New York is set to increase the cap on tax credits the state gives to the film and TV industry from $420 million to $700 million and make other notable changes to its incentive program in a bid to compete with neighboring jurisdictions for productions.
Under an agreement announced on Thursday approving a $229 billion budget, above-the-line wage costs will be eligible for tax breaks for the first time, with certain restrictions and caps. The credit will also be raised to 30 percent. The changes are aimed at luring productions back from areas, namely Georgia, New Jersey and Canada, that offer their own packages of offerings to host productions.
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Gov. Kathy Hochul proposed in February vast revisions to the program, including a 5 percent bump for TV series that relocate to New York. Notably, productions would be able to claim tax breaks for some above-the-line wage costs for star salaries with a cap of at $500,000 per individual. It would be limited to 40 percent of other qualified production expenses.
The proposal followed Illinois passing a measure that similarly allowed some non-resident wages to qualify. California is currently the only state that doesn’t do so.
The budget also proposed to amend rules to allow a production to claim the non-transferable, refundable credit the same year it’s allocated the incentive instead of waiting a year. A common complaint from prospective productions have been delays in payment. The payout schedule dictated that credits are to be distributed beginning in the later of the year after a project is completed or the year following the assignment of the tax credit. Once the first payout year is established, the credit is given according to a schedule based on the amount: for distributions of less than $1 million, the credit is paid out in a single year; for distributions valued between $1 and $5 million, the credit is paid out in equal sums over two years; for distributions of over $5 million, the credit is paid out in equal sums over three years. Distribution of the credit, however, has been known to take much longer because of a shortage of money in the program.
Under the proposal, tax credits to shoot in New York can reach as high as 40 percent if a production qualifies for a 10 percent bump by shooting in certain areas. Productions have increasingly been flocking to Buffalo and Western New York to qualify. Buffalo FilmWorks is currently constructing a $50 million facility set to become the largest soundstage in the state.
The program generated nearly $9.9 billion in direct spending during 2019 and 2020, creating over 114,000 jobs, according to the most recent analysis conducted by the state. The report estimated that 50 cents were returned in tax revenue for every dollar, with New York city getting another 49 cents and local governments receiving 5 cents.
While critics of tax incentive programs have stressed that productions would’ve shot in the states they were granted credits regardless, production executives have increasingly focused on tax breaks to offset budget cuts.
“I don’t know if I’d be able to persuade my leadership in [filming] in a place that didn’t offer robust incentives,” Graham-Borba said at a recent industry panel.
In a statement, Empire State Development spokesperson Kristin Devoe said that New York lowering its credit from 30 percent to 25 percent in 2020 and other states increasing their credits has resulted in vacant film studios and less jobs.
“This is not movie magic, it is basic economics,” she said in a statement. “New York’s film and theater industries bring jobs and investment to our state, provide a return on investment for New York taxpayers, and are vital to our economy.”
Projects that were granted tax credits in the most recent round include John Wick 3: Parabellum, which got $15.7 million, Bull which got $19.3 million, and Woman in the Window, which got $11.6 million.
