Production incentives are a godsend to your film’s budget. The money granted through these state-funded programs is pumped back into your bottom line, allowing you to stretch each dollar you put on screen.
But how do these incentives work? How hard are they to access? And what do you need to know before applying?
To get some answers, we spoke with Ryan Broussard, Wrapbook’s VP of Sales and Production Incentives. He’s spent 16 years studying state film incentives to help projects of all sizes take advantage of these tools.
In that time, Broussard has marshaled film production incentives to optimize financing for countless productions, crafted groundbreaking reporting measures to create faster audit processes, and even consulted with some states and local jurisdictions to help design their incentive programs.
His knowledge and experience makes him an essential member of the team at Wrapbook - and not just behind the scenes!
Through research and legislative debate, states have figured out that hosting productions can have massive economic impact. Crews number in the dozens to hundreds of people - all of whom have to eat, sleep, and entertain themselves while shooting a movie or tv show.
And they’ll spend lots of money doing it. According to Ryan:
“[States] understand that the economic impact of filming in an area is like dropping an economic bomb.”
Production incentives are a way a state says that “we want you to film here and we will incentivize you through money to film here.”
In essence, they are government programs that spend money to entice film in a specific state.
While there are on-going debates about the proper size and spend for incentives, Ryan points out that almost every state that lets their incentives program expire will often spend years trying to get it back up and running.
Film and production incentives aren’t just piles of money sitting outside America’s state houses for anyone to grab. They are highly specialized programs with specific requirements that must be cleared for the incentive to be approved.
We’ve already compiled a list of each state’s incentives for 2023, but each incentive is unique, with its own benefits and requirements.
Let’s take a look at a few of the most popular categories.
A refundable tax credit is one of the most common incentives that states offer. Ryan explains,
“You get dollar for dollar back what you spend in the state, aligned with whatever percentage they're going to give you back. So if the state says they'll give you back 25% on what you spend for example, there are refundable credits that you would get back - if you meet the minimum criteria based on the local spend that you're doing.”
The “local spend” Ryan mentions is an important detail. Remember, the upside to allotting public funds for these tax credits is to bring outside money into a state’s economy.
Therefore, many incentives require a set amount of money to be spent locally, whether that’s on cast, crew, equipment, locations, or other production expenses.
Once that spend is cleared, there’s one more step before the money comes back to production.
“You have to file a tax return. They (the state) offset your liability with what your production company or the person applying has in the state, which could be be nothing. You're coming from out of state, so there's really nothing to offset the tax credit with. Since it's fully refundable, then they give you a check after you've done that tax return.”
Finally, it’s important to note that not all state tax credits are fully refundable. Some are only partially refundable, meaning you’ll only get back a percentage of what you spend on qualified line items.
Make sure that you know which one you’re dealing with before you start budgeting how much money your production can plan to receive back from the state.
In the case of transferable tax credits, the state does not issue your production a refund check. It simply offsets your in-state tax liabilities.
Where this gets tricky is that most productions receiving these tax credits don’t have businesses created in the state, so they don’t have any state tax liabilities to off-set.
So how does that money get back into your budget?
“The tax credit is transferable. You sell it. You sell it on the open market.”
All kinds of in-state companies might be interested in purchasing these credits. For instance, let’s say a retail chain is planning to acquire several stores in Illinois. This will create an increased tax bill for them in Illinois, and they might be interested in offsetting that bill by purchasing credits from your production.
Be aware that selling your credits on the market means you won’t get your rebate back dollar for dollar.
“You have to know what the market is selling the credits for. Are the credits currently going for 90 cents on the dollar? Eighty-five cents on the dollar? Eighty-seven cents on the dollar?”
One of the many things Ryan helps Wrapbook clients do is navigate the market around these tax credits. He’s able to tap into his cultivated network of brokers to take a litmus test of what transferable tax credits are currently going for.
The answer helps give productions a sense of what the return on their tax credits will be and what they can safely budget for after they file their state tax return.
The third type of incentive falls into the category of rebates and grants.
These are essentially “buckets of cash,” as Ryan puts it, that can be accessed by productions that meet certain requirements. They “provide a cash rebate to still photo campaigns, commercials, unscripted television, scripted television, and feature films.” Oregon, for example, just increased their rebate to over 25% on certain film and TV series.
Keep in mind that the state will often want to make sure the projects getting these rebates and grants will pay dividends in terms of public relations for the area. Some grand and rebate programs like Texas and North Carolina want to make sure it’s going to somebody that will paint the area in a positive light because they have limited resources.
Mississippi, on the other hand, has an amazingly popular first-come, first-serve rebate program. It’s important to research and understand what the requirements for each state are.
Be aware that no matter what kinds of grants or rebates you’re applying for, you’ll have to go through a vetting process before you can count on those grants or rebates to support your film.
These incentives aren’t always easy to get.
Each state has limited resources and its own complex system of requirements to abide by, which can make it tricky for a production to decide where to shoot, how to apply, and what to report.
Start by making calls and hitting the internet to find out exactly what start paperwork a state needs from you. Ryan says that - as with everything regarding state incentives - each state is different.
“One state might be as simple as ‘Hey, make sure you fill out this single page application or intent to film page 10 days before you start filming,’ and you're in the system. Others might [require] setting up you know, local companies, local withholding accounts, and a few other hurdles to jump over.”
You’ll want to do this well in advance of your shoot, because state piggy banks aren’t bottomless. You need to make sure that the state you’re looking at shooting in still has funds available to grant.
While doing this research, Ryan encourages you to ask questions to avoid pitfalls. Is there an application fee? If yes, is there more than one application fee? Are there any back end fees that need to be budgeted for?
