Every state has different incentives for productions to film there. However, if you’ve ever thought it might be fun to read domestic tax codes, we hope you got really drunk afterwards. Each state’s tax incentives have different overall consequences and are never as simple as they seem. You will definitely need a good production accountant to guide you through how much you can actually expect and, more importantly, when you can realistically expect it. Don’t be surprised if your production needs to borrow money from some nice gentlemen in tracksuits while you wait for the state’s check.
Imagine an investor who was willing to front almost half your budget with zero expectation of getting paid back in anything other than a special thanks and your presence in his backyard. That’s basically what state tax incentives can do, covering a portion of your budget in credits that can be upwards of 40% (though generally in the 25-30% range in most places). In return, all you have to do is film your project there and hire some local crew members. Of course, this might be difficult if your story is set in Chicago at Christmas time and you’re shooting in Puerto Rico in July. However, a state like Louisiana, which offers a generous incentive for relatively low minimum budget productions, offers a diverse option of locations with everything from swamps to suburbs to cities – well, okay, really only one city, but New Orleans is pretty great and, unless you need a very specific urban setting, can probably cover your needs. In fact, if you’re (pun intended) banking on state tax incentives, you should keep this in mind at the writing level in terms of the locations available in these places.
So why do states offer so much in the way of tax incentives? Like casinos that give complementary beverages to gamblers, they want your production to spend money on other things such as hotel rooms and jobs for residents who will then pay taxes. Also like the casinos, states prefer high rollers to the guys who pump quarters into slot machines. Most states won’t even consider a production unless its budget is a certain level, which often can be out of range without a studio or legitimate financier already in place. So yes, like a lot of the best tax breaks, these often only apply to the rich. And even if your production does meet the standards set by the state, this doesn’t necessarily mean you’ll have the money to spend during production. Most states will refund the money after the production, when you might not actually need the money. A creative accountant can probably figure out a way to roll the money into post-production and make the numbers work, but you will likely need to have some funding to begin with for, you know, actually filming.
In the end, lower budget productions might be better off trying to keep the costs down and filming wherever the hell they want with the crew of their choice. The state tax incentives are primarily designed to lure studios with their franchise projects as a way to boost local economies. Documentaries can sometimes take advantage of the tax breaks, but these would be a side effect anyway; presumably, a non-fiction project is pretty tied to a specific location, so if it happens to be in a state with wonderful incentives, that’s just luck. For most other small productions, there are better ways to recover costs than tax refunds. There is definitely a kind of “spend money to make money” logic at play, but unless you’ve got experienced investors willing to absorb the costs on the front end or a very savvy production accountant, it’s not something you want to plan for in your budget.