If you like forking over your hard-earned dollars to woke Hollywood liberals, Arizona lawmakers have you covered.
Last month, the state legislature took on the role of “Minions” for the film industry. As you may recall, the Club previously fought against a movie tax credit bill known as SB1708. After passing the Senate, it failed in the House. But in a shady move, Senate Appropriations Chairman David Gowan resurrected the effort through a strike-everything amendment to HB2156, declaring that Hollywood subsidies were his top issue in budget negotiations and any budget agreement was contingent on its passage. A few days later, the bill passed when a handful of Republicans joined every Democrat to support it. Governor Ducey allowed the bill to become law without his signature on July 6th…
So, how much Hollywood corporate welfare will Arizona taxpayers be on the hook for?
On Wednesday, the Arizona Senate Appropriations Committee passed budget legislation to offer tax credits to movie studios, after a previous effort on the matter failed. Legislators resurrected this effort by introducing it through a strike-everything amendment on HB2156 — its similar predecessor, SB1708, passed through the Senate but failed to make it to the House floor earlier this year. Analysis of the predecessor bill estimated that it would incur losses to the state averaging $150 million.
The legislation would establish a program to promote workforce development and expansion of the movie industry. Further, movie companies would receive credits up to 15 percent if they spend up to $10 million in production costs, 17.5 percent if they spend over $10 million up to $35 million, and 20 percent if they spend over $35 million.
According to the Nashville Film Institute (NFI), the average cost of making a feature film ranges between $100 and $150 million, though it noted that some comedy and animated feature films like those from DreamWorks average between $70 and $90 million.
AZ Free News reviewed the production costs for mainstream feature films in theaters currently; all are well over $35 million. The blockbuster hit “Top Gun: Maverick” had a production budget of $170 million (as of this report, the film has grossed over $900 million worldwide in under a month). Pixar’s latest animated film, “Lightyear,” cost about $200 million to produce. The biopic, “Elvis,” had a significantly lower cost at $85 million.
The legislation would also limit tax credits exceeding $150 million in any calendar year from being preapproved.
Nick Simonetta, a lobbyist, testified to the committee that leadership in both chambers wanted to move this bill at this time. Simonetta said that this version of the bill, HB2156, was an improvement on a predecessor tax credit bill passed by the committee in February, calling the updated bill the “Cadillac” of accountability.
“You cannot claim a credit in this state for the benefit of the program without paying taxes on the expenditures that you’re making,” said Simonetta.
Simonetta testified that HB2156 was ultimately an infrastructure bill that would create a nonexistent industry in Arizona. He referenced two different movie filming complexes being built in the Scottsdale and Buckeye areas.
“The folks investing in these facilities to build movie sound stage complexes and all the things that go with them — the buildings, the office space, the commissary, the mill space, the back lots, everything — this will be investments of hundreds and hundreds of millions of dollars, even just for the first phases of these complexes,” said Simonetta.
State Senator Sonny Borrelli (R-Lake Havasu City) joked that he was only voting for the bill with the contingency that State Senator David Livingston (R-Peoria) didn’t get a movie role.
State Senator Kelly Townsend (R-Mesa) flipped her vote this time around, having voted against the legislation’s predecessor previously. Townsend didn’t offer an in-depth explanation on her change of heart. She joked that Simonetta’s “little extra explanation” past the cut-off time for his testimony was enough to change her mind.
In the name of the #AZLEG budget & fiscal conservatism, tonight’s dinner will be provided by Dollar Tree. #StartYourOwnRumor
— Senator Kelly Townsend 🇺🇸 (@AZKellyT) June 23, 2022
The Arizona Free Enterprise Club criticized the tax credit bill, arguing that it would cost Arizonans hundreds of millions in taxpayer dollars to subsidize Hollywood liberals.
— Arizona Free Enterprise Club (@azfec) June 22, 2022
Arizona Republican Party Political Director Jeremiah Cota commented that the tax credits only sweetened the deal for Democrats, and played into “woke” agendas contrary to Arizonan interests.
If you support the refundable movie tax credits so you can "get a deal done" in Arizona's budget.
It's also fair to say you support the groomers at @Disney because you know it's woke companies like Disney who stand to gain the most from such a sweetheart deal.#AZLeg
— Jeremiah Cota #InflationStrong✊️ (@jeremiahcota) June 22, 2022
The state’s previous tax credit program for movie companies that began in 2005 bled the state of millions of dollars. At the time, Canada introduced tax incentives that pulled movie companies away from Arizona and all other states. Incentives like Arizona’s tax credit program were launched in response to Canada as a means of enticing movie companies to return to the states.
