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Thursday, July 16, 2009

Ind. Gov't. - Indiana budget cuts film tax credit

Lesley Stedman Weidenbener of the Louisville Courier Journal reported yesterday on cutbacks in the Indiana film tax credit program. Some quotes:

Indiana is pulling back on its tax incentives for the film industry even as other states, including Kentucky, are boosting efforts to lure more productions.

The two-year budget bill passed last month by the Indiana General Assembly eliminated a sales tax exemption for production-related purchases and cut in half an income tax credit meant to encourage filming in the state.

Lawmakers stopped short of a request by Gov. Mitch Daniels to eliminate the income tax credit completely. * * *

Chris Ruhl, the governor's budget director, said Daniels has questioned the value of the tax incentives since they first went into effect in 2008. Daniels vetoed the legislature's first film incentives bill, saying it would help productions that would have been made in Indiana anyway. Lawmakers overrode that veto but then rewrote the law to be more restrictive.

The law offered a tax credit of up to 15 percent of production costs in Indiana but limited the incentive to major television or film projects and capped credits at no more than $5 million a year.

Changes approved last month reduced the cap to $2.5 million annually and eliminated the sales tax exemption. * * *

More than 40 states offer film incentives. In Kentucky, lawmakers this year approved essentially unlimited subsidies to lure TV and movie productions to the state by removing a cap on the state's 20 percent income tax credit. Michigan recently upped its income tax credit to 42 percent, and other states are making similar moves. * * *

The value of state tax credits for film productions isn't clear. A recent Ernst and Young study of a New Mexico credit found that film production activities in the state created 2,220 direct jobs in 2007 and returned $1.50 in state and local tax revenues for every $1 of credit.

But a study released this month by the Massachusetts Department of Revenue found that every dollar the state spends on film tax credits generates only 14 to 16 cents in additional revenue.

Ruhl said with budget problems looming, those numbers just aren't enough to justify state investment.

"As we were looking for ways to provide the modest increases in education and some other areas of the budget, we just thought this one really didn't have much merit," Ruhl said. "In our view, it was a dubious credit to begin with in terms of encouraging permanent job creation."

For background, see this lengthy ILB entry from Oct. 12, 2008.

Posted by Marcia Oddi on July 16, 2009 09:17 AM
Posted to Indiana Government