State lawmakers are moving ahead during lame duck to, once again, expand the state’s lucrative film and television tax break program.
Proposed Senate Bill 4094 passed by an 8-0 vote with two abstentions at the Assembly Commerce and Economic Development’s remotely-held committee hearing on Dec. 6.
This latest expansion attempt 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 filming.
Many production companies have cited the tax credit program as a significant factor in their decision to pick New Jersey.
“It’s allowed us in the industry to continue to employ people in the Garden State and use vendors and become a catalyst for growth during this bad time,” Angela Miele, an executive with the Motion Picture Association, told lawmakers on Monday.
Gov. Phil Murphy gets ready to cut the ribbon on the largest film studio in New Jersey – Cinelease Studios, Caven Point in Jersey City – on Aug. 6, 2021. – EDWIN J. TORRES / GOVERNOR’S OFFICE
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’s 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.
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.
Other enticing factors beyond the tax break include cheaper costs than filming in New York City, and the diversity of different landscapes offered by New Jersey, like urban centers and industrial space, suburbs, beaches, farmland, swampland, mountainous terrain and forests.
Expanded benefits
Under the proposal, 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 productions could be reimbursed for 25% of the costs sunk into South Jersey productions, or 20% anywhere else in the state.
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.
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.
The legislation would also loosen 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.
That proposal drew the ire of Assemblywoman Aura Dunn, R-25th District, who abstained from voting on the bill.
“My concern is that it would actually disincentivize, or certainly have an impact – a reverse impact – than what we plan out of this credit,” she said.
Other critics have more broadly questioned the economic benefit that the tax break process has on a given state’s 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.”
