It looks like it could be back to the future for New Jersey when it comes to efforts to generate more jobs in the film and digital-entertainment industry.
A bill that would re-establish a state tax-credit program for film, television and other digital productions was cleared by a key state Assembly committee yesterday.
The same legislation, which would provide up to $425 million in state tax breaks spread out over a five-year period, was already approved by the full Senate last month.
New Jersey used to operate a film tax-credit program, but it was effectively shut down by former Gov. Chris Christie, who questioned whether it generated enough economic development to justify the tax givebacks. But this year, the bill’s prospects appear to have been boosted by a changeover in the governor’s office as Christie, a Republican, was replaced in January by Democrat Phil Murphy, who seems to be more enthusiastic about using tax breaks to juice the state’s entertainment industry.
New York does it, Pennsylvania too
Sponsors of the push to revive the film tax-credit program say it’s long past due for New Jersey to get back into the entertainment-industry tax-incentive game, as other neighboring states like New York and Pennsylvania have continued to use credits and other tax breaks to lure production companies to set up shop within their borders. The effort to restart the program also comes as the entertainment industry has been undergoing dramatic changes due to the increasing popularity of programs produced by streaming services like Amazon and Netflix. Still, questions about the net economic benefit of the tax credits remain, with a recent fiscal note prepared by the nonpartisan Office of Legislative suggesting the revived program would likely have a “negative fiscal net impact” on the state budget.
The film tax-credit program that used to be in place in New Jersey provided up to $10 million in tax breaks to film production companies, and another $5 million for digital-media productions. By some estimates, the state had nearly 7,000 jobs tied to the production industry before the incentive program was stopped, generating more than $500 million in wages at the time.
But Christie raised questions about the effectiveness of the program as the state’s revenues dropped dramatically during the Great Recession, and he rejected legislative efforts to extend the tax credits during his first term. Members of his administration also disputed an analysis of the tax breaks by New Jersey Institute of Technology that found the program essentially broke even.
Extra funds for South Jersey productions
The legislation seeking to revive the tax-credit program would allow for up to $75 million in annual tax breaks to be awarded to film-production companies operating in New Jersey, and another up to $10 million annually for digital productions. The corporate and income-tax credits could generally be worth up to 30 percent of a film production’s costs, and up to 20 percent of a digital production’s costs. They could be worth slightly more for productions based in several counties, generally located in South Jersey. They are Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer and Salem counties.
To claim the tax credits, at least 60 percent of a film production’s costs would generally have to be incurred in New Jersey, or its expenses would have to exceed $1 million. For digital productions, the expenses would have to total $2 million, with at least 50 percent of the expenses related to employee wages.
The legislation calls for the program to launch during the 2019 fiscal year, which begins on July 1, and operate through the end of fiscal 2023.
Angela Miele, who represents the Motion Picture Association of America, said nearly 40 different states and 20 foreign countries have some sort of tax-incentive program aimed at the entertainment industry, with on-site productions generating a wide range of ancillary economic activities as they hire caterers, construction companies and other local services.
“This creates a significant added economic benefit, which is typically not even factored into analyses of the program’s impact,” she said.
NJ’s film-industry roots
Miele also pointed to the proliferation of programs being produced by the streaming services and other entertainment companies, and said New Jersey is in a prime location to take advantage of the industry’s growth. “This is a perfect time for New Jersey to reinvigorate its incentive with a competitive, sustainable program given this area is part of the regional entertainment capital,” she said.
Sponsors of the bill also pointed to the state’s roots in the film industry, including inventions by Thomas Edison, and early film productions in Fort Lee, as they predicted a revived program would generate untapped economic development.
“This is a strategic investment that will not only make New Jersey a leader in this industry once more, but it aims to create long-term jobs throughout our state and will stimulate our economy,” said Assembly Majority Leader Lou Greenwald (D-Camden).
“Not only will this bring more jobs and revenue to New Jersey through the increased number of films that will be shot here, but crew members will then eat, sleep, and do countless other things in our great state,” said Assemblyman Gordon Johnson (D-Bergen).
Despite those predictions of economic development, the fiscal note prepared earlier this month by the OLS was not as optimistic about the impact the bill could have on tax collections, at least for the state.
OLS gives poor review
“The Office of Legislative Services (OLS) expects the bill to produce a negative fiscal net impact of indeterminate magnitude on the State, considering that the bill does not require tax credit-receiving expenses to yield a net fiscal benefit to the State,” the fiscal note said.
While Christie raised similar concerns about the film credits during his tenure, last year a story published by Variety while Murphy was still running for office suggested the Democrat’s expected victory would reopen the door to establishing a film tax-credit program in New Jersey.
When asked yesterday about the bill now making its way through the Legislature, Murphy’s press secretary, Dan Bryan, did not offer an endorsement. But he said that Murphy believes “New Jersey can and should do more to encourage production companies to film in New Jersey.”
“He looks forward to working with the Legislature to move that goal forward,” Bryan said.