Removes the cap on the aggregate amount of tax credits allowed pursuant to the empire state film production credit

Summary of provisions

Section 1 Amends Subdivision (b) of section 24 of the tax law to add a definition of "Qualified independent film production company" as an entity not publicly traded, or owned by more than 5% by a publicly traded company.

Section 2. Amends paragraph 2 of subdivision (a) of section 24 of the tax law is amended to remove the limitation on claiming from the new credits.

Section 3. Adds a new section to section 7 of part P of chapter 60 of the laws of 2004, relating to the empire state film production credit, to add a new additional credit of $420 million a year in each year 2011, 2012, 2013, 2014 and 2015, to be allocated only after all other prior credits have been allocated. The credits cannot be claimed prior to January 1, 2011, and the aggregate amount of such tax credits paid to taxpayers is capped at $420 million in any year, with any excess amount to be treated as having been applied for on the first day of the subsequent year and thus the first to be paid. Provision of made for qualified independent film production companies to receive their credit in the year in which the production of their qualified film is completed.

Justification

New York State's Empire Film Credit has attracted feature film and television production to New York since 2004 by initially offering a tax credit equal to 10% of qualified New York production activities. A similar credit is available to productions in New York City, equal to 5% of qualifying New York City production expenses. Competition from states that have recently adopted new or more generous film credits reduced the effectiveness of the Empire and NYC film credits. According to data compiled by the New York State Governor's Film Office, introduction of competing incentives from other states, including Connecticut and Massachusetts caused a $750 million drop in New York film production from July 2006 -- June 2007 as compared to the previous 12 months. To improve New York's ability to continue to attract films and television production activities, the Empire state film credit rate was increased from 10% to 30% of qualifying costs in 2008. According to a major recent study, the 30% credit has had the following impacts:

* New York jobs created and retained: 19,512 jobs

* New York State and City Return-on-Investment (ROI): 1.90

The estimated economic and fiscal impact of the 30% film credit takes into account the contribution of the productions qualifying for credits, the increase in other production activities as well as the

contribution of post-production activities. New York employment in the film industry as a percentage of total US employment in the industry steadily declined over the 1999 to 2004 period. Absent the film credit, this trend would likely have continued, if not accelerated, given the proliferation of film incentives across the country. Following the adoption of the film credit, this trend was reversed. By 2007, New York enjoyed an estimated increase of 3,655 jobs from credit-eligible film and television productions, 1,815 additional jobs in non-credit-eligible production activity, and 1,561 jobs retained in post production activities that support film and television production activities in New York and outside the state. The sum of the jobs in these impacted areas (credit- eligible productions, non-credit-eligible productions, and retained post-production activities) is 7,031 jobs. The estimated credit allocation and tax impact of film productions and related activities will yield a State ROI of 1.1. When New York City credits and local taxes are included, the ROI is 1.9. This translates into a State tax return of $208.7 million, against credits paid out of $184.4 million (State ROI of 1.1), of city taxes paid of $195.3 million, against a credit paid of $30.7 million (City ROI of 6.4). The combined amounts are $404 million, against credits of $215.1 million (ROI of 1.9).

Prior legislative history

2008 -- Investigations

Fiscal implications

The bill will continue utilization of film/television production refundable tax credits by extending the credit for 5 years with an annual rolling cap of $420 million per year. The credits will be applied to productions in 2009 and beyond, however, the companies (except independent films) may not access these credits until taxable years beginning January 1, 2011. The fiscal impact is dependant upon the number and extent of productions that take advantage of the credit. According to a recent Ernst and Young study issued by the Motion Picture Association of America, Inc., the current production tax credit program yields a positive return on investment (ROI) with an ROI of 1.1 to the state and a return on investment to the City of New York of6.4, resulting in a combined ROI for the State and City of 1.9. Therefore, there is no fiscal impact.

Effective date

Immediately.