Film Tax Incentive Updates by State for 2021

Legislation on film tax incentives for production is changing all the time. Producers on film and TV projects follow those updates closely, especially in popular production incentive states.  

In a recent webinar, I covered the most significant state-by-state incentives legislation updates for 2021, as well as changes to look forward to in the future. Below is an in-depth recap in case you missed it – it’s a lot, so let’s dive right in.

Big-Ticket Changes to State Incentive Programs in 2021

Georgia Film Incentive Update: It’s All About the Audit

The Georgia film tax credit is still fully transferable and, at its core, hasn’t changed. You must still sell the 20-30% credit on the open market for cash. As for the changes:

Loanout corporations now have a decreased withholding percentage of 5.75%, but qualifying their full wages is a little more difficult; see Georgia audit guidelines summary below.

With a number of California film crews going to Georgia and other incentive states to work on projects, California now requires production to pay into California SUTA (state unemployment tax) on all California residents – regardless of where they work. Georgia countered this stipulation with a new one of its own – if SUTA is paid into any state other than Georgia, that SUTA fringe will not qualify for the Georgia film tax credit. (Georgia fringes still do!)

Visible placement of the Georgia peach logo has always gotten you an extra 10% in incentive money, but now, the state wants proof of placement prior to payout. This means you can receive up to the typical 20% credit up front and the additional 10% later, after verification. So, when organizing your film financing and loans, anticipate a staggered payout.

New Audit Requirements for the Georgia Film Incentive

New verification rules might necessitate a bigger accounting team to get your Georgia film incentive.

Trust me on this: be prepared. The Georgia film office is requiring verification of everything down to the level of vendors and loanouts. You must also fill out a verification spreadsheet indicating the amount of work done in the state and out of the state, by percentage.

CPA audits are now required if your credit is greater than $2.5M, starting immediately. Over the next two years, this threshold will come down further. By 2022, you must perform an audit for projects with a credit return greater than $1.25M, and by 2023 all productions will have to perform an audit.

This should be no sweat, as I advise every Georgia production of any size working to qualify for a Georgia film incentive to perform an audit – it will actually benefit you when selling your tax credits on the open market. Generally, having an audit gives your transferable credit a higher value.

Other Important Georgia Audit Guidelines just released:

• Travel days limited to one round trip. Travel days during production will count as a half day of travel for the incentive.
• There are exhaustive new guidelines determining how loanouts qualify which takes into consideration their contracts and time in and out of state, calculating their exact Georgia presence.
• Like Louisiana, there must be disclosures for related party transactions. No double dipping.
• New production timeline period: Only 4 weeks of prior to opening a GA office is allowed for preliminary qualified spending. 6 weeks post GA office closure is allowed for qualified spending.
• Vendors are required to carry ALL inventory in the state of GA. Inventory outside of GA that is imported does not qualify for the tax credit. (This one is crucial – talk to your vendors – you will need details!)
• COVID-19: Local PPE, testing, and medic costs qualify up to what Federal and Georgia law allows. If you want to self-quarantine for example, this will not qualify, since the state doesn’t require it at this time (08/17/2021).

For more info on new GA audit guidelines, see the full Georgia film incentive details here.

Oklahoma Film Rebate: Pumped Up for 2021

Oklahoma has been increasing in popularity as a production state and legislators have decided, with new incentives legislation in 2021, to supercharge their rebate program (cash – no tax credits or selling), increasing funding from $8 million to $30 million per year!

You must spend a minimum of $25k in-state, with a total budget minimum of $50k, making this one of the more attainable state film incentive programs. The state now allows for post-production work to qualify as well, whether actual production happened in-state or not (much like New York’s popular post production credit).

The most notable change in Oklahoma is the “potential rebate claim,” which uses a scoring system to determine the base percentage you will receive based on the number of locals you hire.

