Lame duck legislation will further expand New Jersey’s film tax deduction program

Senator Loretta Weinberg of the state of New Jersey, then a state, attended a news conference on May 6, 2014 in Trenton, New Jersey.

Senate Majority Leader Loretta Weinberg’s bill appears, in part, to allow payments to major actors, directors and screenwriters to count toward tax deductions. | Kena Betancur / Getty Images

New Jersey could increase its tax deduction for film and digital media for the second time since bringing the program back in 2018 – in part to add some star power to its productions – under legislation introduced this month at the start of the lame duck -session.

Lawmakers hope the legislation will further expand the number of productions with New Jersey as a backdrop.

“I think what happened to the film tax deduction has been a great asset to New Jersey,” said Senate Majority Leader Loretta Weinberg, whose main sponsor, District Comrade Gordon Johnson (D-Bergen), introduced identical legislation into it. lower part of the country. House. “Right here in Teaneck for the last few weeks, there’s something like two or three big Hollywood movies that have been shot here. It’s an economic boom. It’s great for the local economy.”

Link: The bill, NJ S4094 (20R), also comes as Netflix plans to bid for a 300-acre site in Fort Monmouth that would be one of the largest production centers in the region, though Weinberg said the measure was under way long before Netflix’s intentions was known.

“Maybe they benefit from it. I do not know. But they were not the reason for that, “Weinberg said.

NBCUniversal also rents the Meadowlands arena named after the late Governor Brendan Byrne to shoot programming.

Background: New Jersey’s corporate tax incentive programs have been heavily criticized, including by Governor Phil Murphy. But Murphy has supported the film and the digital tax deduction program, which began in 2005 but had been suspended under his predecessor – the otherwise corporate tax-friendly Chris Christie.

Murphy signed legislation in 2018 to bring the program back, and followed it up with an expansion of the program in 2020.

A spokesman for Murphy did not respond to a request for comment on the new legislation.

What the bill does: Weinberg’s bill seems, in part, to allow payments to great actors, directors, and screenwriters to count toward tax deductions.

Currently, payments over $ 500,000 to a “highly compensated individual” screenwriter, director, music director, or actor cannot count toward a tax deduction. The bill would increase that amount to $ 15 million.

The annual tax deduction limit for digital productions would increase from $ 10 million to $ 30 million. Under current law, studios can claim 25 percent of their digital production costs in South Jersey and 20 percent in the rest of the state. That would rise to 35 percent in South Jersey and 30 percent elsewhere.

Production companies no longer need to be the sole owner of a studio to qualify for a tax deduction. To qualify, a production company can lease part of a plant as long as it is at least 50,000 square feet, and they undertake to spend an average of $ 50 million annually on production for a period of five to 10 years.

Studios would be allowed to exceed the current $ 100 million tax deduction in one year, but any amount above the ceiling will be deducted from the available tax deductions the following year.

What they say: Pat Garofalo – a native of New Jersey who is director of state and local politics at the Washington, DC-based American Economic Liberties Project, a progressive think tank – called the incentives a “race to the bottom” because states and even other states continue to to surpass each other. others in incentives to attract productions. The fact that this is New Jersey’s second expansion of the program in so many years shows it, he said.

“The idea of ​​subsidizing an industry from the state is that you think it is important and that you want to support it. But in the end, that support will be taken away, ”Garofalo said. “What happens with movies is that you just keep pouring millions and millions into it. I do not believe that even with these massive production facilities, when you turn off the spout, they will keep going.

Film tax deductions, Garofalo said, are more attractive to politicians who can demonstrate quick and high-profile results.

“This competition is just hopeless. But the reason they survive is that it’s good for local politicians to perform on the set. And the filming that takes place in your city is something that is tangible, and you can see, Said Garofalo. “It’s right there in your face. Famous people. It feels glamorous. ”

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