Stateside incentives lighten financial load

Some states offer generous credits, rebates but have caps on amounts

The explosion of production incentives around the U.S. is a big boost to producers looking for soft financing that’s closer to home. From Providence to Phoenix, it seems many state legislatures can’t pass film incentives fast enough.

But even though the bounties are there for the taking, they’ve also got their limits.

Some states offering generous tax credits or rebates can also have very low annual caps on how much money they can actually give away. When the well runs dry, producers are out of luck until next year. Missouri offers a whopping 50% tax credit, a number that rivals Canada’s spoils. The catch? The program is capped at $1.5 million.

“The places that have caps and waiting lists and all that stuff, financially we’ve avoided them just because of the bureaucracy of it and the lack of certainty they are giving you in terms of whether you are going to qualify or not,” says 2929 Prods. prexy Mark Butan.

When 2929 scouted locations to shoot Uma Thurman starrer “In Bloom,” they were looking to tap into the New York program because Thurman lives in the city and wanted to be close to home. Then Connecticut passed a 30% tax credit with no annual cap, and they decided to move the production north. “We could still get Uma home to New York every night, plus Connecticut aesthetically was better for this movie and the financial deal was better,” says Butan.

“People have to do their homework,” says entertainment attorney Peter Dekom, who is the film adviser to the New Mexico State Investment Council and one of the principal architects of the New Mexico structure. “There are profound numbers of benefits all over the United States. All you have to do is call the film office of the state or visit their Web site and start with that. The states go out of their way to make life a little bit easier for filmmakers.”

Dekom has a laundry list of ways to fully take advantage of these incentives and avoid some of the pitfalls filmmakers run into.

For example, sometimes the tax credits or rebates are so enticing that other, seemingly minor incentives are overlooked, such as free use of buildings and municipalities. “That may not be a big deal,” Dekom says, “but if you’re shooting ‘The Longest Yard’ and the state of New Mexico gives you a free prison, it’s a huge deal. And that’s exactly what happened. And I’m sure that’s true in other states and other venues where they are willing to do that.”

Even when the focus is just on the tax credit, there is a big distinction between a transferable tax credit and a refundable tax credit. If it’s the former, producers have to find somebody, a broker, for example, to access the money. If it’s a refundable tax credit the state writes producers a check directly. Case in point: Louisiana has a 25% transferable tax credit, so Element Films prexy Adam Rosenfelt found an innovative way to tap into the state’s incentive program. He helped found a film fund in 2003 called LA Squared that became the first company to utilize the tax credit. LA Squared recently announced an extension of its relationship with New Orleans-based Lift Films to shoot up to 15 pics in Louisiana over the next three years.

“The film fund is unique in that it actually has the state of Louisiana as an equity investor with us in the fund,” says Rosenfelt. “So not only do we utilize the tax incentives, we also utilize pure equity from the state as an investment vehicle. So that’s unique and proprietary to us.”

While it is up to the producers to educate themselves about which states offer the best incentives, what crews are available to use and other logistical considerations, the film commissions are hard at work to make the process easier.

“We’ve tried to make it a very producer-friendly, business-friendly atmosphere,” says Alex Schott, exec director of the Louisiana Office of Film & Television Development. “We knew that dealing with bureaucracy is not conducive to a business environment. So, if we had relatively simple guidelines for getting your incentive, in the end it would speak volumes about our program.”

TAX TIPS

Pointers from the pros on how to navigate Stateside production rebate programs:

  • KNOW THE LIMITS: “Federal taxes don’t count. Things that don’t pay taxes like nonprofits don’t count. So look out for these. We have a flyer that we ask (producers) to send to all their department heads from the very beginning, so that as they make purchases they are aware of what they are doing.” — Lisa Strout, director, New Mexico Film Office

  • LOCALIZE: “Get on the ground, get dirty, get educated.” — Adam Rosenfelt, prexy, Element Films, and partner, LA Squared

  • DEAL WITH PROS: “Talk to a lawyer who has dealt with it all before.” — Mark Butan, prexy, 2929 Prods.

  • FILE EARLY: “Get all the preliminary information (to the state) as early as possible. That way, when the producer is ready to bring their project down here, all their information is on file and they don’t have to worry about dealing with any kind of state issues or documentation.” — Alex Schott, exec director, Louisiana Office of Film & Television Development

  • STATE OF THE UNION: “One of the things I find less important than people think is the notion of a right-to-work vs. a nonright-to-work state. For example, Louisiana is a right-to-work state. And everyone says, ‘Gee, that means I don’t have to deal with unions.’ The fact of the matter is all the good crews, every single one of them in Louisiana, is union. So it doesn’t matter.” — Peter Dekom, attorney and adviser, New Mexico State Investment Council.
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