Lights, camera, action? Michigan's film incentive program could return with key changes
Stakeholders and lawmakers backing bills to revive a state-backed incentives program to attract media projects say Michigan has been a virtual nonfactor in the film and commercial industry since the previous iteration of the program was gutted in 2015.
Furthermore, supporters of bills introduced in July to create an incentive program for film and video production in Michigan say bringing media projects back to Michigan can help spur job creation in the state. The proposal is not without critics, however, as some in Michigan view the plan as a poor use of the state’s potential tax revenue.
Lawmakers have dubbed the matching legislation in the state House and Senate to create a revamped film incentives program in Michigan the Multimedia Jobs Act. The word “Multimedia” is a key distinction, backers say, as the proposed incentive program would apply to such efforts as commercial filming and professional training videos, in addition to traditional film and television projects.
As introduced, the bills:
Create a transferable tax credit for media projects filmed in Michigan, starting at 25% of total spending and rising to 30% based on the inclusion of “filmed in Michigan,” “Pure Michigan,” “Michigan Film & Digital Media Office” and “MIFIA” logos somewhere in the project. As a transferable tax credit, a company who receives the credit could later sell the credit to another entity with a Michigan tax liability should the company who originally received the credit not have any tax liability of its own.
Create tax credits worth 30% of spending for hiring Michigan residents, and 20% for hiring nonresidents to work on a project.
Outline eligibility requirements for companies to receive the tax credit. To be eligible, companies would have to keep track of the individuals they hire from the state to work on the project, maintain receipts of what spending they do in Michigan and which vendors they work with, as well as other economic data.
Set minimum spending levels for projects — commercial and advertising projects, as well as films 20 minutes and shorter would have to spend at least $50,000 in Michigan to be eligible. Film projects longer than 20 minutes would have to spend at least $300,000.
Define which media projects wouldn’t be eligible: Projects with “obscene matter,” news and sports broadcasts, political advertisements, radio programs, weather programs, fundraisers, reality television and more wouldn’t be able to receive the credit.
Would establish a 10-year “sunset” for the incentives program, meaning the program would be shuttered 10 years after its implementation. Supporters say this sunset clause would allow lawmakers to fully gauge if the incentive program had an adequate economic impact.
Set caps on how much in tax credits the state could distribute under the program: For projects shorter than 20 minutes, a maximum of $25 million in credits could be approved in the first three years of the program; followed by a maximum of $50 million in credits in the next three years; and a maximum $75 million in credits for the final four years. For longer projects, the maximum credit allocations would be $100 million, $150 million and $200 million for the three time periods. Any money left over could be carried over to the next fiscal year.
The credits would be distributed based on the money spent by a company filming in Michigan rather than an all or nothing approach, said Alexander Page, legislative chair of the Michigan Film Industry Association (MIFIA). The group is a key backer of the legislation and had input on the crafting of the bills, Page added.
At least 35 states, plus Washington D.C., Puerto Rico and the Virgin Islands, currently have some form of incentives for the film industry, according to the National Conference of State Legislatures. MIFIA places the figure even higher at 41 states. Both totals are down from a peak of 45 states in 2010, with the economic downturn around that period being cited as a reason for some states rolling programs back, per the NCSL.
Opinion: Film incentives aren’t worth the cost. Don’t bring them back to Michigan.
When crafting the legislation, Page said, MIFIA looked at incentive programs around the country to discern what would work best if implemented in Michigan.
“We talked to other states to see what worked and what didn’t,” he said. “We worked with the Motion Picture Association, with (accountants) to see what worked and what didn’t. We also wanted to work with economists and the state to find out what was the best way of getting the return on investment to be more Michigan-centric, that’s the reason why it’s multimedia jobs.”
In Georgia, perhaps the most prominent example of a state-backed media incentives program, one Georgia State University study found the state’s creative industries sector grew 210% from 2009 to 2019, after being implemented in 2008. Georgia offers a transferable tax credit of up to 30%, similar to the credit proposed in the bills for the Multimedia Jobs Act in Michigan.
Without an incentive program of its own, Michigan doesn’t stand a chance at bringing in projects to shoot, one bill sponsor said.
“It's an industry that they want to make money (in), they're just not going to come here without some sort of incentive,” said state Sen. Dayna Polehanki, D-Livonia, of filmmakers. “Will this be the most generous incentive in the nation? No. It won't be the least generous incentive (either). But it's a smart incentive. It's Michigan-centric.”
In Michigan, state-backed incentives have been doled out at a steady clip — primarily in the manufacturing sector. Since the start of the year, lawmakers have approved hundreds of millions of dollars in incentives for electric vehicle battery plants as part of economic development deals backed by Gov. Gretchen Whitmer. Polehanki sees the multimedia industry as another area where the state can invest in job creation, she said.
