Filmmakers Face Grim Reality of Slashed Tax Incentives

Only a year ago the race among states and countries to lure film and TV productions was picking up steam, with one locale after another offering tax incentives and rebates.

Then the economic crisis and an election that brought in more conservative governments in many states began to change things. So at a discussion on Saturday at the Produced By Conference in Burbank, the mood was very different.

“We all knew it was going to be a challenging year,” says Mary Anne Hughes of Disney, noting the changes in the laws in many states, lower caps on spending in some and programs canceled in others.

As a result there are three things that filmmakers need to be aware of before they commit to making a movie anyplace that offers incentives, says Joseph Chianese, senior vp of Entertainment Partners: “Certainty in the law (in that locale). Certainty in the procedures (as to how the incentive programs are administered). And certainty in funding (making sure the money to pay incentives is really available).

In that context, says Hughes, “we need to rethink what the word ‘certainty’ really means.”

There have been seminars on tax incentives for movie production at the Produced By Conference in past years, but this was different. For the first time the conference was held in tandem with the Association of Film Commissioners International, so the audience was packed with as many film commissioners from around the world as it was with producers.

While some places like Mississippi, Utah, Maryland and Puerto Rico have improved their incentives in the past year, others like Iowa, Arizona and New Jersey have reduced or eliminated programs; and still others like Michigan, Florida, Washington State and New Mexico had seen new governors or legislators put a cap on expenditures lower than what was spent in recent years.

There was even a discussion about producers buying insurance policies that guaranteed the incentives they were promised when they initiated a production would actually be there and be paid at the end. “A year ago it is something we didn’t worry about,” says Hughes, “but now we have to re-think that.”

One panelist told the story of New Jersey, where the incentives were phased out so suddenly, at least four productions are now left unable to collect on the money they expected back from the state.

Many more foreign countries now offer incentives, from Ireland to Italy to the Dominican Republic. But in one of the most popular locations, the United Kingdom, it was also a year of change.

In the past year the U.K. Film Council was phased out, even though the program has been a success in terms of raising revenue. However, said a representative from the British commission, they have been able to move most of the programs into other government homes and are hopeful incentives will continue. There is a review going on right now.