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08

By Erica Michel

LIghts, camera, tax breaks.

Tax incentive packages offered to film producers in the states have become a hot topic this legislative session, largely because of high-profile debates in a handful of states.

California, home to Hollywood and the historic center of the cinematic universe, is considering an expansion of its film incentive program. The proposed changes would allow larger films and television series productions to be eligible for credits, designed to keep studio blockbusters—and the money spent to make them—in the state.

In late April, the California Legislative Analyst’s Office (LAO) released a preliminary report that provides an overview of the film industry in California. The report does not make recommendations regarding the tax incentive bills moving through the Legislature, but highlights some key facts about the industry.

According to the report, California’s share of film and television production jobs has declined since 2004, but California still has more than half of the nation’s production jobs. The report also finds that the number of large budget films produced in California is declining. The LAO notes the difficulty in determining how film incentive programs are affecting industry changes in the state. 

In Maryland this year, the General Assembly debated an increased package of incentives for the Netflix hit series “House of Cards,” which had threatened to film season three of the show outside of Maryland without increased credits. After much discussion, the legislature eventually approved an $11.5 million tax incentive package for the series, short of the $15 million producers had sought, but enough to keep production in Maryland.

North Carolina does not begin its legislative session until mid-May, but film incentives are sure to be on the agenda. With tax credits expiring this year, supporters and opponents of film tax credits have already been making their case. An industry commissioned study recently found that film producers provided a net gain of $25.3 million to the state in 2012 and maintain over 4,000 jobs. A review of that study by the Legislative Services Office Fiscal Research Division states that the film industry conclusions are incorrect, and the return on investment for the state revenues is less than 50 cents on the dollar.

Nationwide, 39 states currently have film incentive programs on their books, and their economic impact in states is far from certain. A number of state offices, independent researchers, industry and other organizations have attempted to calculate the effects of film incentive programs, often with opposite results.

Film incentive programs highlight the difficulty of evaluating economic development programs in states more broadly. As lawmakers try to lure jobs and development to their states, they are often looking for ways to evaluate which development programs give the state the most bang for its buck. The high profile nature of feature films ensures there will be much more talk about film incentives as states continue to compete for jobs and investment.

Erica Michel is a research analyst in NCSL's Fiscal Affairs program. Emaill Erica.

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.

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