Arizona may revive film tax credit to compete with Utah, N.M.

Apr 27 2012 - 6:19pm

PHOENIX -- New Mexico has AMC's "Breaking Bad," USA Network's "In Plain Sight" and now Disney's "The Lone Ranger." Utah has had big productions of its own, including a "Pirates of Caribbean" movie and "127 Hours."

In Arizona some lawmakers say they want their state to be able to better attract the lights, the cameras and the action.

They are resurrecting a film tax credit they say will make the state more attractive to the film and television industry in the way that their neighbors in the Southwest have already done.

Supporters say the plan would bring money, jobs and recognition to a state that could use all three.

"The states surrounding us are taking work away from us, work we cannot get," said Mike Kucharo, a film producer and president of the Arizona Film & Media Coalition.

"As long as other states are doing it, we have to do it or we're just getting clobbered."

But critics say those claims are overblown and that the proposal would cost money, not make it.

"It's a cost to the state we can't afford," said Steve Voeller, president of the Arizona Free Enterprise Club, a lobbying group that supports low taxes.

"It's not as though we're swimming in cash."

The bill, which has been introduced for the third time in three years, is scheduled for a House vote. The proposal includes a 20 percent tax credit for multimedia productions that spend at least $250,000 in Arizona. Companies that use private facilities in the state would be eligible for another 5 percent credit.

Under the proposal the rebate would be capped at $15 million and would last until 2041.

An incentive program was created in 2006 but expired in 2010. Since then, supporters have been pushing to renew it but have been turned back by detractors who say the credit would mean throwing taxpayer money away for little in return.

Opponents such as Voeller say the bill would be a handout to the showbiz industry and that state residents will pay a high price for very little benefit to the local economy.

But John Stewart, a lighting technician based in Phoenix who supports the plan, says it would bring jobs.

"I've seen the effects of this," he said. "When I moved to Louisiana when they first got their incentive, there was a crazy amount of films being shot their all at once."

Dennis Hoffman, a professor of economics at W. P. Carey School of Business at Arizona State University, said the advantage of a film tax credit depends on how much it affects a studio selecting a location.

"If this was a movie about the Grand Canyon, then they're going to be here anyway," Hoffman said. "Then I would concur with the argument that we are giving money away."

According to the National Conference of State Legislatures, 44 states offer incentives such as tax rebates and sales tax exemptions to film companies.

New Mexico offers a refundable 25 percent film production tax rebate with a cap of about $50 million.

Among the projects set to film there is "The Lone Ranger," which will feature Johnny Depp as Tonto. The state has also been the primary location for TV shows such as "Breaking Bad" and "In Plain Sight."

Utah offers a tax rebate between 15 and 25 percent, depending on the minimum dollars spent. Recent movies that shot there include "127 Hours" and "Pirates of Caribbean: At World's End," which features Depp in his role as Capt. Jack Sparrow.

A report issued by the Arizona Commerce Authority shows that in 2009, 17 companies that were pre-approved for the rebate employed nearly 250 Arizona residents.

Of those 17, only four received final approval after their projects were finished. Together, these four companies spent $9.3 million and generated almost $600,000 in state and local taxes.

However, they accumulated $2.6 million in tax credits resulting in the state's general fund spending about $2 million. Recent movies that filmed in Arizona include "Everything Must Go" starring Will Ferrell, which came out in 2010.

State Sen. John Nelson, a Republican from Litchfield Park, and is urging the bill's passage said direct profit won't happen overnight. Nelson said with the jobs and spending film crews would bring, the state would get revenue to help offset any tax rebates.

"The fact that they're going to be spending money 12-18 months before we start giving money back," Nelson said. "We will have all that revenue coming in that we can put in the bank and start collecting interest on."

 

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