“I think it’s smart to not ignore the creative industry. … We're not even on an even playing field. We can't compete with other states like Ohio or Georgia,” she said. “And I think there's a push to make things in Michigan, we hear ‘make it in Michigan’ a lot lately. I think it makes sense to make our multimedia productions right here, too.”
Inside the incentives: How Michigan decides to spend lots of public money on economic development deals
Supporters say new bills are markedly different from previous program
Michigan’s previous film incentives program was in place from 2008 to 2015. That program helped attract Hollywood projects like “Grand Torino,” “Batman vs. Superman: Dawn of Justice,” “Real Steel” and more to film in the state. At one point, the hit Marvel “Avengers” franchise even had plans to film in Michigan, but those plans eventually were abandoned.
The old program was straightforward — rather than tax credits, the state included line items in its annual budget for film incentives. In 2008, under former Gov. Jennifer Granholm, the state issued about $48 million in incentives to filmmakers. The figure grew to about $69 million the following year, and peaked at $115 million in 2010. When Gov. Rick Snyder took office in 2011, however, the program was capped at $25 million annually and state spending to attract filmmakers eventually dwindled.
By 2015, lawmakers and Snyder felt the economic impact generated by the projects wasn’t worth the money the state was spending to subsidize them. A 2010 issue paper published by the Senate Fiscal Agency found that $100 million spent by the state on film incentives in the 2009-10 fiscal year generated slightly less than $60 million in economic impact, a return of about 60 cents on a dollar. Additionally, each job directly created by the program cost taxpayers as much as $186,519, per the agency.
Synder signed a bill to cut the incentive funding in 2015. But the Michigan Film and Digital Media Office, which distributed the money to filmmakers, remains in place and still is housed in the state’s economic development agency.
Supporters argue the proposed incentive program is fundamentally different than the previous iteration since it doesn’t require the state to issue any rebates or checks. Howard Hertz, a longtime entertainment attorney at the Hertz Schram law firm and MIFIA board of directors member, said the legislation is designed to ensure that filmmakers come to Michigan and spend money in the state before they can receive any tax breaks.
“I think the one we’ve introduced this time is competitive,” Hertz said. “... The major difference here is that when the film incentives were in place last time, the state would have to write a check for the incentive for whatever dollar amount the film qualified (for). Whereas this time, instead of writing checks, it’s a tax credit.
“It’s not money that’s being written out of the state coffers. It’s theoretically money that’s not coming in, but that wouldn’t have come in in the first place. If the film wasn’t here, those credits wouldn’t be in play.”
From 2015: What's next for Michiganders who hoped for film career?
Film (incentive) critics question if state spending will be worth the return
The bill signed by Snyder to cut the incentives program was introduced by then-state House Rep. Dan Lauwers, R-Brockway. Lauwers, who still is a member of the Legislature in the Senate, questioned whether the film and media industry is one the state should be offering tax breaks to to bring to Michigan.
"This is committing state revenue before it’s earned,” Lauwers said. “Those decisions should be made very carefully.”
James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, a Midland-based conservative think tank, said the transferable tax credit proposal is “worse than last time,” particularly because media companies aren’t likely to have tax liabilities in Michigan after their projects are completed. The benefit for filmmakers would be selling, or transferring, the credits to entities in Michigan with tax liabilities, but that would likely come at a discount, Hohman said.
“The benefits that you're getting is the transferability, the ability to take the credits that you've received and sell them to other taxpayers who are not eligible for film credits and get them to pay off their other liabilities, which they purchase from the film producers at a discount,” Hohman said. “This increases taxpayer costs while minimizing the benefits for film producers.”
Hohman echoed Lauwers in being skeptical for the need for a state-backed incentive program for the multimedia industry.
“The existence of film credits has little to do with their economic effects and much more to do with the lawmakers' … opinion of the film industry,” he said. “It's not about economic growth, it's about image; it's about trying to do something that makes it seem like you're producing jobs in the state.”
Two bills have been introduced in each chamber for the proposed Multimedia Jobs Act: Senate Bills 348 and 349, introduced by Polehanki; and House Bills 4708, introduced by state Rep. Jason Hoskins, D-Southfield, and 4709, introduced by state Rep. John Roth, R-Interlochen. While only Democratic senators have co-sponsored the Senate versions of the bill, according to the Legislature's website, some Republican House members have co-sponsored the legislation in their chamber, including state Reps. Matthew Bierlein, R-Vassar; Kathy Schmaltz, R-Jackson, and Bill Schuette, R-Midland.
Contact Arpan Lobo: alobo@freepress.com. Follow him on Twitter @arpanlobo.
This article originally appeared on Detroit Free Press: Michigan film inventive bills create tax credits for multimedia
