Location:
ECONOMIC DEVELOPMENT; MEDIA; TAXATION;
Scope:
Connecticut laws/regulations; Other States laws/regulations;

OLR Research Report


May 10, 2011

 

2011-R-0209

STATE FILM INDUSTRY TAX INCENTIVES

By: John Rappa, Chief Analyst

You asked us to compare the tax credits and other incentives the New England states and New York and New Jersey offer the film industry.

SUMMARY

New York, New Jersey, and all the New England states except New Hampshire offer tax incentive to filmmakers. The most common incentives are business tax credits, which are offered by six states, and sales and use tax exemptions, which are offered by four states.

Attachment 1 compares the states' incentives based on their common elements:

1. type of incentive (e.g., tax credit),

2. the applicable taxes (e.g., corporation business tax),

3. the incentive amount (e.g., 30% of eligible production expenses),

4. eligibility criteria (e.g., conduct 25% of principal photography days in state), and

5. rules for using the incentives (e.g., taxpayers can carry credits forward for up to five years).

States generally exclude productions featuring news, current events, weather and financial market reports, talk and game shows, sporting events, awards show and other gala events, fundraising, long form productions marketing products and services, and productions containing obscene material or performances.

TAX INCENTIVES

As Table 1 shows, all the states in our sample except New Hampshire offer tax incentives to filmmakers. Connecticut, Maine, Massachusetts, New Jersey, New York, and Rhode Island offer business tax credits for production expenses incurred in the state. Connecticut, Massachusetts, New Jersey, and New York also offer sales and use tax exemptions for tangible personal property and services acquired for producing films. Maine, Massachusetts, and Vermont offers incentives based on the wages and salaries people earn while making films in their respective states.

Table 1: New England States and New Jersey and New York Film-Related Tax Incentives

State

Incentive Type

Business Tax Credit

Income Tax Credit

Sales and Use Tax Exemption

Rebate

Connecticut

X

 

X

 

Maine

X

   

X

Massachusetts

X

 

X

 

New Hampshire

       

New Jersey

X

 

X

 

New York

X

 

X

 

Rhode Island

X

     

Vermont

 

X

   

BUSINESS TAX CREDITS

Credit Amounts

All but two of the selected states—New Hampshire and Vermont—authorize business tax credits for film making. As Table 2 shows, most offer a flat credit against production costs incurred in the state. Connecticut offers separate, sliding scale credits for producing films and digital animation and a flat credit for constructing studios and other film-related infrastructure. New York offers separate credits for producing films and commercials and post production work performed in the state.

Table 2: Film Related Business Tax Credits in Selected States

State

Purpose

Amount

Refundable

Transferable

Carry Forward

Connecticut

Film Production

10%-30% of eligible production expenses

No

Yes--up to three times

Three years

Digital Animation

Same as above

No

Same as above

Same as above

Infrastructure

20% of eligible development costs

No

Same as above

Save as above

Maine

Film Production

5% of eligible production costs

No

No

No

Massachusetts

Film Production

25% of production eligible expenses

No

No

Five years

Payroll Withholding

25% for wages and salaries under $1 million

Yes—90% of value

Yes

Five years

New Jersey

Film Production

20% of eligible production expenses

No

Yes

Seven years

New York

Film Production

30% of eligible production expenses

No

No

No

Post Production

10% of qualified post production expenses

No

No

No

Commercial Production

5%-20% credit of qualified production expenses

Yes

No

No

Rhode Island

Film Production

25% of eligible production expenses

No

Yes

Three years

The credits differ in other respects. Businesses producing commercials in New York can obtain refunds for unused credits, while film producers in Connecticut, New Jersey, and Rhode Island that owe no business taxes can transfer their credits to taxpayers that do. Producers in Connecticut, Massachusetts, New Jersey, and Rhode Island can also carry forward and apply unused credits to future taxes.

Eligibility Requirements

As Table 3 shows, filmmakers qualify for credits based on the amount of money and time spent filming in the state. Those making films in New York must also agree to recognize the state's help in the film's ending credits or include a video promoting New York in the film's DVD version.

Table 3: Eligibility Requirements for Film Related Business Tax Credits in Selected States

State

Purpose

Eligibility Requirement

Connecticut

Film Production

Incur at least $100,000 in production costs in Connecticut

Conduct at least 25% of principal photography days here or

incur 50% or $1 million of post production costs here

Digital Animation

Spend at least $100,000 in production costs in Connecticut

Infrastructure

Spend at least $3 million developing infrastructure in Connecticut

Maine

Film Production

Incur at least $75,000 in production costs in Maine

Massachusetts

Film Production

Incur at least $50,000 in production costs in Massachusetts and

Incur at least 50% of total production costs there or shoot at least 50% of principal photography days in Massachusetts

