The Garden State is back in the film subsidy business. After a hiatus during Gov. Chris Christie’s term, the state’s subsidy program for filmmakers is being resumed. Proponents hail this as a way to jump-start New Jersey’s film industry, while critics paint it as a handout to wealthy film companies.
Governor Christie disliked film subsidies and worked with legislators to discontinue them when he was in office. The new governor, Phil Murphy, came into office stressing a variety of differences with Christie. Film subsidies is one of them. He recently signed a bill into law that revives state tax credits for film companies.
Under this legislation, the state can offer $85 million a year in tax credits to companies engaged in film production. For companies operating in northern New Jersey, they can receive a tax credit equal to 30% of their qualified production expenses. Companies in southern New Jersey will receive a credit of 35%. Digital media are also eligible for these credits, but at a 20% or 25% rate. Companies with a diversity program can receive even more state aid.
These credits will be applied against a company’s tax liability. Unlike in some states, these credits are not refundable – that is, a company will only receive them if they have a tax liability. Some states provide “tax credits” even if companies do not owe state taxes, essentially turning the credits into payments by the state to the production companies. The New Jersey credits will be transferable, however, meaning that production companies that don’t use them can sell them to other companies that do owe taxes.
Gov. Murphy and legislators who support this tax credit program say that it is vital to attracting film production to New Jersey. They say that other states offer companies these credits, so New Jersey must do so, too, if it wants to have a strong film industry. Opponents point to numerous academic studies that conclude these subsidies produce little in the way of new jobs or long-lasting economic impact. They say that these subsidies are nothing more than corporate welfare for out-of-state companies that are not struggling economically.
This tax credit program will last for five years, then it must be renewed by the legislature.
Do you support states giving tax credits or other subsidies to film companies?