How Film Tax Credits Really Work
Francine Lipman, UNLV law professor
All those tax incentives offered to film production companies to shoot in Nevada? The filmmakers usually don't even incur enough of a tax burden to use them. So who wins when the state gives a tax break to the movie people. It's not who you think -- the credits are usually sold or traded to casinos or other big businesses.
Why issue tax credits to film companies, if they’re just going to sell or trade them?
In the state of Nevada as we know we are a very low tax state and so business taxes predominately are on net payroll. So the movie producer company is going to have very little of the tax that would be imposed by the State of Nevada. If the state is attempting to create more jobs and motivate and inspire movie producers to make movies in the state, they have to offer some sort of incentive to compete with, as you said, the 45 other states that have these sort of tax incentives and so a tax credit or some sort of abatement just for the movie producer themselves would not be meaningful.
Will these credits be good for the Nevada economy?
We hope they will and as I said everybody is motivated to try to create jobs here so there’s a lot of paper trail created by this on an annual basis, and this is a limited time credit so it expires at the end 2017 and I really do believe it will be the burden of the film producers to prove that this did generate jobs and generate more tax revenue. We’re hoping that this will create more revenue, more jobs, more business, more commerce. And so these companies will effectively have the burden of proof.
How will we know if these credits are good for the Nevada economy – what are the benchmarks?
We should all be diligent about making sure that the information that is to be collected on an annual basis. It is in our best interest to make sure that these credits can be the best they can be, because we want these dollars to go as far as they can, so I think we need to look at the annual data that’s going to be generated by the report.