A bill introduced during lame duck would expand the state’s lucrative film, television and digital tax credit program.
The proposed expansion comes as film and television productions stream into New Jersey following the COVID-19 pandemic, and as producers such as Netflix eye the former Fort Monmouth Army base, and NBC Universal uses the former Meadowlands Arena, for its productions.
Under Senate Bill 4094, film and TV producers could be reimbursed for 30% of their expenses in North Jersey, or 35% in South Jersey.
Awards for digital media production would increase from a limit of $10 million to $30 million, and under the law would be reimbursed for 25% of the costs sunk into South Jersey productions, or 20% anywhere else in the state. The bill was first reported by Politico New Jersey.
It would allow payments toward big-name actors, directors and screenwriters to count toward the total tax break amount. Under the current program, payments above $500,000 to any “highly compensated individual” cannot count towards the credit, but the bill calls for expanding that amount to $15 million.
The sponsors – retiring Senate Majority Leader Loretta Weinberg and Assemblyman Gordon Johnson, who will replace her in the next term – could not be immediately reached for comment on why the expansion was warranted. Both are Democrats from the 37th Legislative District in Bergen County.
The legislation would also loosen the rules so that a production company would no longer need to be the sole owner of a film studio in order to qualify for the tax breaks.
Instead, they’d need just to lease at least 50,000 square feet and commit to spend an annual average of $50 million for the next five to 10 years. Studios could go past the annual $100 million cap on the program in any given year, but the amount that goes over the cap would be subtracted from the next year’s allowance.
Living up to the hype
Gov. Phil Murphy first enacted the film tax break program in 2018, and according to state officials it did indeed lure considerable interest to the state film industry. He approved an expansion of the program in early 2020, after the consistent surge of applicants for state subsidies outpaced the amount of funds available under the program.
Murphy’s office did not immediately comment on the proposed changes. But the administration has been widely supportive of the program in the past, having sent out a statement in October predicting that it expects producers to spend more than $500 million in the state this year coming out of the pandemic. And it touted the opening of a new film studio in August, Cinelease Studios, Caven Point in Jersey City.
Despite the promising outlooks of the state industry, critics of the tax break process have questioned just to what extent they benefit the New Jersey economy.
A September 2019 report from the Sol Price School of Public Policy at the University Southern California examined the incentive programs in New York, Louisiana, Georgia, Connecticut and Massachusetts, finding that the incentives “paid by states to the entertainment industry are not generating jobs and economic growth as intended.”
“This new study should put to rest any notion that motion picture tax incentives may work in some states but not others,” said Michael Thom, an associate professor at USC and lead author of the study.
“The states investing the most in incentives are not getting the return on investment taxpayers deserve, pure and simple. These incentives cost taxpayers billions of dollars, at a time when that money could be directed to other much needed public services,” he said.
1 of 2
1 article remaining
Advance your business edge with news from NJBiz. Register now for more article access.