Why New York Is Making Dollars & Sense for Filmmakers
by Richard Sheehan on April 7, 2011 in Financing
New York has long been the heart and soul of independent filmmaking. Directors, writers and producers still manage to find interesting neighborhoods in the city’s five boroughs that have either not changed in the last fifty years and are perfect fits for a period piece, or that have had so much regentrification that they are suited as modern or future neighborhoods. And that is just the city – don’t forget the beaches of Long Island, the beautiful mountains of the Hudson Valley and the cities surrounding the great lake area up north.
There is also a community of filmmakers here that know each other, collaborate, and are welcoming to their fellow filmmakers that come to work here from other parts of the country. It is the kind of community in which many young and talented artists graduate from preeminent film schools such as Tisch and Columbia and choose to stay here to master their craft. It is also a place where many of the greatest actors we have today choose to live, and don’t mind taking a part that will only require a few days or weeks work when they can be home with their families at night.
What has brought many new filmmakers here over the last few years has been the large refundable tax credit incentive offered by NY State. This has been a huge benefit,especially for independent filmmakers with budgets under $15 million dollars. The state offers a 30% tax credit on all eligible below the line money spent producing a film within NYS. This covers basically everything with the exception of the actors and directors salaries. There are some minor caveats, such as spending at least one day on a “qualified” NY soundstage, but the people at the Governor’s Office for Film &Television work very closely with the applicants to make sure everything goes smoothly, which will hopefully make them want to come back here again.
Roughly, the credit works out to approximately 20% of the overall budget. So, if you have a film budgeted at $3 million, you’re refundable tax credit should be around $600 thousand.
Several of my clients have been able to use the promise of the refund as a way to ensure investors at least a portion of their investment will be returned without even to have to sell the film. Others have found ways to use the credit as additional financing.
NYS has been offering it’s tax incentive since 2004, and in the last few years other states have jumped on the bandwagon. They saw how the entertainment industry brings much needed jobs and revenue to their states. I have seen many of my producer clients go to film in Michegan, New Mexico, Louisiana and Georgia in the last two years because of even larger credits offered in those states, and, in some cases, an easier way to cash flow those credits.
In 2010, after much lobbying of the NY Senate & Assembly, the film office here was able to get passed a $2 billion allocation to be given out over five years, at $450 million a year. Because the money was immediately allocated, it ensured the funds would be there for filmmakers at least through 2013. No mention of trying to cut it has been made by our new governor, I think mainly because the film office did such a good job by hiring Ernst & Young to provide statistics that show that for every $1 of tax credit given, the state receives $1.90 in revenue.
Ironically, other states that now have new Republican governors that are trying to cut expenses where ever they can are now either cutting the program all together or severely limiting the cap per year. Michegan and New Jersey are on hold while they decide what to do, New Mexico has proposed to cut the incentive from 25 to 15%, and cap it at $45 million per year. Pennsylvania is on hold , while they consider legislation to cap at $50 million. Only Georgia appears to be taking steps similar to NY, in that they are drawing up a cost benefit report to show what the incentive does for the state.
Meanwhile, back here in old New York, the film office has never been busier as independent filmmakers line up to get there applications in the queue to qualify for tax credits.
Film and television producers representing micro budget indies to huge Hollywood studios are taking advantage of this great opportunity. In fact, the recent HBO mini-series, MILDRED PIERCE, went to great lengths to recreate 1930’s Los Angeles here in NY because it was more cost effective!
Next Time – Now that you know we have this great tax credit, how can you use that money for your project?