Audit Finds New York's $700 Million Film Tax Credits Make Little Difference
The credit "is at best a break-even proposition and more likely a net cost" for the state.
Governments love doling out taxpayer money in the hopes that businesses will invest in their respective states. Often, this takes the form of grants or credits to businesses that build manufacturing plants, but it also includes tax credits for film and television production.
Last year, New York expanded its already-generous tax credit for productions that choose to film in the Empire State. But a recent state-funded report found that the credit may do more harm than good.
Previously, film and TV productions that filmed in New York could qualify for a 25 percent tax break. Then the state budget—passed in May 2023—increased the cap from 25 percent to 30 percent, with a 10 percent bump for any productions that film in upstate New York. It also allowed production companies to count cast and crew salaries for tax credit reimbursement, up to $500,000 apiece.
Under the new proposal, then, a movie that chose to film in Buffalo could get a 40 percent tax break on production and salaries—credits that are also fully refundable, meaning a production could end up getting a check from the state instead of owing any taxes.
With the expanded credit, the state increased its film credit budget from $420 million to $700 million per year.
Last year, the state contracted with PFM Group Consulting to conduct an audit of New York's film tax credit, as is required under state law for any "tax credit, tax deduction, and tax incentive…which relates to increasing economic development." The report, completed in December, was published on the state Department of Taxation and Finance's website with seemingly little fanfare: It is not mentioned on the site's list of press releases or on the "News" section of Gov. Kathy Hochul's state website.
Perhaps there's a reason for that, as the report is scathing. PFM found that the credit "is at best a break-even proposition and more likely a net cost" for the state. Rather than a lucrative financial investment, the credit "does not provide a positive return to the state in terms of direct state taxes revenues, with $0.15 in direct tax revenue and $0.31 for all combined state tax revenue for every $1.00 invested."
In response to questions from Crain's New York Business, a spokesman for Hochul pointed to other state-funded audits that had reached more positive results—though one study, commissioned by the Empire State Development Corporation, found that while state and local governments received $1.70 for every dollar invested in 2021 and 2022, the state government by itself actually lost money over that period, receiving only $0.60 for every dollar spent on the film tax credit.
While disappointing for proponents of New York's film industry, the results shouldn't be surprising. When the state expanded the program last year, a proponent told Buffalo's WGRZ that the extra cash would "allow us to compete with other states like Georgia and New Jersey who we have been losing films to consistently throughout the past couple of years."
But auditors found that Georgia only generates $0.19 for every dollar spent on its tax credits, which works out to a $160,000 taxpayer loss for each job the credit creates.
Rather than expanding the tax credits, New York should scrap them altogether. "It is highly likely, given the existing workforce and infrastructure, that much of the economic activity would occur in [New York State] regardless of the credit," the PFM report found. And while both New York City and the state "benefit from exposure in film and television," "it is likely that much of the exposure would exist because of its prominence in U.S. culture."
