PA Film Industry Tax Credit Program

March 12, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Locations of film industry-related businesses in Pennsylvania

This week, in the wake of a resplendent Academy Awards ceremony, I've had the entertainment industry on my mind. As is often the case, my thoughts began to take on a regional perspective, and I couldn't help but wonder about Greater Philadelphia's stake in the showbiz industry. It's easy enough to look back and see that our region has made a host of appearances on the silver screen over the years.  We all know that the Academy bestowed honors on the portrayals of life in our region in Rocky (Best Picture, Best Director, 1976) and Philadelphia (Best Actor, 1993). And, of course, Trading Places, Witness, Mannequin, 12 Monkeys, The Sixth Sense, and Unbreakable all were shot in Greater Philadelphia, as were a number of other films and a few television shows (Thirtysomething in the 80s; It's Always Sunny in Philadelphia, more recently). 

Add to this history the fact that, in recent years, for those living and working in Philadelphia, it's become more and more common to stumble upon the impromptu collections of trailers, lighting equipment, and hordes of extras that scream, "movie set!"  Toss in Comcast's takeover of NBC, and it would appear that Greater Philadelphia has the makings of Tinseltown Two. But, at the end of the day, what it is that brings filmmakers to Greater Philadelphia? And what sort of fiscal impact does the film industry have on the regional economy?

The Greater Philadelphia Film Office (GPFO) is ripe with information on "the industry" in the region. A self-described "non-profit economic development agency committed to the growth of the regional film production industry," the GPFO has focused on Philadelphia, Bucks, Chester, Delaware, and Montgomery counties since 1992, when then-mayor Ed Rendell appointed Sharon Pinkenson as GPFO director. 

Beginning that year, the City of Philadelphia instituted an incentive to filmmakers who shot in the city, offering $10 million annually in tax credits on a first-come, first-served basis.  At the time, the GPFO estimated the annual impact of the film industry in the region to be approximately $22 million. In 2004, as Pennsylvania governor, Rendell expanded the tax credit program across the state. Then, in 2007, Rendell and state legislators upped the ante by injecting more money into the Pennsylvania's Film Production Tax Credit Program. The program provided $75 million in tax credits to film companies that incurred at least 60% of production expenses in Pennsylvania for the filming of feature films, TV shows, and commercials intended for a national audience. Film companies that reached this threshold were eligible for a 25% tax credit on production expenses incurred in the Commonwealth.

According to the GPFO, this tax credit program has had a significant effect on film industry activity in the region. The Film Office proclaimed 2009 to be a record year for film production in the region, citing $270 million in direct spending in and around Philadelphia by the film industry. According to GPFO estimates, film industry activity created more than 2,000 jobs in the region in 2009 and accounted for a broad economic impact of nearly $500 million.

The value of the tax credit program, however, was a matter of contention during last year's state budget standoff when it was one of the more high-profile tax incentives headed for the chopping block. Detractors of the program characterized it as a drain on the perilously distressed state budget and called for its elimination.  In May of last year, the Legislative Budget and Finance Committee of the Pennsylvania General Assembly commissioned an analysis of the film industry in the state and the tax credit program itself. According to the study, the program produced a marginal fiscal gain for the state in 2007 and 2008. For the two years combined, Pennsylvania netted $4.5 million after doling out tax credits. This gain is based on $62.7 million of fiscal benefits to the state from the film industry, a significant proportion of which, the study report claims, would be at risk if the tax credit program were not in place. 

These figures contributed to a protracted discussion over the merits of the tax credit program within the state assembly. When the dust finally settled around budget talks, the tax credit program survived, but its annual allocation was been trimmed. In 2010, the state will offer $42 million in tax credits, down from $75 million in prior years. For now, the allocation is slated to increase to $60 million in 2011 and return to $75 million in 2012. However, as the state faces another budget deficit for FY 2011, it is not clear if the tax credit program again faces an uncertain future.

-- Nick Frontino, Program Manager