Michigan bill revives film subsidies, adds cash giveaway for touting state in commercials

Michigan lawmakers once created and later ended a program to subsidize companies that make films in the state. A new set of lawmakers is considering plans to revive the subsidies, which could include 35% of the cost of hiring certain workers.

Senate Bill 438 was introduced June 28 by Sen. Dayna Polehanki, D-Livonia. The legislation would give producers a transferable tax credit worth 25% of what they spend in Michigan on certain services and supplies. A producer can receive another 5% for including specific branding references in its product. These references include "filmed in Michigan," "Pure Michigan," "Michigan Film & Digital Media Office," and the Michigan Film Industry Association logo.

Producers can claim a credit for the money they spend on personnel for the next ten years — 20% for hiring nonresidents and 30% for hiring state residents. Producers can get a 5% bonus for buying from businesses owned by women, minorities, people with disabilities or veterans. They also can get 5% for their personnel expenses for hiring minorities, people with disabilities or veterans.

If, for example, the film company has expenses of $100 million, the state will issue a transferable tax credit amounting to 25%, or $25 million.

The legislation allows producers to sell their tax credits to other taxpayers. When a business that holds a tax credit sells it to someone else, it usually does so for less than its full value. The business can then receive a direct cash payment, while the state treasury collects less than it otherwise would.

Producers can claim a credit for purchases from Michigan-based vendors for tangible property and services directly related to their projects. These purchases exclude assets with residual value, as well as durable items. Examples of what the legislation calls “qualified production expenditures” eligible for the credit include facility rentals, transportation expenses within the state and insurance policies purchased from in-state agents. They also include postproduction expenses such as animation, editing, sound recording and visual effects.

Producers might choose to sell their tax credits instead of using them, if their financial situation calls for it. Film productions often require significant amounts of money right away, and selling tax credits allows producers to access much-needed funds quickly.

While Michigan is one of the few states without an active film incentive program, it had one in the past. The program cost taxpayers $500 million during its lifetime. The number of film production jobs increased by fewer than 2,000, according to the Bureau of Labor Statistics.

“A rising tide lifts all boats,” said Michael LaFaive, the Mackinac Center’s senior director of fiscal policy. “Rather than try to subsidize what politicians think should be Michigan’s next big industry, they should create an attractive environment for all and let the economy take care of itself.

“The market has been creating jobs long before government started rolling out fiscal favors,” LaFaive added. “Brands like Kellogg’s and Motown Records were not born of taxpayer subsidies, but from entrepreneurs who thought their own investments might produce a return.”

The bill is now in the Senate Committee on Economic and Community Development.

Will Young is a Michigan Capitol Confidential intern.