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Film tax incentives

Extension of movie tax credits pushed


With a state program offering movie productions tax credits set to expire at year's end, a lawmaker wants to not only renew the program but offer incentives similar to those in New Mexico.

"If we can build an industry here, Why not?" said Sen. John Nelson, R-Glendale, sponsor of SB 1409.

His bill would offer companies a cash refund for tax credits they don't use when shooting in the state. The current program forces filmmakers to sell their unused credits to companies with state tax liabilities.

Selling unused credits is a time-consuming process that involves hiring a broker, said Philip Bradstock, program manager for the City of Phoenix Film Office. With refundable credits, producers would be able to close shop after a film is over without needing a third party to sell unused credits, he said.

"It takes a person out of the picture," Bradstock said.

Cash refunds for tax credits would make Arizona's program more like that of New Mexico, which has picked up the nickname "tax-incentive capital" in the movie industry, said Randy Murray, owner of Phoenix-based Randy Murray Productions.

Murray said it's important to be on the list of states offering refundable tax credits but not essential for Arizona's tax incentives to match or exceed those of other states. Arizona can compete and win based on its beautiful and diverse filming locations, rich history and talent pool, he said.

"We don't have to give away the farm," he said.

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The bill, which was heading to the Senate floor by way of the Rules Committee, would require productions to hire 25 percent of their employees in-state rather than the 50 percent currently required by the program.

Bradstock said that change would help because there aren't enough people in Arizona's movie industry to have 50 percent of employees come from here if multiple films are in production.

Production companies that pass the application process and agree to be audited by the state would receive a 20 percent tax credit if they spend between $250,000 and $1 million in Arizona. A 25 percent tax credit would apply to those that spend more than $1 million here.

The bill would limit total tax credits for a production to $20 million.

Adding a requirement to audit productions that receive tax credits would ensure that Arizona is reaping the benefits, Nelson said.

"We're going to get people to spend their money in the state," he said.

If a production company films at a studio with a $50 million infrastructure investment, it would be eligible for a 30 percent tax credit. There currently aren't any studios of that size in the state, but two such facilities are planned for Mesa and Avondale.

Barry Kluger, a spokesman for Mesa Gateway Studios, which plans to break ground in August and offer post-production, special effects and animation, said being able to offer that level of tax credit would bring more major productions to Arizona.

"You can have the studio, but if you don't have the incentives, who is going to come here to shoot?" he said.

However, Sen. Ken Cheuvront, D-Phoenix, said the bill is offering too much and asking too little in return. When the Senate Commerce and Economic Development Committee heard the bill, Cheuvront questioned offering productions millions in tax credits for a relatively small number of jobs created.

"In a time when we are in economic straits, the idea that we are going to be handing over checks is unconscionable," he said.

A 2008 Arizona Department of Commerce report determined that the existing tax credits program actually ended up costing the state more money than it made _ more than $6 million for the state's general fund.

Bradstock said the report didn't take into account other tax revenue generated by production companies, including taxes paid by hotels and other firms that benefit from productions.

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