Movie Production Incentives

A Quick Guide to Movie Production Incentives

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Sometimes movie producers are encouraged to film their projects in specific areas for reasons that go beyond the gorgeous scenery. To help stimulate economies and create jobs, many places across the globe tempt producers by offering them financial incentives to shoot within their respective territory. The Irish Film Commission, for example, offers a 32% tax credit on local Irish expenditures as long as the production company shoots there.

These incentives can make all the difference for a film with few resources. In fact, offering tax benefits to film producers here in the United States all started in the 1990s when many movie productions began moving their projects to Canada to reduce costs. In an effort to keep film and television production in the U.S., each state began implementing their own incentives to entice and attract productions.

Types of Movie Production Incentives (MPIs) in America

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The following are the five main types of MPIs offered by states here in America. Please note that each state differs in terms of the requirements needed to qualify for the incentives:

Tax Credits

If a production company meets the minimum spending requirements, they are eligible for a tax credit for a portion of the income taxes they owe the state. This is similar to a cash rebate except the production company has to file a state tax return in order to obtain the funds. Companies can do more with less by earning back some of the money they used on local expenditures such as wages and production costs.

Cash Rebates

Many states bring in production companies by offering a cash rebate. The money received is usually a percentage of the company’s qualified expenses. The more the company spends on productions costs, labor, and other services, the more they get back.

Grants

Although uncommon, there are a few states that offer grants to production companies just for filming there. In 2016, the state of Montana provided $500,000 in grants to support the production of 11 films.

Sales Tax and Lodging Exemption

Not having to pay any sales tax on production costs is a huge plus for many production companies, which is why certain states offer sales tax exemptions. A number of of states also allow companies to not have to pay lodging taxes for all their guests— usually the requirement is that they stay for more than 30 days.

No Fee Locations

A small but valuable incentive some states offer is letting production companies film on state-owned property for free.

Proponents and Opposers of MPIs

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Although offering MPIs sounds great, some argue that they actually have no (or a negative) effect on the state’s economy and are, thus, a waste of money. Below are the main arguments for those in favor of production incentives in the film industry and those who oppose them.

Pros: MPIs have a positive impact on local economies.

Since the filmmaking process can require a lot of laborers, services, and resources, having a big-budget movie produced in a certain area can have a positive effect on the local economy. This includes the creation of jobs, infrastructure, and small businesses along with the generation of tax revenue. States also enjoy the increased tourism that comes from people wanting to see where their favorite movies and TV shows were filmed.

To get an idea, consider that the average studio feature takes with them around 100 crew members and then employs another 100 locally. This means the company will spend millions of dollars on wages but also expenditures such as food, lodging, everyday sundry, etc. Local employees are also left with hands-on training by the traveling production crew, increasing the chance of local film production.

Cons: MPIs don’t actually improve the state’s economy in any way.

Some argue that film production incentives don’t actually help create jobs since they’re only temporary. Unless a state has a steady stream of productions, the jobs created by the film and television industry are short-term thus, leave specialized employees with no work once the production wraps.

People who oppose MPIs also point out that many states are overeager to offer incentives based on tailored reports of success from other states. In other words, states rely too much on perceived success in other states failing to properly assess how a major film production will affect their own economies.