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NEW MEXICO LEGISLATURE PASSES TWO BILLS TO INCREASE TAX INCENTIVES FOR FILM & TV PRODUCTION


 

NEW MEXICO LEGISLATURE PASSES
TWO BILLS TO INCREASE TAX INCENTIVES FOR FILM AND TELEVISION PRODUCTION

Santa Fe, New Mexico, March 20, 2015 – In keeping with the goals of both the Governor and legislative leaders to pass substantive economic development and job creation bills during New Mexico’s current legislative session which ends Saturday, the New Mexico legislature has sent two bills to the Governor that make key improvements to the state’s world-class tax incentive program for film and television production.

Coming two years after the state famously passed the “Breaking Bad Bill” that increased financial incentives for series television to 30%, the newly passed legislation extends the 30% credit to stand-alone pilot episodes, and makes it easier for feature film productions to qualify for the 30% labor credit by expanding the definition of “qualified facilities” to include outdoor movie ranches.

The first bill, SB.565, sponsored by Senator William H. Payne (R-Bernalillo), which was approved by the state senate last week on a unanimous vote, passed the House yesterday by a vote of 51-2 and is now on its way to the Governor’s desk for signature.

“This bill proves once again the deep, bi-partisan support for the film industry in New Mexico,” said Dana Arnold, CEO of Albuquerque Studios. “We want to thank the legislators and the Governor for promoting job creation and small business growth in New Mexico. These bills make New Mexico even more competitive and attractive for producers, while encouraging producers to hire locally and use New Mexico vendors. This is a big win for the working men and women of the New Mexico film industry.”

The second bill, HB 216, introduced by representative Jim R. Trujillo (D-Santa Fe), allows a production company to pre-assign its tax rebate to a third-party. Unlike the many states that require producers to sell their credits at a discount, New Mexico provides a direct cash rebate, and the ability to pre-assign the earned rebate will be a benefit both to independent producers seeking financing for their projects and commercial producers working for agencies or accounts wanting direct assignment of the rebate. This new feature will attract more independent film and commercial work to New Mexico.

Once signed by Governor Martinez, the following enhancements from SB.565 would take effect onApril 10, 2015:

1.    30% for Pilots. Extends the 30% incentive for series television to a standalone television pilot intended for series production in New Mexico.

2.    Resident Above-the-line. Resident writers, directors and producers are now eligible for the rebate as “resident crew” provided that the individual has filed a New Mexico income tax return in each of the two previous years.

3.    Resident Performers. Removes resident background performers and resident performers in non-principal roles from the limitation of no more than $5 million in credits for the services of performing artists on any one production.

4.    Filming Ranches as “Qualified Facilities.” Expands the definition of “qualified production facility” that feature films must use to qualify for the 5% bonus credit (30% total) for hiring resident crew. For a production with a budget of up to $30 million, 3 of the 10 principal photography days may now be filmed at a “standing set that includes and least one interior and at least five exteriors… located on at least 50 acres of contiguous space designated for film production use.” For a production with a budget of over $30 million, up to 5 of the 15 required principal photography days may be filmed at such a facility. (p. 5, lines 12-19, p. 25, lines 16-20).

Effective January 1, 2016:

1.    Expands definition of “direct production expenditures.” Adds kit rentals to qualified direct production expenditures when paid to a New Mexico resident industry crew member hired on the production.

2.    Eligibility for non-resident performing artists. Makes payments to non-resident performing artists on a television series eligible for the incentive if (a) the production completes at least one full season in New Mexico; and (2) the company certifies its intention to produce at least one subsequent season in New Mexico; and (3) the company or its parent company commences production of an additional eligible television series during the same taxable year.

3.    Non-resident industry crew. In a change requested by the Hollywood studios, the bill replaces the uncertainty of the previous system for qualifying non-resident crew with the assurance of a simple formula. Under the new system, producers will no longer pay New Mexico gross receipts taxes on the wages of non-resident crew working in the state and will receive a 15% rebate on those payments to non-resident crew (other than a production designer, director of photography, line producer, costume designer, still unit photographer or driver whose sole responsibility is driving). This provides producers with clarity and certainty when bringing in non-resident crew with highly specialized skills that may not be available in New Mexico.

New Mexico production has been booming in the two years since the legislature passed the "Breaking Bad Bill." Television series currently in production in Albuquerque include Better Call Saul, the hit prequel/sequel to Breaking Bad; the second season of NBC’s hit new medical dramaThe Night Shift; USA’s Dig; with new seasons of Longmire and Manhattan current in production in Santa Fe. Major feature films including the upcoming Sicario starring Josh Brolin, Emily Blunt and Benicio del Toro and the second film in the Maze Runner series have recently wrapped production at Albuquerque Studios.

The current New Mexico legislative session ends this Saturday March 21st. The Governor’s signing deadline for all legislation passed in this session is 20 days later, or April 10, 2015.