• 25% locals = 10% base claim
• 25-45% locals = 15% base claim
• 45%+ locals = 20% base claim

For non-resident below-the-line crew members, you can only achieve a 7.5% rebate, with no potential for bonuses.

Unless you’re a major studio or have a state-approved financial backer, all productions in Oklahoma will now require a completion bond to qualify.

I can help you get a completion bond. Ping me here.

A new apprenticeship program is required for the Oklahoma rebate as of 2021; you must hire 2-16 apprentices, depending on your budget:

• $7.5 million and under = 2 apprentices
• $7.5-15 million = 4 apprentices
• $15-25 million = 8 apprentices
• $25+ million = 16 apprentices

If your production doesn’t meet the requirements of the apprenticeship program, your rebate will be reduced.

Oklahoma introduced an enormous number of bonuses this go-round. It’s important to pay attention to the phrase “up to” here. The percentage of the bonuses are variable and based on a number of conditions. See the full detail on the new Oklahoma bonuses in our production incentives database.

Arkansas Film Incentive: The Choice Is Yours

The biggest change in Arkansas is an option to choose from a cash rebate or a transferable credit. There is still no known cap for the rebate; however, the credit has some limitations:

• First come, first served
• Base is still 20%
• Sunset is 2032
• Up to 30% (the most you can get/no compounding) in bonuses if:
  • 10% payroll is resident wages. (Applies to rebate still)
  • 10% of hires are veterans.
  • 10% of vendors are veteran owned (veteran owns at least 50% of the business).

Minnesota Film Incentive: Have Credit, Will Travel in 2021

Guidelines are still pending (as 8/12/2021), but we do know a fresh transferable tax credit has been added. With $4.9 million dollars in funding, Minnesota will distribute to productions don a first come, first served basis.

The existing rebate incentive is still around, covering 25% of expenses. However, funding for the rebate has been reduced to $475K annually. This effectively targets locals and locally produced projects.  

This rebate had a few changes of its own, including:

• reducing the required minimum spend of commercials to $100k 
• An Above The Line cap is set at 3% of the qualified spend
• Similar to recent changes in California, MN is pushing for W2 employees, not independent contractors and are no longer qualifying 1099s

Get help with your W2 production payroll here.

Speed Round: Updates on Other State Film Incentives in 2021

California Film Incentive 2021

Funding for California’s non-refundable/non-transferable film tax credit has been bumped up big time with an additional $75 million ($207 million total) allotted for recurring TV and another $15 million ($71 million) for relocating TV. This is California’s newest move to entice long-lasting runs of television production in the state.

A new studio construction credit has been introduced as well. Granted, there are exacting guidelines for qualifying as such a studio, but once approved, some cool doors open. For productions that do a minimum of 50% of production on that stage and spend at least $7.5 million in direct in-state expenditures, and have a connection to the construction, California offers upwards of $12M dollars in credit per project.

If you do qualify, the great part about this is you get to bypass the lengthy and difficult Jobs ratio process that normal applicants must participate in to qualify.

In addition, for the Construction Studio credit, applicants gain access to a potential extra 4% incentive for increased diversity. Unique offering! 

Colorado Incentive Changes 2021

Funding has increased for the Colorado film incentive, to $9.2 million with a 20% base rebate for productions that qualify.

Kentucky Film Incentive Future

Looking ahead to 2022, Kentucky’s credit will become fully refundable once again. Yay! Annual funding has decreased, however, to $75 million. The base credit stands at 30-35%.

The state has also done away with the Sales and use tax exemption.

Massachusetts Incentive Springs Eternal

No need to fear the program’s expiration any longer. Massachusetts did away with its incentive sunset date, demonstrating a commitment to the incentive, while providing some security for productions in the state.

The credit is still fully transferable / partially refundable and can be sold on the open market or back to the state at a 10% discount. MA’s payroll credit requirements remain the same as well – you must spend 50% of your budget in MA to qualify for the 25% payroll credit on residents and non residents working in MA.

