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Mich. Bills Seek To Revive Film Tax Credits For Virus Recovery

By Paul Williams · December 4, 2020, 6:14 PM EST

A Michigan legislator introduced two bills seeking to restore the state's film tax credit program, touting the incentives as a tool that would provide jobs and help boost the state's economic recovery from the novel coronavirus pandemic.

H.B. 6504 and H.B. 6505, introduced Thursday, would create an income tax credit program from Jan. 1, 2021, through Dec. 31, 2030, for commercials, film, television and streaming productions produced in the state. The credits could be claimed for 25% of direct production expenditures, or 30% if a production includes a "filmed in Michigan logo," as well as 30% of employee compensation for Michigan residents or 20% for nonresidents.

The credits would be nonrefundable, but could be carried over for up to five years. A credit applicant could also transfer or assign any unused portion of the credit to up to 10 assignees.

Rep. Robert Wittenberg, D-Huntington Woods, who filed the bills, said in a statement that he believes the incentive package would drive economic growth in the state and raise employment as Michigan rebuilds its economy after the pandemic.

"This is about Michigan jobs," Wittenberg said. "As we witness the devastation and business losses from the pandemic, we know that attracting an industry that reinvented itself amid the crisis is a smart investment in our state's economy and its workers."

It's uncertain if the bills, which were referred to the Committee on Tax Policy, have enough support to swiftly pass through the Legislature before the legislative session ends on Dec. 31. But Wittenberg, who is term-limited and won the race for Oakland County treasurer in November, said Sen. Adam Hollier, D-Detroit, has agreed to carry the legislation in the next session that starts on Jan. 13.

Wittenberg and representatives for the Republican majority leaders in the state House of Representatives and Senate did not respond to requests for comment on Friday.

Michigan ended its prior package of film tax credit incentives — which once reached as high 42% of film production expenses — under a 2015 law that former Republican Gov. Rick Snyder signed. Brian Kelly, co-chairman of the Michigan Film Industry Association's Board of Directors, said in a statement that the bills resulted from three years of discussions with Wittenberg that focused on reviving a version of the subsidies.

Under the bills, the amount of tax credits that could be awarded each year would be capped at increasing levels over the program's 10-year span, with more credits awarded for productions that are 20 minutes or longer. The annual credit cap for productions of fewer than 20 minutes would start at $2 million and escalate up to $10 million, while the cap annual for longer productions would start at $50 million and rise to $100 million.

Greg LeRoy, executive director Good Jobs First, an organization that has been tracking state tax breaks for decades, told Law360 on Friday that Michigan's previous program was once one of the most generous in the country. While film tax credits are popular, as more than 30 states offer them, LeRoy noted that internal state studies generally find them to yield little economic value, regardless of the size of the incentives.

"I'm not aware of any state that's ever credibly estimated a positive revenue result from a film production credit program," LeRoy said, adding that "states get back dimes on the dollar" for each film credit they issue.

Additionally, by making the credits transferable, LeRoy said the incentives could end holding back the state's recovery from the pandemic because the benefits would flow to unrelated, profitable businesses that could use the credits to reduce their state tax liability.

"I would never recommend [transferrable credits] as a budget remedy for a state," he said.

The bills would require the Michigan Film and Digital Media Office to issue annual reports on the credits, starting in 2022, that would detail the effectiveness of the subsidies, including the number of full-time equivalent jobs that were created and retained, and whether those jobs were entry-level or higher.

Hollier told Law360 on Friday that he thinks some film tax break critics overlook the ancillary economic activity that results from media productions, such as food catering orders and event planning services. He said the incentives might give a leg up to the elements of the service industry that have taken the brunt of the economic downturn amid the spread of COVID-19, the respiratory illness caused by the virus.

"Barring some significant investment, I think you'll see [the service industry] come back a little bit slower," Hollier said. "It really activates the spaces of our economy that in many ways have been hit the hardest."

--Editing by Joyce Laskowski.

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