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Why New York gives TV and film companies a $400 million break

Governor Andrew Cuomo raised the possibility of ending the state’s Film Tax Credit Program if the state Senate would cut some of the pricey measures included in its budget proposal. We explain what exactly the Film Tax Credit Program is and why Cuomo is suddenly interested in ending it.

A Brooklyn film set.

A Brooklyn film set. Sean Pavone/Shutterstock

As state budget negotiations reach a fever pitch ahead of an April 1 deadline, Gov. Andrew Cuomo is going off script. During a press conference on Tuesday, the governor raised the possibility of ending the state’s Film Tax Credit Program – which he has long supported – if the state Senate would cut some of the pricey measures included in its budget proposal. Inherent in Cuomo’s remarks was the suggestion that lawmakers who opposed tax breaks offered to Amazon for its now-cancelled headquarters ought to also oppose the film tax credits, as the two are based on the same principle. “The Senate’s position was very clear on Amazon, ‘We are against tax incentives to bring business to New York.’ That’s why Amazon is gone,” Cuomo said on Tuesday.

The governor’s comments could just be a last-minute jab at lawmakers he still bears some resentment towards over the fallout of the canceled Amazon HQ2 agreement, but they merit a deeper look at the state’s film tax credits and what exactly they do for the industry in New York.

What is the Film Tax Credit Program?

First introduced in 2004, New York’s tax credit program for film and television productions aimed to give producers a break to encourage some of Hollywood’s business to move east. When it started, the production film tax credit cost the state $25 million, but today, the program has ballooned to $420 million, prompting the question from critics: Are these tax credits actually bringing more productions to New York?

Under the current version of the program, qualifying productions – films, television shows, television pilots and films for television, mostly – can receive a 30 percent credit for every dollar spent on production and post-production costs in New York. In most cases, this amounts to a 30 cent refund for every dollar spent on “below the line” costs, which include salaries for film crews, caterers and other jobs that exclude some of the higher-billed employees like actors, directors and screenwriters. Productions in Onondaga County and in other areas outside of New York City receive a credit of 40 cents for every dollar spent. In 2017, the state Legislature voted to extend the program through 2022.

Are these credits really comparable to tax breaks offered to Amazon?

Cuomo drew a parallel between the film tax credit and the nearly $3 billion in tax breaks and subsidies from New York City and state that were part of the bid to win Amazon’s new headquarters. Ultimately, plans for Amazon’s HQ2 failed in New York, after local lawmakers, labor unions and community groups railed against both the massive subsidies and the company itself. But the comparison between Amazon’s tax breaks and ones for studios like Eye Production Studios and Warner Brothers is not an entirely apples to apples. The film tax credit “is not a tax break, it's a cash gift,” said Greg LeRoy, executive director of Good Jobs First, a good government organization. By comparison, $420 million is spent on the film tax credit per year, while the Amazon credits totaled as much as $3 billion. Much of that calculation was based on up to $1.2 billion offered through the state’s Excelsior Jobs Program, which consists of fully refundable tax credits as a percentage of gross wages for new full-time jobs created. The Amazon deal also included a $505 million discretionary capital grant.

While the tax credits differ somewhat logistically – and in value – general opposition to corporate incentives is what the governor appeared to allude to on Tuesday. An article in the New York Post described the governor’s remarks as “a shot at” state. Sen. Michael Gianaris, who vehemently opposed the Amazon deal but whose Long Island City district also includes a film and television studio that benefits from more in-state production.

What’s the argument for the film tax credit?

The $420 million spent on production tax credits per year is associated with an estimated $22.7 billion in spending and 1.4 million new hires by film and production studios in New York since 2011. Both production companies and the studios in-state benefit from the program. But most proponents of the tax credits will point to those “below-the-line” hires who make up production crews as the real beneficiaries.

“I've been a prop man in (the Motion Picture Studio Mechanics Local 52) since 1978 and prior to the tax credit, there was never any full-time work. We had a couple of movies a year and one or two television shows, and that was it,” said John Ford, now president of MPSM Local 52, IATSE. “The tax credit has been in place since 2004, and we've pretty much been at full employment since then.”

Ford’s union represents employees working in sound and video, set construction and special effects, among other jobs. He estimates that the jobs included in the union represent 40 percent of a film crew. “Every person that's in the union or is applying to be in the union is out working, probably making $70,000 per year or more,” he said. “Full medical benefits, and they're entitled to retirement benefits.”

Is Cuomo serious about his suggestion to end the program?

The governor did not include a proposal to ditch the Film Tax Credit Program in either his original budget proposal or his 30-day amendments, suggesting that his brief remarks this week were more rhetorical than realistic. The tax credits have had their critics in both chambers of the state Legislature, including some Republicans who argue that it benefits New York City more than anywhere else in the state. But the Democratic-controlled state Legislature has not raised the film tax credits as a central issue this session.

Representatives for Cuomo, the state Senate and the Assembly did not respond to requests for comment.

Would film and TV productions leave New York if the program were ended?

Ford is certain that film and TV productions would leave the state if the tax credits ended. He recalled a time before the introduction of the program when most shows set in New York – like Seinfeld – were filmed in Hollywood. “They would come here for two weeks in the spring and maybe a week in the winter time, and then shoot all the interiors in California,” Ford said. If the tax credit program ended, productions would revert back that schedule, he said. “(Productions will still) come here, but instead of coming here for eight months, they'll come here for two weeks.”

LeRoy mostly disagreed, saying that New York is an attraction in itself. “It always has been an attractive place to do productions because it's got an enormous amount of talent, it's got all kinds of gorgeous settings,” he said. “Obviously, when you're trying to attract a market, it's the biggest city in the country so it's got the biggest installed viewer base.”

Still, LeRoy admits that ending the Film Tax Credit Program could have some effects on the margins, if companies engage in “rent-seeking” by shopping around states or localities with more excessive production tax credits. “It could happen,” he said of the possibility of some productions leaving New York. “I don’t want to deny that.”

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