The end of the 2022 legislative session led to a record-high number of new and expanded film and TV show production incentives across most US States. These incentives aim to enable filmmakers to offset the cost of film production while encouraging statewide economic development. With most states already experiencing a bolstering economy through filmmaking, several other states are finding movie-making an excellent investment.
In Arizona, filmmakers also have an opportunity to enjoy the benefits of the newly introduced film tax incentives during film production. But what exactly is the Arizona state film tax credit, and who qualifies for these incentives? Read on to find out.
What is the Arizona State Film Tax Credit?
The Arizona state film tax credit is an annual film and TV tax incentive introduced by the state government to offset film production costs for Arizona filmmakers. It is offered in exchange for hiring local workers and using local resources within Arizona. Credit amounts awarded to production companies often vary depending on the total production cost within Arizona, including the number of jobs created.
Tax incentives for production were first introduced in the US in the 1990s, creating a win-win case for production companies and the state. The aim was to mitigate an increasing number of film productions shifting to other countries like Canada and the UK.
How Do Film Tax Incentives Work?
Film tax incentives are tax credits equivalent to a percentage of a film production’s in-state spending or exemptions based on sales tax on transactions. It involves programs that provide cash refunds to production companies whose producers shoot or create their films or television shows solely within Arizona. The entire filmmaking process must begin from pre- to post-production and hire workers within the state to qualify for the incentive.
How Much is the 2023 Arizona Tax Credit?
Also referred to as the Arizona Motion Picture Production Program, the 2023 Arizona tax credit has an annual cap of $75 million, which is set to increase to $125 million by 2025. The terms offer a 15% tax credit for productions of up to $10 million, 17.5% for up to $35 million, and 20% for over $35 million. Production companies also benefit from an additional 2.5% tax credit for labor positions given to Arizona residents.
Benefits of the Incentive
Production companies that qualify for film tax incentives can lower the costs of film production, reducing the overall film and TV show production. In addition, the incentive is given in exchange for employing domestic workers and using local resources, which is critical in promoting regional economic growth.
Eligibility Requirements
Production companies must meet several requirements before receiving an incentive or tax reduction. However, in most cases, rebates may apply to first-time expenditures, where producers must complete the project and pay taxes despite being eligible for a tax credit. Eligibility requirements for the incentive include the following:
- Using a qualified in-state production facility to produce and perform all production needs at an industry-standard facility in Arizona.
- Maintain the company’s production labor positions in Arizona
- Acknowledge that production was solely produced and performed in Arizona
- Provide an audited report approved by an in-state certified public accountant.
Qualifying Expenditures
Qualified expenditures for the Arizona film tax incentive include pre-production, production, and post-production costs incurred within the state. It also includes salaries and wages of all hired Arizona residents, excluding marketing and distribution expenses.
Types of Projects Eligible for Incentives
The Arizona film tax incentive includes several types of productions eligible for rebates. However, talk shows, commercials, reality TV, and game shows do not qualify for film incentives. Productions eligible for incentives in Arizona include;
- Animation
- Feature films
- Video games
- Documentaries
- Pilots
- Scripted television.
How to Apply
Before applying for the Arizona film tax credit, production companies must first meet the requirements to get a rebate. However, you must ensure you submit all the necessary documents for a complete application at least ten days before the start of principal photography. It is also important to review program guidelines and tracking tips before applying.
How Do I Apply for the Arizona Tax Credit?
While the Arizona film tax credit has several application periods each fiscal year, applicants must fill out the online form and submit it for approval at the specified periods. Once the initial application is approved, you will be notified that your project is eligible for the final submission. Submit a final application with the actual project information for audit.
Apply Now Through Arizona Film & Digital Media Coalition
Instructions
• To create a new account, click here.
• Fill out the form with all necessary information. For “Industry” select Arts, Entertainment, and Recreation. For “Primary Program of Interest,” select The Arizona Motion Picture Production Program.
• Once you submit this form, the Arizona Commerce Authority (ACA) will create an account and send you an email from the ACA Help Desk with your unique username and a temporary password (please check your junk mail folder).
• Login here with your username and temporary password (both are case-sensitive). You’ll be prompted to create a new password.
• Once logged in, you’re now ready to apply. Click “Incentives.” Select Motion Picture Production.
• Complete the Motion Picture Production: Initial Application for Pre-Approval.
• If you’d like to read the rules for the new program, click here.
If you have any questions, please feel free to contact the ACA’s Senior Program Manager of Financial Incentives, Cindy Grogan at 602-845-1221 or e-mail: [email protected].
Requirement Documentations
When applying for the Arizona film tax credit, here are the necessary documents for a successful process:
- Project summary
- Budget cost qualifier
- Employment report
- End credit requirements
- Frame grab
- Daily production reports
- Production budget
- Workforce utilization report
- General ledger reports
- Post-production budget
- Shoot days summary
- Cast and crew list
- Supplier and subcontractor report
Are There Any Restrictions on the Types of Expenses That Can be Claimed for the Arizona State Film Tax Credit?
Like most states, Arizona excludes marketing and distribution expenses that can be claimed when applying for incentives. In addition, particular productions like talk shows, game shows, and commercials are not eligible for rebates.
What is the Application Process and Timeline for the Arizona State Film Tax Credit?
Qualified production companies can apply for the Arizona state film tax credit online d receive preapproval before making a complete application. All initial applications must be made at least five days before principal photography begins, with the final application submitted within 60 days of competing post-production.
What is the Maximum Amount of the Arizona State Film Tax Credit That Can be Claimed?
The 2023 Arizona film tax credit allows production companies to claim 20% rebates for production over $35 million, with a production that spends up to $10 million to receive a 15% tax credit.
How Long Does It Take to Receive the Arizona State Film Tax Credit After the Application is Submitted?
While the timeframe to receive incentives may vary, it can take 6-8 weeks to receive refunds, while other applications can be as long as 12 weeks or more.
Conclusion
Utilizing the Arizona film tax credit can be an effective way for filmmaking companies to offset film production costs. While the process can be selective, meeting the requirements and providing all the necessary documentation can result in being awarded a tax credit.
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