Arizona will give $125 million a year in tax credits to film and TV productions
In order to lure television and film producers to the Grand Canyon State, Arizona will give out up to $125 million a year in tax credits under a new program that Gov. Doug Ducey allowed to become law on Wednesday without his signature.
The new Arizona Motion Picture Production Program goes into effect in 2023 and will last until 2043. It will begin at $75 million a year, then grow to $125 million by 2025.
To qualify, producers must primarily shoot their film or television show in Arizona, conduct pre- and post-production in the state and hire Arizona workers to crew the production. Productions that spend less than $10 million could get tax credits for 15% of their costs, while those that spend more than $35 million are eligible for 20% of their spending to be offset by tax credits.
But production companies could take those tax credits as cash refunds if the credits are larger than the amount of taxes they paid in Arizona.
The measure was the resurrection of an earlier proposal that passed the state Senate but ultimately stalled in the House of Representatives, where conservative lawmakers refused to allow it to be considered by the full chamber. The bill is an attempt to revive the 2005 Arizona Motion Picture Production and Infrastructure Credit program that oversaw a loss of $6.3 million in just one year.
More than 5,000 movies and television shows have been filmed in Arizona since it became a state, and it was once a popular location for Westerns starring John Wayne and other stars of early cinema. In 1963, Sidney Poitier starred and directed in "Lilies of the Field," which was filmed in Tucson, and for which he won an Academy Award for Best Actor. But in recent decades, Arizona has fallen out of favor as other states — including neighboring New Mexico — have implemented tax incentives aimed at drawing film production to their states.
The original plan called for up to $150 million a year in tax credits. In the final week of the session, the bill was revived as a strike-everything amendment on House Bill 2156. It passed the House with strong support from Democrats and fewer than half of Republicans.
Legislative budget analysts reviewed the original proposal and said claims that the state will see a return on its investment are unfounded — and the state could end up getting little in return for its money, in large part because the tax credits are refundable.
The analysts also concluded that claims the tax incentives would give Arizona a competitive edge over other states are also not true: As many as 30 other states offer film credit programs that reduce production costs anywhere from 20% to 30%, and Arizona's 25% is not much more enticing.
While the bill seeks to attract out-of-state film productions, in-state productions would also benefit – at the cost of taxpayers.
"For example, local commercials that would have been filmed regardless of the bill would now receive a credit of at least 15% of their production costs," the analysis by the Joint Legislative Budget Committee noted.
Neither version of the program includes minimum total spending requirements, instead making eligibility contingent on in-state production. To qualify for tax credits in California, projects must have a budget of at least $1 million — this ensures only the larger projects with greater rates of economic activity production benefit.
Ducey on Wednesday took the rare step of allowing the legislation to become law without his signature. The state constitution gives governors the power to sign bills into law, veto them or allow them to become law without a signature.
This report was first published by the Arizona Mirror.