NY Budget Plan Boosts Film Tax Credits to $800 Million

As seen on Bloomberg Tax.

New York lawmakers are backing a budget proposal by Gov. Kathy Hochul (D) to create $100 million in film tax credits for independent producers, boosting the size of the annual film production benefit to $800 million.

The Democratic majorities in the state Senate and Assembly included the governor’s new independent film production program in budget resolutions they plan to pass Thursday before negotiating with Hochul on a final budget due April 1.

Both chambers also backed a two-year extension of the existing $700 million program for other film production and post-production activities, allowing it to last through 2036. The credit for independent films would also expire that year.

Hochul’s push to remove limits on how much the state’s film tax credit can offset a project’s wage costs—the cap now is $500,000 for above-the-line talent like directors and actors—didn’t fully pass muster with lawmakers. The Senate and Assembly plans, released March 10, oppose lifting the limit for the post-production credit, which is capped at $45 million annually.

The lawmakers’ move underscores how the arms race among states to beef up their film incentives shows no signs of slowing down, as elected officials vie to attract Hollywood blockbuster films and major television series that bring cast and crew to local businesses and hotels. But New York’s benefit, which is already one of the largest in the US, has faced criticism for its impact on tax revenue—a concern that has mounted as GOP policy makers in Washington work on federal cuts to major spending areas like Medicaid.

Beating the Competition

Senate Deputy Leader Michael Gianaris (D) said that the state has to continuously “tinker” with the film tax abatement to keep up with incentive packages offered by other states, and that the program provides broad economic benefits—including luring tourists to see the filming locations of productions like “Sex And The City.”

“It’s a very competitive policy area,” Gianaris said in an interview. “New Jersey is taking more and more productions from New York.”

The film tax credit “often gets swallowed up by the larger productions,” he said, adding the new pot of money will make it easier for independent production companies to get a slice of the pie.

The film and television industry has said incentives are a driving factor in determining where films and television series choose to shoot. Many of the contenders for this year’s Academy Award for Best Picture were shot far from Hollywood, instead taking advantage of millions in tax credits offered by Louisiana, France, and elsewhere. And as producers continue to look beyond California, lawmakers there are considering a proposal from Gov. Gavin Newsom (D) to more than double the amount of credits available every year, from $330 million to to $750 million.

“We’re really encouraged that the legislature agrees with Gov. Hochul’s desire to grow the film industry statewide,” said Josh Levin, vice president of state government affairs for the Motion Picture Association. “All New York stakeholders are looking for ways to respond to national and global competitive pressures, and we believe the final budget language will best position filming in the state to flourish.”

Joseph Chianese, senior vice president and practice leader of production incentives at Entertainment Partners, said the new credit would allow New York to “compete directly with Ireland and the UK when it comes to independent film.”

Criticism Mounts

But the push to boost New York’s film tax incentive comes at a risky time for state finances, with officials projecting billions in future budget gaps as congressional Republicans pursue cuts to major programs that states rely on, said John Kaehny, executive director of Reinvent Albany.

“To pretend that everything is fine and we’re in this period of enormous prosperity, so much so that the state can flush taxpayer money down the toilet, is insane,” he said in an interview.

Critics have faulted the program for demonstrating little return on taxpayer investment. An audit by PFM Group Consulting found the film tax credit produced 15 cents in direct tax revenue and 31 cents for all combined state tax revenue for every $1 invested. State economic officials have disputed the finding and said studies they have commissioned have found a positive return.

State Sen. James Skoufis (D) is sponsoring legislation aimed at getting a better accounting of how film tax credits are spent. One bill (S4662) would require quarterly reporting specifying where in the state projects were filmed that have received film tax credits. Another (S4661) would require applications for the incentive to be reviewed by CPA firms.

“At the bare minimum, we should be passing measures like this that hold these programs more accountable,” he said.

To contact the reporter on this story: Danielle Muoio Dunn in New York at ddunn@bloombergindustry.com