Arizona’s tax credit program lapsed officially in 2010, though it was shut down by the 2008 recession.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
A controversial bill to offer up to $150 million in tax credits to filmmakers, SB1708, passed the House Appropriations Committee on a divided vote: 8-5.
The bill reads like a promotional deal for a store: if a company spends up to $10 million, then they get 15 percent in tax credits. If they spend between $10 and $35 million, then they get $17.5 percent. And if they spend over $35 million, then they get 20 percent. Companies could get more: an additional 2.5 percent for total production labor costs associated with Arizonan employees, an additional 2.5 percent of total qualified production costs associated with filming at a qualified production facility in Arizona or primarily on location, and an additional 2.5 percent of total qualified production costs if they filmed in association with a long-term tenant of a qualified production facility.
Arizona Free Enterprise Club Vice President Aimee Yentes told the committee that the $150 million refundable tax credit was not only unwise but likely unconstitutional, directing the committee members to review the Goldwater Institute’s analysis of the bill’s potential gift clause violations. She added that this type of legislation only causes a bidding war between states that ultimately cause its residents to lose out, citing similar legislation adopted in other states and their current struggles. As for the argument that the tax credit would result in more jobs for locals, Yentes asserted that theory fails to prove itself in practice.
“It’s a loser that produces few, shallow, low-payment, temporary jobs,” said Yentes.
Michael Scott, CEO of self-described “faith-based” film company Pure Flix responsible for movies like “Case for Christ” and the “God’s Not Dead” series, said that they spend tens of millions outside of Arizona. Scott promised they would employ many locals if they could bring filmmaking to Arizona.
Rob Gerstner, a longtime cameraman, said that this bill wouldn’t stop film companies from “sub-renting” equipment: local companies lack all the equipment necessary to film a movie, meaning that they would then need to rely on renting equipment from other states to fulfill the film company’s contract. Gerstner said that money would bleed out of Arizona because of logistical problems like that.
State Representative Jake Hoffman (R-Queen Creek) noted that pornography movies don’t qualify for the credit, but asked why works like the controversial Netflix film “Cuties” wouldn’t be scrutinized — something that would oppose certain Arizonan’s values. The bill sponsor, State Senator David Gowan (R-Sierra Vista), said that the bill would inspire the “mass good” and that the bad and good works could compete.
“I don’t know how you control all that aspect, but it certainly allows them to be here and allow them to counter that with our religious movies,” said Gowan. “You can’t control everything that’s out there, but you can certainly control the most evil.”
Hoffman said that political candidates and their campaigns could reap the tax credit reward. Gowan said that those kinds of works would fall under campaign laws, which would. Hoffman said that attorneys informed him of the opposite legal take and advised Gowan to look into that.
State Representative Gail Griffin (R-Hereford) explained that she’s never voted for a refundable tax credit. Hoffman said that he wasn’t confident political campaigns wouldn’t benefit from the bill, and cited concerns that the bill would cause a slippery slope “race to the bottom” for tax credits. State Representative Joanne Osborne (R-Goodyear) cited similar concerns.
“At the end of the day I’m just a small mom and pop business owner; I don’t get a $150 million tax credit,” said Osborne. “This bill does set a precedent, and it’s not one I’m going to support.”
State Representative Lorenzo Sierra (D-Avondale) expressed excitement at the thought of all the film-related programs that may arise from this bill.
Butler argued that this bill was “really scary” from the sheer amount of money being committed from the state legislature, at the potential expense of other investments. She said she wasn’t convinced that the returns would outweigh the funds given, citing that there needed to be more checks and balances like a sunset clause to keep the legislation in check. Yet, Butler voted for the bill.
Chairman Regina Cobb (R-Kingman) said that she felt there were significant advantages and disadvantages presented by the bill, agreeing with Butler that there should be a sunset clause, and voted for the bill.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
Arizona lawmakers are currently living in “La La Land.” No, really. They want to dole out $150 million of your dollars to sign checks to woke Hollywood producers to literally California our Arizona.
SB1708, sponsored by Senator David Gowan, passed out of the Senate last week by a vote of 21-7. It provides a tax credit for a percentage of movie production costs: 15% for productions up to $10 million, 17.5% for productions between $10 and $35 million, 20% for productions over $35 million, and the opportunity for an extra 2.5% on top for positions held by Arizona residents, if the production is filmed in a qualified facility or primarily on location, or if it was produced in association with a long-term tenant in a qualified production facility.
The worst part—it’s refundable. This means that if Hollywood producers wipe out their tax liability to zero, the remaining tax credits come as a check from you, the taxpayer.
