Discover why film incentives are critical for filmmakers and local communities. Explore the different types, their accompanying economic benefits, and success stories.
By Ben Spielman
First introduced in North America during the late 1990s and early 2000s, film incentives have become a popular and widespread means of financially fueling film and television productions across the continent. Government entities lure filmmakers to shoot in their jurisdictions by offering discounted rates for production, allowing filmmakers to save money while they boost the province’s local economy. In this article, we’ll explore the different ways these deals function and how they can greatly benefit those involved.
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What Are Film Incentives?
Throughout North America, film incentives are provided by federal, state, and local governments to help partially finance film and television productions. These incentives differ on a regional basis, but their main purpose is to assist financial shortcomings or help productions manage their budgets. Based on the particular incentives that different regions offer, filmmakers can determine what location will best support their production. Although these incentives all serve the same general purpose, it’s worth defining the three primary forms they come in: tax credits, rebates, and grants.
- Tax credits
- There are two common types of film tax credits: refundable credits and transferable credits.
- Refundable credits
- A refundable credit is a deduction toward the taxes owed by the production. The governing body will give the production a refund after the production has filed its taxes. Reimbursement through refundable credits commonly takes longer than other incentives because the production has to wait for the money until after they’ve filed their taxes. Depending on the location, refundable tax credits are either fully or only partially refundable.
- Transferable credits
- Transferable tax credits are not refundable. Instead, they are used by a production with a large tax bill to offset the amount of money it owes in taxes to the region where it is filming. If the production does not owe money, it can transfer these credits to a local company at a discount.
- Rebates
- When it comes to rebates, the governing body simply writes a check to the production company in charge of spending. Unlike tax credits, the production does not need to submit a tax return to receive a rebate. Rebates are similar to grants, though rebates are taxable while grants are not.
- Grants
- In the case of grants, the governing body provides a tax-free payment to the production company, so no tax return or reimbursement needs to be returned by the production. Grants are usually attained through a competitive application process, and the decision to award one can be based on various factors, from the project’s artistic merit to how realistic its execution is.
Why do Film Incentives Matter to Filmmakers and Why Are They Offered?
Funding and budgets are some of the trickiest parts of making a movie or television show, and film incentives give productions the chance to achieve valuable savings that can be effectively used elsewhere, from equipment and transportation needs to craft services. Plenty of projects lack abundant financial backing, so any money preserved for other uses is essential. Many films and shows with more sizable budgets will also take advantage of tax incentives, as saving money is nothing to scoff at within the film industry. An additional advantage for filmmakers is the environmental diversity in locales across North America that offer incentives, giving filmmakers more affordable means to shoot in a location that authentically fits their project.
While these arrangements benefit film productions, they also give back to the government entities that offer them in the first place. A production that has been given financial assistance in return for operating on a specific site ends up energizing that filming location’s local economy in multiple ways, thus spurring economic growth that rewards the government’s investment. The knowledge of such profits has encouraged many regions to put more effort into enticing film and television productions to shoot in places they wouldn’t initially consider.
The Economic Impact on Local Communities
The local community a film production decides to shoot in will experience various benefits that boost their economy and can leave a lasting impact long after production has wrapped. One significant reason a local community will thrive when hosting a film or television production is simple: incentives usually require the production to spend locally, so much of the production’s budget fuels the shooting site’s economy. This spending by the production can positively impact a multitude of businesses, such as:
- Hotels or motels for members of the production to live during shoots.
- Food establishments, either through onsite business or catering services.
- Construction material suppliers that productions can source from to build sets and more.
- Rental equipment services for technology needed by productions.
Many local businesses, including small and independent enterprises, can carve out individual spots and become essential resources for the project inhabiting their locale. Another excellent opportunity for the community is employment, as temporary jobs are created for local performers, producers, and crew members. It’s also worth noting that these jobs can give locals experience on bigger productions than they’re used to, allowing them to expand their skills and gain more experience within the film industry.
One more notable economic perk for local communities is increased tourism, which can happen when a show or movie gains attention and acclaim from audiences. While some communities’ tourism booms may be temporary, a project becoming enduringly popular over time can permanently improve the economy of the shooting location. These positive effects help local communities prosper, and this economic success becomes a significant way that governments’ film incentive offerings pay off.
Success Stories of Film Incentives
Film incentives probably aren’t in most people’s minds as they watch movies and television, so here are a few notable examples of regions and productions that have prospered through these arrangements:
- One of the first states in America to offer incentives, New Mexico was home to three major blockbusters released in 2011: Cowboys and Aliens, Thor, and Fright Night. Soon after, the state was inspired by the major success of Breaking Bad (filmed in Albuquerque), recognizing the lucrative opportunities television could provide and creating the “Breaking Bad Bill,” which added extra incentives to television productions. These deals led Longmire and Better Call Saul to take advantage of the improved savings, with each successfully running for six seasons.
- Minneapolis, Minnesota, originally inspired the script for Clint Eastwood’s Gran Torino, but the filmmakers decided to shoot in Michigan to take advantage of new film incentive deals provided by the state. The film got a 42% tax credit, pushing Warner Bros. to approve funding for the movie.
- Films like Driving Miss Daisy and Fried Green Tomatoes had been shot in and around Senoia, Georgia, but the entertainment industry had primarily abandoned the town by the early 2000s. The Georgia Entertainment Industry Investment Act, established in 2005 and updated in 2008, led to The Walking Dead choosing Senoia as its filming location. The program became a smash hit that translated to high tourism rates, completely revitalizing the town. In 2002, Senoia’s Main Street had five businesses; today, there are more than 50.
Challenges and Criticisms of Film Incentives
While film incentives aim to benefit all parties involved, the practice can bring about some challenges that filmmakers should consider before production:
- Film tax credits can be complicated and take time to figure out, especially for filmmakers with less experience or smaller projects with less time to spare. Having an experienced producer will likely ensure that time isn’t wasted and that the correct tax credit opportunity is chosen if a realistic one is available.
- The aid provided by tax credits is not always seen until after production is finished, which can sometimes lead to funding issues. It’s essential to understand the type of tax credits being offered and their terms so that you can foresee potential roadblocks and determine if your project can efficiently work around those obstacles.
- Grants can be more competitive and take considerable time to complete for submission when there is no promise of receiving one. Gauging the odds of your production attaining specific grants can save valuable time, potentially allowing you to search for other options instead of heavily relying on one source for funding.
Film incentives have also been criticized over the years. While these concerns will likely persist and encourage deeper conversation, some potential difficulties are out of the filmmakers’ control. Take initiative regarding the more foreseeable and addressable complications that productions encounter so that your endeavor can succeed.
Film Incentives Offer Great Opportunities for All Involved
Film incentives have become a significant way for film and television productions to save money. Vital finances can be preserved for other essential expenditures, and some projects can be saved from shutting down through these deals. The financial support productions subsequently give to the local communities hosting them creates jobs and strengthens local businesses, ultimately feeding back into the governments offering these film deals and allowing this productive cycle to continue.
Interested in learning more about film incentives and the different offerings found around North America? Check out our Film Incentives Directory, and don’t forget your free subscription to Destination Film Guide.