Knowledge is power and you’ll want to make sure you’ve prepared for your application from every angle so you have the best chance at receiving incentives.
Once you’ve put in the legwork to make sure the state program you’re looking at is funded and that your project meets their requirements, it’s time to start filling out applications.
Each state has a different process that must be completed on their individual timeline. Most require the application to be filed before principal photography, but Ryan points out there are always exceptions to that.
“Louisiana lets you go a year backwards from your allocation letter. Georgia, you can apply all the way up until the end of principal photography.”
Despite these varied timelines, it’s generally a good idea to be prepared as thoroughly and as early as you can.
Assuming your production qualifies for state incentives, you’ll still need to follow up with the film commission to demonstrate that you are meeting all the requirements.
And would you be shocked to learn that each state has different reporting requirements?
For instance, if you’re shooting in Utah, where they only incentivize local hires, the state will want to take a look at your payroll reports to make sure you complied. They will want to see how many hours these locals worked and what fringes they were paid.
Other states may want to examine required tax withholdings to make sure they were reported properly. And if there are minimum spend requirements, (e.g. you have to spend at least $50,000 in state to qualify for the incentive) you’ll need to verify that those thresholds were met.
Even if the state doesn’t require these updates during production, it’s a good idea to stay on top of these requirements so that reporting them doesn’t become a chore later. For instance,
“Mississippi has a whole hyperlink Excel sheet that they give you, and I recommend people [get] in front of that form early. Start working on it as you're going through production. They want hyperlinks to every payroll, every cost, every vendor in this sheet, and if you're doing it with production it's not so bad. If you're doing it retroactively, you might need some help.”
As you do your research, you’ll learn that not all incentives are created equal. It’s important to consider states and incentives from all angles to figure out which ones best match your project’s needs.
First, choose the right state for your production.
Not all states incentivize all kinds of production. For instance, Connecticut doesn’t incentivize theatrical films. They look to incentivize television productions, post, and movies-of-the-week so that they are building a base of episodic, recurring work for their local crews. They are not looking to bring the giant “tentpole productions” to the state, and that has worked brilliantly for them.
Tennessee doesn’t usually incentivize non-residents for productions filming there, but for scripted series that bring high quality, repeat business - like in the case of Nashville - they will make exceptions.
Budget is also a factor to consider. If you’re shooting a micro-budget project, you might not qualify for the larger in-state spends that some states require. But New Mexico doesn’t have minimum spend requirements, and states like Massachusetts and Mississippi have extremely low thresholds, making them a great target for lower budget productions.
Finally, some states, like Georgia, have become booming film and television production hubs. You can take advantage of a robust production infrastructure and well-trained local crews.
But, be sure to research how busy a state is before you decide to shoot there. It would be a disaster to budget for local crews and incentives only to realize that all the local labor has been snapped up after you get boots on the ground.
Because there are so many variables involved in making decisions around incentives, Ryan encourages producers to run all their numbers before making any decisions.
“If you're from California and you work with a particular camera vendor and they just give you an amazing discount, don't just assume, ‘Well, I'm going to a particular state, so I got to find a camera package there.’ Because yeah, you might get the incentive on it [...] but is it cheaper than the one that you have that you've been using and have connections to?”
Another place to consider financial variables is the difference between states that offer refundable tax credits versus a transferable tax credit. Remember, if you’re trying to choose between a 20% refundable tax credit in one state versus a 25% transferable tax credit in another, you likely won’t be able to sell those transferable tax credits for their full value.
Bottom line: don’t just chase the higher number. The 20% credit that is fully refundable may actually end up being a much safer bet.
After you’ve done your research and run your numbers, then you’re ready to spend the targeted time and energy it takes to apply for state incentives.
Because state film incentives are a boon to both production and the locales where they are granted, Ryan sees a bright future for incentives in the U.S.
“In the beginning of July we will see a flood of new legislation come through for states, and many of them are improving their programs. They're making the percentages higher, they're extending their programs, they're getting more funding. And there's a reason why. It works.”
One of the most high profile examples of a local economy being transformed by state filmmaking incentives is the case of Senoia, GA - home of The Walking Dead. On the ropes since the local cotton and agricultural industries died off, the town now boasts a retail district that grew from six to 49 businesses in half a dozen years.
Success stories like Senoia have driven the baseline for incentives to around 20% with many states already trying to beat that. And it’s not just the numbers that are set to evolve. Many states are finding ways to make incentives work even better for their citizens.
One focus that many film incentive programs have is broadening the diversity of their labor base. For years, Illinois requires that projects must demonstrate their best effort to hire a diverse crew on both sides of the camera.
According to Ryan, more states are requiring local hires or tying bonus incentives to productions that give something back to the community from an educational standpoint.
States are starting to request that productions hire local interns and contribute to localized training programs. This will help areas build a strong on-set labor force that can compete in a globalized market.
Even more so, there are states that simply do not have a program currently, but their local areas might. For example, the Florida state program expired years ago. However, rebates and grants in North Miami, Fort Lauderdale, and Miami-Dade County are all being utilized.
This kind of competition is great for productions, who can better tune their incentive applications to areas that best fit their needs. And it’s great for cities and townships who have a strong tax base and want to juice their economies with all the benefits of film production!
While state production incentives may seem overwhelming, Ryan has some parting words of wisdom:
“It's not as simple as it sounds, but it's not as complicated as people fear.”
Scouting production locations? We’re breaking down 10 states with considerable film tax breaks so you can get the most bang for your budget buck.
Wrapbook's newest resource is our podcast, "On Production," which features experts in the field and tips on how to navigate the production world. Check it out!