By Kyle Davidson, Michigan Advance
“Whip It.” “8 Mile.” “Only Lovers Left Alive.” While each of these movies is very different, Michiganders may feel a sense of familiarity while watching these films. That’s because each of these movies was shot — at least in part — in Michigan.
On Tuesday, members of the House Economic Development and Small Business Committee took testimony on an effort to revive tax incentives for film and digital media, in a bid to draw more productions to the state and support local business.
The bipartisan set of bills were introduced by state Reps. Jason Hoskins (D-Southfield) and John Roth (R-Interlochen) as a replacement for Michigan’s previous film and digital media production incentive, revamping a program that was eliminated in 2015 during the former Gov. Rick Snyder era.
House Bills 4907 and 4908 would create a transferable tax credit administered by the state’s Film and Digital Media Office, for companies producing qualified productions in Michigan.
According to a report from the House Fiscal Agency, the Michigan Film and Digital Media Office could approve credits for 30% of the qualified production expenditures if the proposed production includes approved logos — the “Filmed in Michigan,” “Pure Michigan,” “Michigan Film Industry Association” and “Michigan Film & Digital Media Office” logos — or 25% if it does not.
It could also provide credits for 30% of the qualified personnel expenditures for employees who are Michigan residents when they begin work on the production and 20% for employees who are not.
There is also a 10% credit on expenditures for probationary Michigan vendors that would have qualified as a production expenditure if the vendor was a qualified Michigan vendor.
The digital media office could also approve an additional 5% credit for expenditures for a certified minority- or woman-owned business, a certified business owned by persons with disabilities, or a veteran-owned business or for employees who are part of a minority group, have a disability or are veterans.
Productions must be created wholly or partially in the state for exhibition or distribution, in any digital format, film or videotape in order to qualify for the credit. However, there are some exceptions.
Productions that include obscenity; primarily consist of televised news, current events, live sporting events or political advertising; weather shows or financial market reports; radio programs or talk shows; game shows or unscripted reality shows; awards shows or other gala events; productions made with the purpose of fundraising; and productions containing sexually explicit material that requires age verification from federal law would not be eligible for the tax credit.
Unlike the old incentives, which supporters say acted as a rebate, the new credit is issued as a transferable tax credit voucher, which would ensure the credit remains in the state.
According to information from the Michigan Film Industry Association, this credit would also require a minimum spend of $300,000 per project 20 minutes or longer, and $50,000 per project under 20 minutes or for commercial photography in order to qualify for the credit.
The new credit also has safeguards in place to address issues with the old program, including a credit cap and a 10-year sunset on the program, Hoskins said.
It also includes a cap on compensation of more than $500,000 per person, versus the previous incentive’s $2 million salary cap, which was criticized as a “Hollywood Handout” for directors, producers and A-list actors.
Alexander Page, legislative chairman of the Michigan Film Industry Association, said Michigan’s lack of multimedia production incentives is hindering its ability to compete, noting that nearby states like Indiana, Ohio and Illinois each had their own production incentives.
According to the Michigan Film Industry Association, more than 40 states and cities have incentive programs for multimedia production.
Reviving these incentives would drive investment into Michigan’s multimedia industry, with Page saying his organization anticipates a direct spend of $6 billion to $8 billion in the first 10 years of the program.
Attracting more projects would also have a ripple effect on businesses, with each film production engaging with an average of 60 vendors, Page said.
While the incentive received a deluge of support from members of the production industry, educators and business owners, the new version of the tax credit wasn’t without its detractors.
James Hohman, director of fiscal policy at the Mackinac Center, a think tank promoting free-market policies, argued that the previous version of the credit failed to bring a sustainable film industry to the state in exchange for $500 million in subsidies.
Hohman also raised concerns that allowing film producers to transfer their credits would decrease the transparency of the incentive program,
Jacob Whiton, a research analyst with Good Jobs First, a watchdog organization focused on the use of public subsidies, echoed Hohman’s concerns that subsidizing the film industry has failed to bring financial returns.
“We shouldn’t expect tax cuts to pay for themselves, nor can it be denied that these programs have induced some new economic activity where they are adopted. But these modest returns must be weighed against other higher impact public investments,” Whiton said, arguing the state should focus on providing funding for schools, infrastructure, or affordable housing.
The committee did not take votes on the bills.
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