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 |
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.