Reality 101 from the Alaska Dispatch

Film tax credit extension tabled until 2012

A new report from nonpartisan think tank the Tax Foundation says that states are moving away from film tax credit programs, even as Alaska lawmakers continue to entertain the idea of extending the state's own film tax incentive program.

"Film tax credits fail to live up to their promises to encourage economic growth overall and to raise tax revenue," said the report, released Thursday. The report said that 40 states had active film tax incentive programs in both 2009 and 2010 -- an all-time high -- but 2011 had only 37 states represented, the first decline in participating states since before 1999. That number will fall to 35 by next year, the report said.

“Film incentive programs were once considered great economic development tools and tourism boosters, but their merits have come under considerable doubt,” said Tax Foundation Vice President for Legal & State Projects Joseph Henchman in a press release. “At a minimum, film incentive programs should be audited by a third party to determine effectiveness. We are now seeing that many of the states that have looked into the performance of their own programs have determined them not to be worthwhile.”

During the most recent legislative session, and in the wake of two major Hollywood productions based in Alaska and a spate of Alaska-themed reality television shows, lawmaker Johnny Ellis drafted legislation that would have extended the Alaska film tax incentive program for 10 years and committed $200 million in tax credits to qualifying productions. That legislation passed the Alaska Senate with a unanimous vote. The bill was then tabled by the House until the 2012 following concerns about possible abuse of the program.

As the future of the legislation remains in limbo, the current program has been very appealing to the state of late, with several productions already wrapped and others already showing interest in the state as a possible shooting location. But the new Tax Foundation report could reflect poorly on the program when it is re-examined next year.

Additionally, the report may be painting a bleaker picture than is actually the case: the report mentions that the Alaska Legislature postponed renewal of the program, but doesn't mention that the program had unanimously passed the Senate before being tabled.

Included as bad signs for other state's programs are setting caps on the amount of credits, gubernatorial administrations' opposition to the programs, and a vote in Hawaii not to expand the program in that state.

Meanwhile, eight other states are expanding their programs, demonstrating a wide array of policies regarding film tax incentive programs, varying from state to state. Should Alaska adopt its own extended program during the next legislative session, it will swap Alaska from the "pared back or challenged" category to the "betting more" category.