A Primer on State Tax Incentive Programs for Film & TV Production
Leading up to next week’s “Make the Most of Your Budget with State Tax Incentives” virtual session with Wrapbook’s Ryan Broussard, we thought this would be a great time to brush up on the basics of tax credits for film and TV production. But first, let’s understand why securing tax credits could make or break a production.
Your brilliant screenplay with a singular premise, a moving narrative, and the most compelling protagonist is finally done! It’s time to bring your “baby” to the screen. But there’s one nagging worry that has plagued every waking moment of your life for the past four years – where on earth could you get the money to make this movie? As an independent filmmaker, one of the first and most important things you could do is make sure that you understand what types of tax incentives/rebates/credits, or “soft money,” might be available for your project to minimize the capital you will need to raise. [To get your arms around what soft money means and the difference between refundable versus transferable tax credits, refer to Entertainment Partners’ (“EP”) quick guide on production finance terminology and film financing.]
For Oscar-nominated period drama, Brooklyn, a combined $8 million in tax credits from the United Kingdom, Ireland, and Canada offset a major portion of its $11 million production budget. Spirit Awards winner, Room, had a large part of its $13 million budget covered by Irish and Canadian tax credits as well. With $11 million in Ohio tax credits, this summer’s DC reboot for Superman incurred $37 million in qualified expenditures and hired over 3,000 Ohio residents for the shoot. Closer to home, two series nominated this Emmy cycle — political thriller Paradise and psychological thriller Presumed Innocent — were shot entirely in Southern California thanks to $12 million in tax credits each; combined, these credits enabled the hiring of more than 650 cast and crew.
The significance of tax incentives cannot be underestimated, as it played a major role in uprooting productions which impacts lives (and livelihoods) in its wake. After filming at least 12 Marvel films over the last decade in Georgia, Disney has recently moved its production to the UK, where the latest Fantastic Four reboot was shot (not to mention the next two Avengers films!). The approximately 150 projects that were denied California tax credits from 2015 to 2020 reportedly cost the state $7.7 billion in economic activity, after 28,000 jobs left the state for Canada and Georgia’s more lucrative incentive programs.
Fortunately, several states have recently ramped up its film incentive programs to keep productions stateside. With the passage of significant legislation this summer, California’s Film & Television Tax Credit Program 4.0 more than doubled its annual cap from $330 million to $750 million for the next five years, with the base credit percentage increasing from the previous 20%-25% to 35%-40%. For the first time, animated features and series with episodes at least 20 minutes in length will be eligible. Another substantial change is that credits will now be refundable, making it easier for production companies to truly monetize the credit once production is complete. To qualify, a project’s minimum spend must be at least $1 million, and spend at least 75% of its budget or conduct 75% of its principal photography days in California. For those interested in a deep dive into how this game-changing legislation came to pass over the summer, check out WrapPRO’s insightful “California’s Film Production Crisis” roundtable discussion with industry stakeholders, state legislators, and the California Film Commission.
Independent filmmakers should delight in the fact that California’s Program 4.0 significantly bolsters support for independent projects by allocating $75 million annually to independent films (5% for projects with budgets < $10 million and 5% for those > $10 million). In recent years, independent projects have been getting a larger share of the pie as studio films increasingly flee the state for cheaper labor elsewhere. In the most recent round of funding for feature films this June, where a total of $96 million in tax credits were allocated, 43 of the 48 projects were independent films, many with a budget under $10 million. For the revised the definition of what qualifies as “independent” film, refer to Wrapbook’s overview of Program 4.0.
Other states have done their part in shoring up their film incentive programs as well. To lure production from neighboring states, the Texas Moving Image Industry Incentive Program (“TMIIIP”) has increased from $100 million to $150 million per year through 2035, thanks in part to impassioned testimony before the state legislature by Texas native filmmakers such as Yellowstone franchise creator, Taylor Sheridan. With no fewer than four shows that were shot in Texas with a combined annual budget over $700 million (including Yellowstone spinoffs 1883 and 1923, Landman, and Lioness), he pointed out that none of that could have been possible without the tax incentive program.
New York State has rapidly increased the annual cap of its film incentives as well. In May, the state increased its annual cap to $800 million, which almost doubled the amount from 2022. The latest program also earmarks $100 million for independent projects (the Empire State Independent Film Production Credit). Snagging eight Emmy trophies this month — Apple TV+’s dystopian workplace thriller and Spirit Awards alum, Severance, was shot in the Tri-State area with the help of $39.6 million in New York tax credits for its first season and an estimated $9.2 million in New Jersey tax credits across both seasons. To learn more about either program, refer to EP’s overview for NYS and NJ.
To dig deeper into U.S. film incentive programs, here are a few resources to explore:
State-by-State Tips for Flagging Film Incentives
Jurisdiction comparison – compare up to three locations at a glance
10 Best States for Film Tax Incentives & Tax Breaks | Wrapbook
Wrapbook’s overview of CA Film Tax Credits
Wrapbook’s overview of Ohio Film Tax Credits
Select state film incentive program websites
Texas Moving Image Industry Incentive Program
New York State Film Tax Credit Program
New York City Film Production Tax Credit
New Jersey Film and Digital Media Tax Credit Program
To keep up-to-date with U.S. and international production incentives, check out Wrapbook’s blog and free alerts from state and city’s film commissions or Entertainment Partners.
If you haven’t already, register for September 23’s “Make the Most of Your Budget with State Tax Incentives” virtual discussion and sign up for our upcoming events.
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