New Mexico speeds up tax rebates to film industry

New Mexico
UNM Film

SANTA FE, N.M. (AP) —  New Mexico announced tax rebate payouts of nearly $100 million to producers of film and television shows that were shot within the state in recent years, as the state’s Democratic governor courts new investments and industry jobs.

The Taxation and Revenue Department said Thursday that payments of $98.5 million will be issued this week to 98 shows.

Legislation signed this year by Democratic Gov. Michelle Lujan Grisham removes a $50 million annual cap on film production tax credit payments and provides money to clear a portion of the backlog of applications. The first-year governor campaigned for office last year on promises to raise the cap in an effort to attract more film business and jobs to the state.

“In New Mexico, we pay our debts, simple as that,” Lujan Grisham said in a statement.

The film tax incentive credit can be worth up to 35 percent of production expenditures to New Mexico vendors and resident employees, and the new law includes provisions aimed at attracting “Breaking Bad”-style ventures that provide dependable, recurring employment.

New provisions of the film tax rebate are likely to represent the most significant state investment ever for New Mexico in a single industry for economic development, according to analysts for the state Legislature. They estimate a $500 million payout from the state general fund over the next five years as a result of legal changes, on top of $250 million in previously anticipated spending.

Surging oil and natural gas production has provided the state with a multibillion-dollar windfall in income, as the state wrestles with high rates of childhood poverty, relatively high unemployment and low wages in comparison with most states.

The individual film rebates being issued this week range from $1,300 to $15 million.

The Taxation and Revenue and Economic Development departments declined Thursday to immediately identify film productions that are receiving rebates this week. Tax department spokesman Charlie Moore said a request for that information was under evaluation for compliance with state law.

Companies including Netflix and NBCUniversal that have committed to sustained film activity in the state under a new program are exempt from the film production rebate cap, set at $110 million starting July 1.

Some state lawmakers expressed unease Thursday with the extent of the newly approved film industry incentives, at a hearing of the lead state budget committee in Portales.

“We’re driving a car that we can’t afford,” said Republican Rep. Phelps Anderson of Roswell, suggesting that the state won’t be able to sustain promised film rebates indefinitely.

Sen. James White, R-Albuquerque, said film productions generate taxes on sales and services — but suspects that profits ultimately are sheltered from state corporate income taxes.

“It’s fun having them here. It’s just expensive,” he said.

State Economic Development Secretary Alicia Keyes on Thursday announced new efforts to track how much wealth is generated by film productions that receive incentives and where, an effort welcomed by legislators.

“I really believe that this industry is providing high wages,” she said.

Keyes indicated that state officials have started meeting with all film tax credit applicants to ensure better tracking and verification of data. She also noted that film companies that lie about residency requirements to qualify for credits can be banned from incentives for two years under new provisions.

Deputy Economic Development Secretary Jon Clark said extensive auditing is performed on all film tax rebate applications.

Films that are produced far beyond Albuquerque and Santa Fe will be eligible for a richer rebate starting next month in an effort to steer economic development toward depressed rural areas and the south of the state.

Planned payouts this week to film companies reduce the state backlog of qualified rebates to just over $230 million, Keyes said. That equals about 3 percent of the state’s latest $7 billion annual general fund spending budget.

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