However, to qualify for the expenditure credit and sales and use credit, in 2022 you will have to spend at least 75% of your budget in-state.

Montana Doubles Down on Incentive Funding

An increase in funding bolsters this up-and-coming state. Now, with annual funding of $12 million, this is a solid transferable film tax credit with a 15-30% credit base.

Nebraska Grants Filmmakers a New Grant

Nebraska is back! The state started a grant program with up to a 25% base for Nebraska filmmakers only. Definitive guidelines are still pending (as of 8/12/2021).

The program has $1 million in annual funding with a 0-25% aggregate system (meaning theye will determine the amount you get on all your spending in state up to 25%) on any in-state spend. 50% of your crew must be NE residents.

New Jersey Ups the Ante on Incentive Investment

New Jersey maintains its 30-37% transferable credit, and introduces a new unique program aimed at long term investment.

If you and your production company are interested in “long term” investment in NJ, the studio partner program could be right for you. The state will only take on five partnerships at a time and requires the partnering production company to commit to a ten-year contract to lease a production facility of at least 250,000 square feet as part of a “transformative project.” 

What is the benefit of this outside of the norm? Well, Above-the-Line compensation is usually capped at $500K per individual in New Jersey. However, as a studio partner those wages become an aggregate cap of total qualifying wages, based on how much is spent in the state.

• $15-50 million= 15% aggregate cap
• $50-100 million = 25% aggregate cap
• $100-150 million = 40% aggregate cap
• $150 million+ = 60% aggregate cap

New Jersey also pushed the sunset of its entire production incentive program to 2034, so things are looking good in the Garden State.

New Mexico Credit: Quick Update on Talent Withholdings

While the refundable credit incentive is mostly the same here, the most impactful change comes in the form of a change to withholding on talent wages, which is now 5.9%.

Since the only Above-the-Line non-residents that can qualify are actors, whether paid through a  loanout or direct W2, you’ll want to give them a heads up on the now increased withholding.  Don’t forget if they are loanouts, a “Super Loanout” will be needed to qualify. 

Need a Superloanout? Reach out anytime.

New York Extends to Preserve Its Film Credit 

Huzzah, an extension on NY’s refundable tax credit by pushing the sunset date to 2026. In addition, there is a 10% bonus for shooting in upstate NY expanding its qualifying counties. 

Oregon Boosts Bonuses on Its Rebate

Thanks to a healthy number of bonuses, OR’s base cash rebate of 10-20% can be inflated to well over that 20% mark, on a case-by-case basis. Their payroll credit greenlight program was extended to 2030 as well!

New application rules will apply, as annual funding has increased to $20 million with an added incentive for diversity and codified anti-harassment rules (look for this in more states as well –this will become a welcome trend).

Texas Film Grant Funding Decreases

The grant program here stays the same, but get your applications in sooner rather than later as they decreased funding this cycle (every two year) to $45 million. 

Utah Bumps Up Its Dual Production Incentive

Funding increased to $8.3 million annually to pay for a dual program of refundable tax credits and a rebate. The 20-25% credit is largely based on the number of residents vs. non-residents hired.

Virginia’s Refundable Tax Credit Inching Upward

Staggered increases in program funding have arrived for VA’s 15-35% (mostly based on resident hires) refundable credit. Funding increased to $3 million in 2021 and will increase again to $4 million for 2022.

Washington Drops State Connection Requirement

While it can still help to have a direct Washington state connection (ie. a local producer, actor, writer), it is no longer a requirement to qualify for their rebate program. This is key, as that requirement held back a productions and out-of-state interest in the past.

Wrapping Up Film Incentives Roundup for 2021

Whew! That was a lot of information on film incentive programs throughout the states. For the audio-visual version, check out our webinar on the 2021 legislative changes.

We’re here to stay on top of these legislative updates for you, whether on film incentives, production payroll or financing.

Need more detail on anything covered here? Let’s talk.