Arizona may reintroduce tax credits to lure TV, film, commercial industry to state

East Valley Tribune
Friday, February 15, 2013
Howard Fisher

Hoping to lure more movies, TV shows and commercials, state lawmakers are moving to once again provide income tax credits for those who produce them in Arizona.

The legislation unanimous adopted Wednesday by the Senate Committee on Commerce, Energy and Military would provide up to $70 million a year to companies that spend at least $250,000 on productions. They could get credits equal to at least 20 percent of what they spend, with bonuses for using state-certified production facilities and for wages paid to Arizona residents.

SB 1242 would fund not only production costs but also provide funds for those who build production facilities in the state.
But the future of the measure remains uncertain.

The bill also needs to clear the Senate Finance Committee. And Sen. Steve Yarbrough, R-Chandler, who chairs that panel, has said he has no intention of giving it a hearing.

Part of Yarbrough's concern is that this is a refundable tax credit. That means a company which has enough expenses to offset its gains -- and therefore owes nothing to the state -- actually would get a check.

"It's one thing to have a tax obligation that gets reduced or even eliminated because of a credit,'' he said. "It's quite another in my mind to say that even though you don't owe taxes the government is going to give you something as a result of that.''

But Sen. Al Melvin, R-Tucson, who is sponsoring the measure, said it remains a good deal.

"I look at it, really, as a jobs bill, putting our people back to work,'' he said, jobs that are moving elsewhere to states with generous tax credits for multimedia production.

"All we're trying to do here is to level the playing field with New Mexico and other states that are competing with us,'' Melvin said. And there are procedural ways for Melvin to have the bill enacted first by the House, a move that would bypass Yarbrough's committee.

Barry Aarons, lobbyist for the Tucson Convention and Visitors Bureau, said Arizona already has things producers want, including a good year-round climate. But where it falls short, he said, is providing financial incentives.

"Ask yourself that question: Why would I invest when there are other places that give me that production opportunity?'' he told lawmakers.

The measure also gained support from Jennifer Miller-Bender who said she is building a production studio in Scottsdale. She said the incentives for producers would mean not only companies wanting to use her facilities but could create over 3,000 jobs.

But the state's prior tax credits for the industry have a bad history.

A study prepared for the Arizona Commerce Department (cq- that's what it was called at the time) said the productions given credits generated 317 full-time jobs in the industry in 2008. Another 413 jobs were created indirectly from spending by filmmakers in the state.

All totaled, that generated about $2.3 million in additional state and local taxes. But Arizona gave out more than $8.6 million in credits to get that gain.

Proponents have argued the credits in this legislation are sufficiently different. But Scott Mussi of the Free Enterprise Club said that "refundable'' provision remains.

He said the film industry has a practice of saying that some of their most popular movies have not made a profit. He said what actually occurs is that companies could be "very slick with their accounting maneuvers'' to show a net loss.

And Kevin McCarthy, executive director of the Arizona Tax Research Association, argued that the best way of stimulating the economy in Arizona is to lower overall taxes and fix quirks in the system rather than carve out special treatment for individual industries.

But Aarons said the precedent is there, saying lawmakers have previously approved refundable tax credits for companies that move their headquarters to the state or do increased research and development here.

But Yarbrough said the comparison is not valid, questioning the value of the jobs this legislation would create.

"They appear to me more temporary than manufacturing jobs or other types of jobs that seem to me to be more permanent and better paying, and to have a more positive impact on the Arizona economy,'' he said.