28 February 2011

A proposed cut on Michigan's film tax credit may hinder production incentives

Movie makers in the Michigan film industry are questioning the cap Governor Rick Snyder proposed for the state's incentive-based film tax credit.

As part of Synder's first budget proposal, the Michigan Governor added a limitation on the amount of funds allocated for the film tax credit to $25 million. That's less than 20% the amount the state paid out to the industry in 2009.

The drastic reduction in tax funds is raising the eyebrows of many Michigan filmmakers and activists.

"Putting a $25 million cap would severely curtail Michigan's attractiveness to the film and television industry and create a severe limitation," said the senior vice president for state government affairs.

Producers who choose Michigan to shoot their big screen masterpieces are eligible to recoup up to 42 percent of production expenses totaling over $50,000 through the program.

The film tax credit was first introduced in 2008 by the former Governor Jennifer Granholm as an effort to increase major film production in Michigan - a plan that potentially offers many indirect benefits to the state's commercial interests.

The motives behind the program include attracting more jobs, in addition to enhancing state's image as it has become synonymous with the decline of the manufacturing sector in American. Such tax credits have attracted the creation of movies like "Detroit 187" and "Gran Torino."

Since the program's launch in 2008, 133 projects have wrapped in Michigan with $365 million in incentives approved and $95.6 million already paid to production companies, according to data from the Michigan Film Office, which disburses the tax credits. The production of those films resulted in over $648 million spent in the state since the program took full effect.

In addition to the direct affect the tax incentive has had on Michigan movie production, the film credit has improved business in various other industries - indirectly. For instance, Michigan furniture manufacturer Case Systems was able to capitalize on few high volume purchases in accordance with the tax credit.

Currently, there are applications for over $93 million in tax credits pending at the Michigan Film Office for 2011. However, warnings are being announced that if the tax breaks are cut, Michigan's talent base for movie making may soon be headed to other areas like Hollywood. One production in particular has been already pulled out of the state.

"It's safe to say that a number of our companies may not consider Michigan in the mix anymore because of the uncertainty as to whether they would be able to obtain a portion of the credit," said Michigan's senior vice president of government affairs. "The potential for a mass exodus is real given those parameters," Stevenson said.

He acknowledged that most film producers were lured by the size of state's tax credit since 40 states have film industry incentives in place and most are competitive, if not quite as generous as the credit in Michigan.

The governor's proposal would limit tax incentives to $25 million for fiscal 2012 and 2013. The budget is still pending approval by the state legislature, but many officials on the conservative side have argued that Michigan cannot afford the tax credit in the face of a $1.8 billion budget deficit.

On the liberal end of the fight, proponents are arguing that the tax credit has a positive impact in many sectors beyond the arts, ranging from auto transport companies to unique Michigan-based boutiques.

The move has displeased over 5,000 state residents who were employed by the film industry in 2010. Plans for a new film studios near Detroit could be jeopardized, prompting over 1,000 Michigan residents to meet on the issue. Mitch Albom and actor Jeff Daniels were among the powerful voices behind the assembly.

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