Payroll Withholding

Incur at least $50,000 in production costs in Massachusetts

New Jersey

Film Production

Incur at least 60% of production costs in New Jersey

New York

Film Production

Incur at least 75% of production costs in New York

Time spent filming in New York varies depending on whether the film maker is independent or owned by a publically traded company

Acknowledge the state's help in producing the film by

Citing New York's help in closing credits or

Including New York promotion video in DVDs or other secondary market video

Post Production

Incur at least 75% of post production costs in qualified New York production facility

Commercial Production

Spending specified amounts depending on the New York location

Rhode Island

Film Production

Conduct at least 51% of principal photography days in Rhode Island

Incur at least $300,000 in production costs (including pre and post production) in Rhode Island

New York's eligibility requirements are more complicated than those of the other states in our sample. A filmmaker must meet separate requirements for (1) time spent making the film in state-approved production facilities and (2) shooting the film on location in New York and the costs incurred doing post production work there. As Table 4 shows, these requirements vary depending on whether a film is an independent production (i.e., total production budget is under $15 million and publicly traded companies own less than 5% of the production company).

Table 4: Eligibility Requirements for New York's 30% Film Production Tax Credit

Threshold Requirements

Film Company

Independent

Corporation

Facility

Shoot at least one full day on a set expressly built for film in a qualified production facility

Incur at least 75% of total production costs (excluding post production) in qualified production facility

Shoot on a set expressly built for the production on a stage in a qualified production facility

Except for pilots, conduct at least 10% of principal photography days in a qualified production facility

Incur at least 75% of total expenses in qualified production facility

Location (outside facility)

Conduct at least 75% of on-location principal photography days in New York or

Spend at least $3 million working in a qualified production facility

Same as above

Post Production

Meet facility threshold

Meet location threshold

Incurred at least 75% of post production costs anywhere in state

Same as above

New York offers a separate credit for making commercials, and producers qualify for them if they spend between $200,000 and $500,000 filming commercials there.

OTHER INCENTIVES

Besides business tax credits for production costs, several states in our sample provide sales and use tax exemptions, income tax credits, and cash rebates to filmmakers. Connecticut, Massachusetts, New Jersey, and New York exempt from the sales and use tax specific types of products and services used or consumed to produce films.

Maine, Massachusetts, and Vermont offer incentives geared toward the wages and salaries people earn while working on films in their respective states.

Maine reimburses filmmakers for a portion of the income tax they withhold from wages and salaries under $50,000 (12% for residents and 10% for non state residents).

Massachusetts provides a 25% payroll withholding tax credit against wages and salaries under $1 million paid in the state.

Vermont provides income tax credits to out-of-state residents performing in films shot in the state. The credit equals the difference between the tax on the income earned in Vermont at the highest rate in the performer's home state and the Vermont tax.

JR:ro

Attachment 1: Comparison of New England States and New Jersey and New York Film Production Tax Incentives

State

Incentive Type

Applicable Taxes

Incentive Amount and Limit

Eligibility Criteria

Incentive Structure

Connecticut

Film Production Tax Credit (CGS 12-217jj)

Insurance Premium

Corporation

Three-tiered credits:

10% for expenditures between $100,000-$500,000

15% for expenditures between $500,000 and $1 million

30% for expenditures over $1 million

Businesses must incur specified film production expenses and costs, including costs for production equipment and trailers incurred here

Film company must:

conduct at least 25% of principal photography days in Connecticut or

incur 50% or $1 million of post production costs here

Credits are not refundable, but (1) may be carried forward for up to three years and (2) sold, transferred, or assigned up to three times

Film Infrastructure Tax Credit (CGS 12-217kk)

Insurance Premium

Corporation

Flat 20% credit

Business must spend at least $3 million developing buildings, facilities, and installations needed to produce films.

Projects must be 100% completed before credit can be claimed

Credits are not refundable, but (1) may be carried forward for up to three years and (2) sold, transferred, or assigned up to three times

Digital Animation Tax Credit (CGS 12-217 ll)

Insurance Premium

Corporation

Three-tiered credit:

10% for expenditures between $100,000-$500,000

15% for expenditures between $500,000 and $1 million

30% for expenditures over $1 million

Business must incur eligible digital animation production expenses and costs in Connecticut

Eligible costs and expenses include intellectual property, production equipment, and trailers

Credits are not refundable, but (1) may be carried forward for up to three years and (2) sold, transferred, or assigned up to three times

Film Production Tax Exemption (CGS 12-412 (44))

Sales and Use

Exemption from 6% sales and use tax rate

Specified tangible personal property used in films, television, and radio

Not Applicable

Maine

Cash Rebates for Withholding Taxes (Maine Rev. Stat. 36 6902)

Reimbursement of Payroll Withholding Taxes

Rebate for taxes withheld from wages and salaries up to $50,000:

12% of certified for wages and salaries paid to Maine residents

10% for non Maine residents

Income withheld for Vermont income tax from wages and salaries under $50,000 paid for work in certified visual media productions, including films, TV series, video, and digital or photographic media project

