Copyright © 2019 Albuquerque Journal
The latest figure for paying off the backlog of rebates for movies and TV shows filmed in New Mexico through the end of the current year now stands at $382 million.
That number, released in a report by the New Mexico State Film Office, takes into account productions that have not yet submitted financial paperwork and those productions that have not yet started filming in New Mexico. The report helps explain the different amounts that have been mentioned in public statements, and breaks them down into three categories.
According to the document: “After extensive data collection and input that was not captured and presented during the past administration, NMFO, TRD (Tax and Revenue Department) and EDD (Economic Development Department) have found the backlog of submitted projects to be $198,285,562.”
In addition, the New Mexico Film Office compiled information on the total film production costs that have not yet been submitted to Tax and Revenue. That amount is $130.5 million.
The Film Office also compiled projections for films it believes will still come in during fiscal year 2019, which ends on June 30. That amount is $53.6 million.
To deal with the backlog, Gov. Michelle Lujan Grisham is supporting a bill – Senate Bill 2 – that would remove the current $50 million cap on what can be paid out to film/TV productions in a single year. She also favors a one-time payment to cover the entire backlog.
But the $7 billion budget bill passed by the House, which is now pending in the Senate, assumes a one-time payment of $150 million to reduce the film backlog, though that number could be changed moving forward.
The legislation is sponsored by Sen. Nancy Rodriguez, D-Santa Fe.
The bill also would tighten the law regarding which expenditures qualify for film rebates, while requiring movies and TV shows filmed in New Mexico to provide greater acknowledgment of the state in their credits.
One other important note – according to Alicia J. Keyes, secretary designate of Economic Development – is that the bill will help put more transparency between the Department of Taxation and Revenue and the state Film Office. In the past, the departments would have different data regarding various TV/film productions.
“A lot of the data wasn’t kept properly (by the state Film Office),” Keyes said. “We are correcting the process so that we will have more transparency between the two departments. We have an economist in the department that will be overseeing all of the information within film and TV.”
Currently, film companies receive a 25 percent rebate on expenses for most projects in New Mexico and up to a 30 percent rebate for some TV shows.
Keyes said that streamlining the process between tax and revenue and the Film Office will strengthen the state’s ability to crack down on residency issues.
“That’s a big thing for us,” she said. “It will also eliminate any kind of pass-throughs.”
A pass-through entity is a special business structure that is used to reduce the effects of double taxation. Pass-through entities don’t pay income taxes at the corporate level. Instead, corporate income is allocated among the owners and income taxes are levied only at the individual owners’ level.
According to the state Film Office report, since 2003 the film industry has brought in $3.44 billion to the state.
“(This is) money that would not have been in the state’s economy otherwise,” said Keyes. “It’s the jobs that keeping coming in. The film industry pay is roughly 42 percent more, say, if you were a regular electrician. And you get benefits.”
According to the report, the legislation was crafted to incentivize productions to use local crew, support services and vendors.
However, not all direct production spending qualifies for the tax credit.
During fiscal year 2017, the direct spend in New Mexico from the film industry was about $464.6 million. Expenditures that qualified for a rebate stood at $324 million, which left $140.4 million as the portion that did not qualify for rebates.
The Film Office has also tried to spread the film projects throughout the state.
Keyes says that while the Albuquerque/Santa Fe corridor is the epicenter of production, many rural areas have seen substantial production spending.
“In 2017 alone, 40 rural communities had film or television in their areas and millions of dollars spent in the local economies,” according to the report.
Wesley Young of Raks Building Supply said one positive aspect of the film industry is that it is virtually recession proof.
“In 2006, the film industry helped fill the hole in our business,” Young said.
Schimmel Security has also benefited from the film industry over the past five years.
“Approximately 90 percent of our business is related to the film industry,” Joseph Schimmel said. “Our work in film and TV has allowed us to hire a sizable work staff (of) over 150 people.”
The report also notes that the film industry provides opportunities for students to find high-wage jobs with benefits without having to leave the state.
“Today, there are 23 film, television and or media programs offered in New Mexico,” according to the report.
If Senate Bill 2 is passed and the cap is removed, New Mexico will join Georgia and Illinois as the states without a cap for the film industry.