New Jersey's $85 Million Film and TV Tax Credits Bill Signed by Governor

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New Jersey Gov. Phil Murphy

Some hail the new incentives, though a legislative analysis predicts a net loss to the state.

The Garden State is back in the production tax credits game.

Gov. Phil Murphy signed legislation Tuesday morning restoring the state’s tax incentive program, which had been on hiatus during the governorship of Chris Christie. The program allocates up to $85 million in credits annually for the next five years, commencing immediately (technically, July 1 of this year). The incentive ranges from 30 to 37 percent, depending on production location and diversity.

“The film and digital media industry is poised to become a dynamic part of New Jersey’s economy, one that will create good-paying union jobs and countless residual benefits to the economy,” Murphy said. “I look forward to seeing the many projects that will come out of our great state thanks to the Garden State Film and Digital Media Jobs Act.”

The news from New Jersey comes a week after California Gov. Jerry Brown signed legislation that extends California’s $330 million annual incentives to 2025. But the New Jersey legislation may have more impact on that state’s East Coast neighbors, including New York State, which allocates $420 million per year in incentives.

“Given the diversity of New Jersey’s geography, cultures, and leisure and entertainment options, New Jersey is uniquely suited to compete for nearly any film or television production opportunity,” said Murphy in a statement May 31, in which he conditionally vetoed the bill, sending it back to the state Senate for amendments.

“In recent years,” he continued, “this natural advantage has been squandered as productions have increasingly located elsewhere, including in neighboring states like New York and Pennsylvania that offer robust tax incentive programs. Relaunching New Jersey’s film tax credit program in a thoughtful and targeted manner will allow New Jersey to regain a competitive footing in the entertainment industry.”

The incentive is 30 percent of above and below the line qualified production spend for productions in northern New Jersey, and 35 percent for productions in certain southern New Jersey counties. That uplift is meant to ensure that the benefits of production spending aren’t solely concentrated in the metro New York City area.

“My phone has been ringing off the hook in the past month since the New Jersey Legislature passed the incentive bill and the Governor announced that he would sign it,” said Steven Gorelick, executive director of the New Jersey Motion Picture and Television Commission. “We have been traveling all over the state with a number of producers scouting scores of locations for major productions.”

Digital media content can qualify for a 20 or 25 percent incentive; $75 million each year is reserved for film and television projects, while digital media productions draw from a separate $10 million annual pot.

“There are at least ten motion picture productions and 15 television series — ranging from television networks and cable/satellite program services to Internet distributors — that are looking for locations in New Jersey or are in the planning stages to greenlight projects,” Gorelick added.

The legislation also includes an additional 2 percent uplift for productions with a diversity program. The details of that requirement are being worked out, The Hollywood Reporter has learned. It’s a provision that the Governor proposed in his conditional veto, along with a provision that allows some reality television productions to qualify for incentives.

Translating any production tax credit into cold hard cash is not always straightforward, because projects often don’t have any tax liability at their production location. Some states, such as New York, offer refundable credits, meaning that the producer can file a tax return and get cash back. Others, including New Jersey’s, are not refundable, but may be transferable, meaning that monetizing the credit will likely require a production to sell the credit — at a discount — to some other company that does have New Jersey tax liability. Still others offer outright cash grants or rebates, while California’s credit is generally neither refundable nor transferable. A range of foreign countries have similar programs.

 “Governor Murphy’s vision to bring the economic and cultural power of storytelling to New Jersey was the catalyst for this strong production incentive program and his leadership was crucial to its enactment,” said Motion Picture Association of America chairman and CEO Charles Rivkin. “I also want to thank the sponsors of the legislation, Senator Loretta Weinberg and Assembly Commerce and Economic Development Chair Gordon Johnson, for their commitment to creativity and growth.”

Added Rivkin, “This program will benefit New Jersey’s creative community for years to come by attracting major film and television projects that generate thousands of jobs and millions of dollars in economic development.”

But programs like New Jersey’s are not without controversy. Academics often say tax credits seldom produce enough public benefit to justify the expense, and a recent study by the Pew Charitable Trusts says that states such as Georgia (which doled out $600 million in 2016) don’t even engage in adequate cost-benefit analysis.

Indeed, whether benefit to New Jersey will outweigh the $425 million five-year cost is unknown. An analysis by the state legislature’s Office of Legislative Services said that the indirect state and local revenue gain was “indeterminate” and added that it expected the law “to produce a negative fiscal net impact of indeterminate magnitude on the State, considering that the bill does not require tax credit-receiving expenses to yield a net fiscal benefit to the State.”