Not Applicable

Film Production Tax Credit (Maine Rev. Stat. 5219-Y)

Business Income

5% of certified production expenses incurred in Maine

Business must incur at least $75,000 in certified visual media preproduction, production, or postproduction expenses, excluding wages, salaries, and other compensation

Not Applicable

Massachusetts

Film Production Tax Exemption (Mass. Gen. Laws Ch 64H 6 (ww))

Sales and Use

100% sales and use tax exemption (current rate is 6.25%)

Business must incur at least $50,000 over 12 consecutive months in Massachusetts producing feature length films, video, or digital media project; TV series; or commercials

Not Applicable

Payroll Withholding Tax Credit (Mass. Gen. Laws Ch 62 6 (l) (2))

Payroll Withholding Tax

Credit equal to 25% of Massachusetts withholding except salaries $1 million or more

Business incur at least $50,000 in production costs in Massachusetts

Credits may be:

Refunded for 90% of their value or

Transferred to another taxpayer and

Unused credits may be carried forward for up to five years

Film Production Tax Credit (Mass. Gen. Laws Ch 6)

Personal Income

Corporate Excise

Credit equals 25% of production expenses, excluding payroll subject to the payroll credit

Same as above, plus business must:

incur at least 50% of production costs in Massachusetts or

shoot at least 50% of the principal photography days there

Credits may be:

Refunded for 90% of their value or

Transferred to another taxpayer

Taxpayers may carry forward unused credits for up to five years

New Hampshire *

No incentives

No incentives

Not applicable

Not applicable

Not applicable

New Jersey

Film Production Tax Exemption (N.J.S.A 54:32B-8.49)

Sales and Use

Exemption from 7% sales and use tax for:

tangible personal property, including motor vehicles, replacement parts, tools, and supplies and

services for installing, maintaining, servicing, or repairing such property

Motion pictures, including television films and episodes, for broadcast, cable, closed circuit, or unit distribution, excluding films or video for a business' internal use

Not applicable

Film Production Tax Credit (N.J.S.A 54:10A-5.39)

Corporation Business

Gross Income

20% credit of qualified film and digital media production expenses

Business must:

incur at least 60% of total qualified production expenses, excluding post-production costs, in New Jersey and

begin principal photography days within 150 days after it was approved for credits

Credits may be carried forward up to seven years or sold or assigned to another taxpayer for at least 75% of their value

New York

Film Production Tax Credit (N.Y. Tax Law 24)

Business Corporation Franchise

Personal Income

Fully refundable 30% production credit

Feature length films and television films, pilots, or series

Businesses must:

spend specified amounts of time and money shooting the film in New York,

certify that they will procure taxable goods and services in state, and

acknowledge the state's assistance in producing the film

Depending on the credit amount, business must claim credits the later of two or three years after completing film or credit allocation was approved

$420 million per year in 2010-2014 ($7 million per year reserved for post production credit discussed below)

Post Production Tax Credit (N.Y. Tax Law 32)

Business Corporation Franchise

Personal Income

10% of qualified production expenses of feature length or television films, pilots or series

Business must incur at least 75% of post production costs in qualified production facility in New York

Credit must be claimed in the tax year when the work is completed

Cannot claim the post production and production credits for the same project

$7 million per year in 2010-2014

Commercial Production Tax Credit (N.Y. Tax Law 28)

Business Corporation Franchise

Personal Income

5% to 20% fully-refundable credit for qualified production costs

Annual credit limits vary by designated geographic area

Incur at least 75% of production costs in New York

Minimum expenditures range from $200,000 to $500,000, depending on where the business filmed or recorded the commercial

Credits exceeding tax liability are partially refunded:

50% of the credit amount the first time taxpayer claims the credit

100% of any remaining credit balance in subsequent year

Film Production Tax Exemption (N.Y. Tax Law 1115)

Sales and Use

4% state sales tax

Tangible personal property used or consumed directly to produce films for sale

Not Applicable

Rhode Island

Film Production Tax Credit (R.I. Gen. Laws 44-31.2)

Corporation Business

Banks Excise

Insurance Company

Personal Income

25% of certified production costs

Feature length films, video, video games, television series, or commercials

At least 51% of principal photograph days in Rhode Island

Business' total production budget is at least $300,000, including salaries

Certified production costs must be incurred in Rhode Island

Production cost include pre and post production costs

Transferable credit

Credit can be carried forward for up to three years

$15 million annual cap

Vermont

Tax Credit for Income from Film Production (32 V.S.A. 5826)

Income Tax

Credit equals the difference between the amount of tax the taxpayer would pay on the income if it were owed in his or her home state and the tax he or she must pay to Vermont

Taxpayer must have earned income for performing in a dramatic commercial film produced in Vermont

Not applicable

* The New Hampshire Film and Television Office's website acknowledges that the state offers no film production tax credits, but advertises that it imposes no sales, personal income, capital gains, or use taxes.