $1.8 billion in total financial impact, as of last June. And in fiscal year 2008, the productions in the state generated 142,577 days of employment, up from 25,293 in 2004.

Elsewhere, however, critics have sharply challenged the notion that state subsidies for the film business can ever buy more than momentary glitter.

“There’s no evidence yet that this is a particularly efficient or effective way to create jobs,” said Noah Berger, executive director of the Massachusetts Budget and Policy Center.

The nonprofit center reviews budget and tax policies in Massachusetts, which is spending about $60 million a year on producer credits. A recent study by Mr. Berger’s center pointed out that the state’s film credit, at 25 percent, is five times higher than that offered to those who build in designated economic opportunity areas, and more than eight times the state’s standard investment tax credit.

Until two years ago, Louisiana’s program offered a 15 percent credit for virtually the entire budget of a qualified film (and more for Louisiana resident wages), including money that may have been spent out of state. Things were fast and loose enough in Louisiana that Mark Smith, who oversaw the program, last year pleaded guilty to taking $67,500 in bribes to inflate budgets for a film production company that was not named by the authorities.

Kathy English, a spokeswoman for the United States attorney’s office in New Orleans, said the case remained open. Louisiana’s new rules offer a larger credit, but only on spending within the state. That made the incentive less attractive for big-budget movies, like “Button,” which was done under old rules, and could recover parts of star salaries and other expenses that left Louisiana. But it has drawn a welter of smaller movies and TV shows, 70 of which have been shot so far in 2008, up from 56 the year before.

“All areas of the state have prospered as a result — everyone sees it,” said Sherri McConnell, director of Louisiana’s Office of Entertainment Industry Development. (Ms. McConnell said she did not expect to have a detailed picture of economic impact until the completion of a planned study, early next year.)

Others are not so sure. “There’s no way you can say this makes money for the public” treasury, said Greg Albrecht, chief economist for Louisiana’s legislative fiscal office.

In 2006, the last year for which it has complete figures, the state granted about $121 million in credits. Mr. Albrecht estimates that only about 18 percent of that is ever recovered in taxes on expanded economic activity.

“It’s an expensive way to create jobs,” Mr. Albrecht said. But he noted that Louisiana, like New Mexico, can afford it, thanks to rising oil and gasoline revenue. “We’re happy as larks right now to do this.”

Not so happy are some folks up in Michigan, where a State Senate committee recently moved to cap the state’s film rebates at an aggregate of $50 million a year.

“It’s just horrible right now,” Mike Bishop, a Republican state senator, said of Michigan’s financial condition. Mr. Bishop initially backed the film incentive. But he grew alarmed at outlays that he estimated could quickly exceed $110 million a year to subsidize movies like “Gran Torino,” directed by Clint Eastwood, and “Youth in Revolt,” a comedy by the filmmaker Miguel Arteta.

Anthony Wenson, chief operating officer of the Michigan Film Office, said the actual amount of credits granted was only about $25 million so far. The annual number is impossible to reckon, he said, because plans for future projects are in flux.

In any case, Nancy Cassis, another Republican who was the only Michigan senator to oppose the incentives when they began last spring, said she expected to see them capped with bipartisan backing later this year. And she does not look for Hollywood to hang around when the money dries up.

“These are not long-term jobs,” Ms. Cassis said. “If just one state offers more, they’ll be out of here before you can say ‘lickety-split.’ 

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SEPTEMBER PRODUCTION INCENTIVES UPDATE

 ALASKA  - The state has not yet selected a film commissioner, but   the new 30-44% incentives legislation is now in effect. Interested   parties should contact the state for pre-certification.

 ARIZONA - To help producers understand and successfully complete  the post-approval process for Arizona's transferable production tax credits, the Arizona Department of Commerce has scheduled a  workshop on October 1, 2008, in Phoenix. 

 

 GEORGIA - The new regulations will be posted in the next two weeks,  detailing some of the requirements to receive the recently approved   20% base transferable credit, plus the 10% bonus for inclusion of the state logo.  Both cast and crew from in- and out-of-state qualify, with certain guidelines applicable.

 IOWA - The state's 50% combined transferable tax credit is  generating a considerable amount of interest. Several new films are scouting and plan to take advantage of this generous program. 
 
LOUISIANA - Fortunately, the impact of Hurricane Gustav on the state's film industry has been minimal. Films based in Shreveport  continue in production.

MICHIGAN - Many producers seem confused about the calendar year-end  tax-filing requirements in Michigan.  To receive a rebate in 2009,  the following three steps must be completed by December 31, 2008:   1) the film must wrap; 2) the third-party CPA audit must be 
> completed and 3) a post-production certificate must be issued by  the state.  This allows the Michigan Business Tax to be filed in  January or thereafter, with the rebate to be received 30-60 days later;  otherwise, the rebate will not be processed until 2010.