In a bid to make the state as competitive as a filming destination as nearby New Mexico, Arizona has signed a compelling new Film and TV Tax Credit Bill into law. While some legislative naysayers claim the state will not see a return on the investment, it’s sure to attract some attention as content-hungry streaming companies look for new and different ways to drive content to their streaming platforms. Entertainment lawyer Brandon Blake, with Blake & Wang P.A, has all the details.
$125 Million in Tax Breaks
This makes Arizona one of only a handful of states offering nine-figure caps for their entertainment incentive programs. Despite not signing the bill himself, Gov. Doug Ducey passed it into law as of last Wednesday.
The new bill will allow productions shot in Arizona to qualify for a refundable tax credit of up to 20% of expenses. Called the Arizona Motion Picture Production Program, it will launch in 2023 with $75M in the kitty, and swell to $125M by 2025.
People who wish to claim from the incentive must either:
Use an Arizona facility for production,
Or, for location shoots, must shoot and conduct the bulk of pre- and post-production in the state.
Additionally, the credit system is tiered as follows:
Productions spending less than $10M get a tax credit of 15%
Those between $10M and $35M qualify for 17.5%
Over $35M wil net 20%
If Arizona locals are employed, or if a long-term tenancy of a local production facility is signed, there can be a 2.5% bump in those totals. As a practical example, a production with $15M spent in-state could net themselves tax breaks between 17.5% and 22.5%, depending on the amount of local hires, and a minimum of $2.5M back for it. The overall studio cap sits currently at $25M in tax breaks, but a cash refund is offered where it’s larger than the tax liability.
A Local Game Changer or Not?
Supporters of the new program have had their eye on the positive results seen in New Mexico after the launch of its own Film and TV tax incentive program, which has recently swelled it’s cap to $110M. Bringing a slice of this same power to Arizona, they argue, could be a game changer for the state.
New Mexico has, indeed, done pretty well from the deal. It’s seen about $624M in direct spending in the state for 2021 alone. Its own refundable credit program sits between 25% and 35%, dependent on certain parameters, one of the most generous on offer currently. They’ve also seen local investment from both NBCUniversal ($500M) and Netflix ($2B), who are hosting production studios there and actively producing content. New Mexico is now busy enough that Arizona may just manage to lure away competition struggling to find stage space there. The last 2 decades tells us that states with tax incentives do attract entertainment business.
However, Arizona’s older 2005-2010 state program was killed when it resulted in a 2008 loss of $6.3M for the state. Critics of the new incentive claim this will happen again, especially as in-state productions that would have filmed there anyway (think TV commercials) qualify under the program.
However, the modern filming landscape is a vastly different creature from where it was in 2005. With the increased demand for content a critical factor in the issue, Arizona well could see its luck turn around with this new implementation.