Eliminates limitation on the annual aggregate amount of the empire state film credits that may be taken against state taxes

Summary of provisions

Section 1 of the bill amends section 7 of part P of chapter 60 of the laws of 2004, amending the tax law relating to the empire state film production credit, subdivision (a) of section 7 as amended by section 4 of part WW-1 of chapter 57 of the laws of 2008, subdivision (b) of section 7 as amended by section 2 and subdivision (c) of section 1 as amended by section 3 of part Y of chapter 62 of the laws of 2006, subdi- vision (d) of section 7 as amended by section 1 of part Q of chapter 57 of the laws of 2010, subdivision (e) of section 7 as amended by section 1 of part C of chapter 312 of the laws of 2010 to eliminate the limita- tion on the annual aggregate amount of the Empire State Film Credits that may be taken against state taxes.

Section 1 also amends section 8 of the abovementioned law to provide that the annual report submitted by the Commissioner of the Department of Taxation and Finance, in conjunction with the Director of the Gover- nor's Office for Motion Picture and Television Development, evaluating the effectiveness of the film production tax credit provided by this act in stimulating the growth of the film industry in the state may include recommendations on whether, based on information in such annual report, an annual limitation of the aggregate amount of the empire state film credits that may be taken against state taxes should be imposed.

Section 2 of the bill amends Paragraph 2 of subdivision (a) of section 24 of the tax law, as amended by section 4 of part Q of chapter 57 of the laws of 2010, to remove reference to a cap on the annual aggregate amount of the Empire State Film Credits that may be taken against state taxes.

Section 3 establishes the effective date.

Justification

The Empire State Film Production Tax Credit has been an unqualified success for the State of New York, both culturally and financially. Despite the fact that New York's tax credit is significantly less gener- ous than the credits offered by competing states (including Connecticut and Massachusetts), it continues to be a premier destination for films and television shows, shining light on the State's rightful status as a world capital for the arts. The tax credit program has also proven to

have a consistently beneficial impact on the State's bottom line. In 2009, an Ernst & Young study estimated that the program had cost the state $690 million while generating $2.6 billion in tax revenue. Even more importantly, the program has helped create tens of thousands of new jobs in this state.

While the 2010-2011 state budget extended the program by five years in 2010, it failed to address a major institutional problem which dissuades television shows from setting up roots in the state. Unlike movie productions, television productions are "quasi-permanent" institutions that ordinarily must run for at least four years to reach syndication length and become truly profitable. This means that as soon as the second year of a five-year tax credit extension, television production companies considering putting down roots in the state can no longer be assured that the credit will still be in place when their shows reach sufficient length. Consequently, in order to consistently attract the most promising television series, it is critical that production compa- nies be given the peace of mind that, if their shows are successful, they will not be forced to uproot production and move elsewhere in a few short years.

This bill gives television producers that peace of mind by removing the cap on the Empire State Film Tax Credit program. A simple funding exten- sion would only delay the problem instead of providing the genuine solution that is called for. This bill does not increase the percentage of production costs eligible for a tax credit, it merely removes the total cap on aggregate costs. It also instructs the Tax Commissioner to annually evaluate whether such a limit should be imposed. Consequently, the State would remain largely insulated from risk while seeing increased benefits. While removing the cap on a tax credit program might be a drastic step in other contexts, it is a simple matter in logic for a program that nets the state a consistent and substantial return on its investment.

Between 2002 and 2009 the number of states offering film-production tax credits rose from 5 to 44. The vast majority of those states offer more substantial credits to individual productions than New York, and many are considering increasing the percentage of costs that can be credited still further. Fortunately, New York does not need to take part in this film tax credit arms race. Television production companies want to come here, even if it costs more. They simply want to be assured that funding for the program will still be in place when their shows become profita- ble. If we are to continue to attract top-shelf television productions we must make certain that our own program follows the basic dictates of common sense. This bill provides that common sense solution.

Legislative history

This is a new bill

Fiscal implications

To be determined.

Effective date

This act shall take effect January 1, 2015 and shall apply to tax years commencing on or after such date.