Read the 2017 results on film incentives from the Virginia’s Joint Legislative Audit and Review Commission

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Posted by Brandon Jarvis




It was first reported by the Richmond Times-Dispatch, that the state paid $536,000 in incentives to get The Bachelorette to film here. Some of the requirements were they had “to mention the state’s ‘Virginia is for Lovers’ tourism campaign and provide a link to the state’s tourism page on the show’s website.”

A debate has since been happening as to was it actually worth it for Virginia to spend this much money on the Bachelor. In 2017, a study was done by JLARC to examine the tax incentives for film productions. You can read the results of the study below.

Through language in the Appropriation Act, the General Assembly directed the Joint Legislative Audit and Review Commission (JLARC) to review and evaluate economic development initiatives. Topics include spending on incentives and activity generated by businesses receiving incentives; the economic benefits of incentives; and the effectiveness of incentives.

JLARC releases two reports each year: a report on overall spending and business activity and an in-depth report on the effectiveness of selected individual incentives. (See Appendix A: Study mandate.) JLARC contracted with the Weldon Cooper Center for Public Service to perform the analysis for both reports.

This report is the first in the series of in-depth reports on the effectiveness of individual incentives and fo- cuses on Virginia’s film incentives.

What the results of the study found:

  • Virginia spending on economic development incentives for the film industry totaled $47.5 million over the past five years, including $14 million in FY16, through a combination of grants, tax credits, and tax exemptions.
  • The film tax credit and grant have had mixed success in achieving their goals. While the in- centives have influenced most productions that received incentives to film in the state, film in- dustry growth in Virginia has been very small overall even after increased spending through its incentives.
  • The tax credit and grant have a positive impact on Virginia’s economy (an additional 580 jobs and $51 million in Virginia GDP per year, on average), but the impact is smaller than that of other economic development incentive pro- grams.
  • Both incentives provide a low return in revenue to the state (20 cents per dollar invested for the tax credit and 30 cents per dollar for the grant.)
  • Virginia’sgrantprogramisuniqueinthatitleveragesin-kindadvertisingfrom productions, which generates additional economic benefits and state revenue through increased tourism in Virginia.
  • The film tax exemption has little effect on film location decisions, an egligible benefit to the Virginia economy, and provides a negligible return on the state’s investment. However, the exemption addresses imperfections in the sales and use tax system.
  1. OPTIONS AND RECOMMENDATIONS: Legislative actionOptions: The General Assembly could consider eliminating the film tax credit and grant or creating a more effective film grant.Recommendation: If the General Assembly decides to maintain the film incentive program in Virginia, elements of the tax credit and grant should be combined to pro- vide a more effective incentive. The enhanced incentive should be structured as a grant, use the formal award criteria of the tax credit, have a simplified version of the rate structure used by the tax credit, and use a scoring system to make award decisions.

    Executive action

    Recommendations: If the General Assembly decides to maintain the film incentive program in Virginia, the Virginia Film Office should develop proposals to simplify the reimbursement rate structure and create a scoring system to make award decisions.

    RECOMMENDATION 1

    If the General Assembly decides to maintain the film incentive program in Virginia, the General Assembly may wish to consider amending the Code of Virginia to repeal § 58.1-439.12:03, which establishes the Motion Picture Production Tax Credit, and to incorporate the tax credit criteria and reimbursement rate provisions into § 2.2-2320, which establishes the Governor’s Motion Picture Opportunity Fund.

    RECOMMENDATION 2

    If the General Assembly decides to maintain the film incentive program in Virginia, the Virginia Film Office should develop a proposal to simplify the reimbursement rate structure of the Motion Picture Production Tax Credit for use in the new grant pro- gram. In developing the proposal, consideration should be given to making the rate more competitive. The Virginia Film Office should report on its proposal to the gov- ernor and the chairs of the House Appropriations and Senate Finance Committees no later than November 1, 2018.

    RECOMMENDATION 3

    If the General Assembly decides to maintain the film incentive program in Virginia, the Virginia Film Office should create a formal point-based scoring system to evaluate each application for a grant award. The system should be based on objective criteria to better enable staff to identify projects likely to maximize state economic benefits. The Virginia Film Office should report on its proposal to the governor and the chairs of the House Appropriations and Senate Finance Committees no later than November 1, 2018.

    RECOMMENDATION 4

    The JLARC Economic Development Subcommittee may wish to consider sending a letter to the Joint Subcommittee to Evaluate Tax Preferences requesting the subcom- mittee to review the merits of the Film, TV, and Audio Production Input Sales and Use Tax Exemption in achieving a more efficient tax system. The review should con- sider that the exemption narrows the tax base, complicates state tax regulations, and provides little or no effect on film production activity.

     

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