Many projects are turning to states like Oklahoma or Georgia to film because of various tax incentives. (Photo via StockSnap/Pixabay)
Thirty-eight states in the U.S. offer incentives for film and television production, Texas among them. These incentives take the form of grants or tax credits, which encourage productions to film in certain states. With a two-year investment of $200 million — up from $45 million annually — Texas is bulking up its filming commitments but lags behind state neighbors.
It’s key to remember that Texas is not inherently a bad place to film, but faces stiff competition with other incentivized states. In 2023, the statewide filming grant went from $45 million to $200 million, but filmmakers aren’t yet drawn to Texas as they are to Oklahoma or Georgia. Before the grant investment shot up, the $45 million quickly ran dry each new year. While the current amount is much larger, it still allows for a limited number of projects to be made in-state over a relatively short investment period of two years.
According to the New York Times, Oklahoma currently holds a $30 million cap for projects as part of its rebate program and was the primary filming location for Martin Scorcese’s “Killers of the Flower Moon,” FX’s “Reservation Dogs,” season one of Sylvester Stallone’s “Tulsa King” series and the upcoming “Twisters” revival, starring Austin-native Glen Powell. This is a 10-year program, with a sunset date of 2031. In other words, medium-to-high-budget projects made in Oklahoma can receive up to $30 million in rebates. Texas’ rebate system pulls from a limited amount of money for all eligible projects (the $200 million mentioned previously).
The article concludes with a brief description of Texas House Bill 3600, or TX HB3600, citing it as an unsuccessful bill that would have completely changed Texas’ incentives, replacing the current cash grant system with a transferable tax credit system.
As the New York Times reports, states can offer incentives through grants or cash rebates, which is money outright paid to a production entity (either a company or individual). Texas is a grant incentive state.
Other states offer tax credits, meaning a percentage of money can be saved from the taxes owed to the state government.
The credit amount can benefit the production entity in three ways, depending on the state. First, these credits can be used for tax liability, meaning the amount owed in taxes can be deducted by subtracting the credit amount.
Second, production entities can have their credit amount as a refund. This would be paid to them by the state in a separate transaction.
Last, these credits can be sold to other companies for a discounted rate, which could be done if the production doesn’t owe enough in taxes to use the credit, or if the deal is otherwise mutually beneficial. Say a production company receives a $1 million tax credit for a film. They could follow the first two options, or sell the credit to Coca-Cola for $800,000. This way, the production still benefits from the credit, albeit for a slightly lower amount.
Why does Coca-Cola want the credit? They have their own taxes, so they can use the $1 million credit to deduct from what they owe. Additionally, they build a relationship with the production entity for future deals, including but not limited to future credits.
Why is this legal? The companies have approached the state and relevant tax authorities and have gone through the approval process.
Why would they approve? This deal is one of many in the state’s economy, but the dollar amount is significant and it’s returning to the marketplace. The state is also losing $1 million regardless, so it makes no difference which of the two companies benefits.
Filed on March 6, 2023, TX HB3600 would allow for uncapped tax credits aimed at projects made for at least $15 million, according to The Hollywood Reporter. Eligible projects would receive a 30% base transferable tax credit, which could reach up to 42.5%. The credit would be based on various factors, including in-state spending, wages, time spent filming in-state, project type and more.
The uncapped system would mean tax credits wouldn’t max out at a certain dollar point, allowing for massive amounts of money to be returned to creditors.
As reported by the Associated Press, Georgia is expected to pay $1.35 billion in tax credits for 2024 due to their uncapped incentive system, which has been a major draw to blockbuster franchises such as the Marvel Cinematic Universe and “Stranger Things.” Because the total credit amount is so high, and most companies don’t owe enough in taxes to use all their credits, $1.4 billion in taxes is still outstanding. It can’t be predicted when these unused tax credits will be submitted, potentially causing a massive tax income shortfall if turned in all at once. Additionally, according to a Georgia State University study in December 2023, less than 20 cents on the dollar are returned for the state’s credit investment, making the long-term feasibility of Georgia’s uncapped system a topic of debate.
The costliness of an uncapped system spelled doom for TX HB3600, which would implement the same program in Texas. It was read and considered through a series of hearings and committees, postponed on May 1, 2023, postponed again on May 8, 2023, and again on May 11, 2023. The bill is not dead, and will be revisited on May 11 of this year, but is currently listed as “sine die,” meaning “without any future date being designated (as for resumption).”
Although currently lagging behind state neighbors, the future of Texas’ incentive program is not set in stone. Whether it’s through cash grants or tax credits, the demand to film in Texas is still high.
Did you learn anything about Texas film incentives? What would you like to know for the future?
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