Arizona will provide up to $125 million a year in Hollywood tax breaks, joining the ranks of a handful of states with nine-figure caps on their incentive programs.
Under a program Governor Doug Ducey authorized to become law Wednesday without his signature, productions shot in Arizona will be eligible for a refundable tax credit of 15 to 20 percent of expenses. Arizona’s film production program will start at $75 million in 2023 and will reach $125 million by 2025.
To be eligible, producers must use a production facility in Arizona or, if the project is primarily filmed on location, must primarily shoot and perform pre and post-production in the state. The program has a tiered credit system: productions that spend less than $10 million will get a base tax credit of 15%, while those that spend more than $35 million will get 20%. Projects with budgets between $10 million and $35 million are eligible to have 17.5% of their expenses offset by the incentives.
Productions are also eligible for a 2.5% increase in labor costs for hiring Arizona residents or if they are long-term (5-year) tenants of a production facility qualified. A feature film spending $15 million in the state could qualify for a tax break of between 17.5% and 22.5% depending on local residents hired for a return of at least $2.5 million.
While capped on receiving $25 million in tax relief, studios could get the credit in the form of a cash refund if it’s more than their tax liability.
“It’s definitely a game-changer,” said Ryan Broussard, vice president of sales and production incentives at Media Services. “75 million dollars is gigantic.”
Lawmakers pushing for the program’s passage noted the economic activity fostered by New Mexico’s film and television tax incentive program, which recently doubled its cap to $110 million. They wanted in on the action.
In 2021, New Mexico saw a record $624 million in direct spending by productions, like You better call Saul. With refundable tax credits of 25-35%, the state offers Hollywood one of the most generous tax breaks in the country. Netflix and NBCUniversal both recently built production studios in New Mexico, committing $2 billion and $500 million respectively to produce content in the state.
Productions that do not qualify for the New Mexico schedule or cannot find stage space can now choose to shoot in Arizona.
“They try to be competitive with New Mexico, not only because their landscape is creatively competitive, but also because New Mexico is very busy,” Broussard said. “There will definitely be fallout.”
The program resurrects in some form a more limited movie tax credit the state had from 2005 to 2010. It was killed after the Arizona Department of Commerce reported that the program resulted in a loss of $6.3 million in 2008.
Legislative analysts who reviewed the program also found this time around that the state would not see a return on its investment. They noted that state productions, like local commercials, that would have been shot in Arizona regardless of the tax breaks are now eligible for a credit of at least 15%.
Parts of Steven Soderbergh TrafficTodd Phillip’s The Hangover Part III and George Clooney Confessions of a Dangerous Spirit filmed in Arizona. Productions, however, were mostly shot in other states with tax incentives.
“In the last 20 years that I’ve been here, we’ve had tons of calls from big studios wanting to shoot here, but due to the lack of incentives, they either quickly moved on or came to us for a small part of it. ‘bigger project,” said Peter Catalanotte, director of Film Tuscon. “We’ve always had interest, but without incentives, we could never grab an entire series or feature film. we are convinced that this will change.