Underhill, Mark

Written by Mark Underhill, CPA

All across the country, various state and local governments have been trying to lure film and entertainment companies to their location to produce their next project.  They entice films with various incentives ranging from state tax credits to sales and use tax exemptions, and everything in between.  Fortunately for some states (and unfortunately for others), not all incentives are created equally.  If you’ve ever wondered how and why there were so many TV shows made in Alaska, you just have to follow the money.  Sure they have exciting story lines and great scenery to produce shows such as Deadliest Catch, Gold Rush, Life Below Zero, Buying Alaska, and so many others, but great locations and storylines can be found across the country.  The truth is, Alaska paid out roughly $80 million in incentives from 2008-2015 to grow the industry in Alaska.  Forget the gold rush, Alaska engineered a film incentive rush.  They recognized early on that not only does the incentive grow an industry in the state, but it also publicizes the state which helps drive tourism and other economic growth factors.  Recognizing this, Alabama has offered a film incentive since 2009 and, when compared to other state incentives across the country, we are viewed as a very film friendly state.

Whether a film’s budget is $500k or $20 million, money is always THE issue.  From financing and budgeting, to return on investment, money drives the conversation throughout pre-production, production, and post.  For projects filmed in Alabama, the state offers a production incentive of 25% for all in-state qualifying production expenses and 35% for payroll paid to Alabama residents.  Productions must spend at least $500k and have a spending cap of $20 million.  Unlike many states, Alabama’s incentive is a refundable tax credit and not a transferable tax credit.  This means you get a physical check back from the state and not a tax credit that you have to sell to others.  Having to sell the credit can translate to as much as a 20% loss from what you would have received with a refundable credit.

Other advantages for Alabama include (but, of course, are not limited to):

  • Diverse environments – whether your next production calls for big cities, small towns, white sand beaches, rural farm lands, mountains, or anything in between, Alabama has it covered. Alabama is the most biologically diverse place in the country outside of California.  You’d be hard pressed to ask for a production setting you could not find in Alabama.
  • Right to work state – As a right to work state, you can hire union or non-union talent and personnel to fit your production needs.
  • Talented, in-state personnel experienced in the profession. You won’t find a better example on the post-production side than BMSS friend and client, Red Sky Studios (redskypost.com).  We’ve had clients from across the country come to Alabama just to use Red Sky telling us that they got “Hollywood and New York quality work at Alabama prices”.  The cherry on top is that their costs are also incentivized as a qualifying production expense.

Production companies that come to Alabama tell us time and again how great it has been to film in our state.  They mention the great ambassadors they work with from the Alabama Film Office and wonderful support they receive from people like Buddy Palmer with Create Birmingham.    We have seen the rise of talented local filmmakers such as Birmingham’s own Erwin Brothers.  They make feature films that not only showcase their talent but also the state they love.  As the demand for content grows, new companies such as Steel City Films are forming to meet this demand.  In the last year alone, we’ve seen the creation of events like the 2016 Sports and Entertainment Industry Symposium presented by Samford University and Darkness to Light Films.  The Annual Sidewalk Film Festival was named as one of the top 25 coolest movie festivals in the world in 2015.  Events like this have taken off and drawn people from across the country and around the globe to Alabama.  They come here to be entertained and to entertain others, but they stay here because of the opportunities and excitement generated by a growing industry.

Right about now, you’re probably wondering how and why this matters to a CPA firm in Birmingham, AL.  The answer is simply that it matters to our clients and, therefore, it matters to us.  As CPAs with experience in the film and entertainment industry, we know how important these incentives are, not only for the production companies, but also to local businesses who benefit from the money these productions bring to a location.  Individuals like Victor Brown with the Birmingham Business Alliance have pointed out time and again how films can have a lasting impact on a business community long after the cameras stop rolling.  For the average $12 million film, a production could spend $350k hiring local carpenters and contractors to build sets, $150k on rental cars, $275k on hotels, and $120k on catered meals alone. Restaurants, hotels, transportation services, clothing retailers, facilities for rent, and so much more all benefit from a film being produced in the area.   According to state figures, for every $1 spent by the state incentivizing a production to come to Alabama, the state receives $7 in return spending.  Local crew, talent, and production support companies all benefit by the projects brought to the state.  Above all else, this means jobs for Alabama.

I say all of this to point out that the incentives, locations, support, and talent are all here.  So what are you waiting for…Go Film Alabama.

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