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Puerto Rico sweetens film incentives

Looks to lure biz as some states trim offerings

Just as Michigan and New Mexico are proposing to slash their film incentives, Puerto Rico has wildly revamped its program to offer some of the U.S.’ most generous tax rebates.

The new legislation, signed into effect on Friday by Gov. Luis G. Fortuno, offers a 20% rebate for nonresidents in addition to the pre-existing 40% rebate for residents. Fortuno raised the annual cap on incentives from $15 million to $50 million.

Program also offers a 25% rebate for infrastructure to lure new studios, post-production houses and other industry. Once those facilities are up and running, the governor has pledged an additional $300 million in annual rebates for all productions that take advantage of them.

In addition, Puerto Rico has reduced the budget required for productions down to $100,000 and expanded its list of eligible projects.

News comes after last week’s proposals that Michigan cap its incentives at $25 million per year; the state currently offers the largest rebate of any state at 40%. Meanwhile, under New Mexico’s current budget proposal, its incentive program would be capped at $45 million per year. While both proposals must still gain legislative approval, the prospect of their passage has already reverberated through the film industry. Several productions, including the high-profile “Avengers,” have pulled out of the states.

Studios lured to Michigan because of its infrastructure and filming incentives say they’re nervous about productions tapering off. Some have even discussed closing shop.

So Puerto Rico is positioning itself to take advantage of a changing playing field.

“We look at it as an opportunity,” Secretary of Economic Development and Commerce Jose Ramon Perez-Riera told Variety. “While other jurisdictions are cutting back, we’re recommitting to the industry.”

Incentive programs have come under fire in recent years, with analysts questioning how much revenue they really generate. As many states grapple to reduce enormous budget deficits in a rough economy, those incentive programs have come under even tougher scrutiny.

In November, research and policy institute the Center on Budget and Policy Priorities issued a report concluding that using state tax incentives to entice production hurts public services by reducing state revenue. The MPAA harpooned the report as “slipshod.”

Looking to capitalize on its proximity to the U.S., climate and scenery, Puerto Rico first expanded its 11-year-old incentives last year.

“We really didn’t have much of a movie industry coming from outside Puerto Rico,” Perez-Riera said of the program’s beginnings. “It wasn’t evident how big of an impact it could have on the economy.”

More than 60 productions have shot in Puerto Rico since 1999, including “Pirates of the Caribbean: On Stranger Tides,” “Fast Five” and “The Losers.” Perez-Riera says “Die Hard 5” and “Potsdamer Platz” are preparing to shoot in the territory this year.

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