Citizen referendum seeks Arizona film tax incentive program on November ballot

Proponents of ‘tax-credit’ program predict $7 billion revenue influx

A view of filming in progress at the Scottsdale Community College where the art of major motion picture making is taught meanwhile a citizen referendum effort is under way seeking to lure more media companies to Arizona.
A view of filming in progress at the Scottsdale Community College where the art of major motion picture making is taught meanwhile a citizen referendum effort is under way seeking to lure more media companies to Arizona.
Independent Newsmedia/Arianna Grainey

An effort to bring the major motion picture industry to the desert is afoot through a citizen referendum effort where proponents contend a tax-credit program could provide a $7 billion shot in the arm to public education and infrastructure.

The Arizona Entertainment Industry Act envisions an income tax credit program for film production companies whereas a company making an investment of $500,000 would be provided a tax credit equal to 25% of the base investment.

Also, according to the paperwork on file at the Arizona Secretary of State’s Office, the act would allow for an additional 10% tax credit if the Arizona Commerce Authority determines the film’s production provides promotion of Arizona.

In order for this statewide tax credit to appear on a November 2020 ballot, a total of 237,645 signatures need to be gathered and delivered to the Arizona Secretary of State’s Office by July 2.

If the ballot measure is approved by voters, as envisioned, revenue from the measure would be divided up as follows:

  • A total of 40% would go toward K-12 teacher salaries specifically;
  • A total of 20% would go toward public colleges to help reduce tuition; and
  • A total of 40% would go toward public infrastructure including, but not limited to, public schools, streets and roadways.

“It all started back when I was running for U.S. Congress in District 19 when I knocked on 13,000 doors,” said Tempe resident Irina Baroness Von Behr.

“Also, some people from the film industry called me during the campaign and mentioned they would like some help to bring the Arizona film tax credit back to Arizona.”

As Ms. Von Behr researched the topic, she began to feel strongly the prospect for a tax-credit program is a state of Arizona issue --- not necessarily a national one.

“However, after the election, I decided to investigate it further and it really looks like something that would be good for Arizona, and good for a lot of the people of Arizona,” she said. “Another major problem we have here in Arizona is teacher pay, so I sat down with my husband and wrote out a bill.”

Ms. Von Behr contends for a decade the state of Arizona has not offered any tax incentives for the film industry resulting in other states reaping the benefits of such programs.

“Why not the film industry?” she asked. “The tech industry gets a tax credit when they move into the state, why not this industry? Georgia has about a $9 billion economic impact every year --- that is just huge.”

Ms. Von Behr explains the ballot initiative is not a blank check.

“We are not trying to just give one group a handout,” she said. “This initiative is trying to solve multiple problems. I think this is a win-win situation.”
But Ms. Von Behr admits gathering signatures and gathering any kind of political support has been an uphill battle.

“We have been having a lot of difficulty with this because people don’t understand tax incentives. For some reason they think that every person would get taxed,” she said. “All of the big companies coming here are provided some kind of tax incentive typically, why not the film industry?”

It appears, a total of 28 states today offer a tax incentive program of some kind to the film industry.

“Low-orbiting satellites are going around the earth creating more and more media companies,” she said of the growing digital industry through the advent of mobile data technology. “They are trying to open up more and more companies, which means they are producing more films, TV programs and more and more of everything. Arizona needs to get in the game in terms of the production of those products.”

--- Irina Baroness Von Behr

The tax incentive program could be a high-wage job creator for the state, Ms. Von Behr says.

“It will be a great way to generate money and generate jobs,” she said.

“This is a matter of keeping a promise when I was running for office. But, sometimes being in office is not the answer. We the people really have the control and the choice of what we really want to do. When you put a ballot initiative up there the next government can’t take it away with a stroke of the pen.”

A complicated tough sell?

Phoenix film advocate Joe Gruberman outlines the idea and reality behind tax incentive programs are not so cut and dry.

“It’s a complicated scenario, so it’s hard to answer,” he said in response to being asked if a tax-credit program would be a benefit to the film industry. “We used to have transferable tax credits, and companies sprang into existence with the sole purpose of buying and selling those tax credits. Imagine having middlemen (brokers) making money off of taxpayer dollars.”

Mr. Gruberman, who serves as treasurer of the Arizona Film & Media Coalition and by trade is an award-winning producer and screenwriter, says no tax-credit program is created equally.

“Be careful when you use the term ‘tax credit,’ as it’s a simple term that is nowhere near an accurate identifier of the structure of any particular tax credit. Besides, ‘tax rebate’ is where our mindset currently is. Also, nobody in Arizona government is interested in giving tax credits to the film industry,” he said of the last time a tax incentive program was in place at the Arizona capitol. “I can’t say I blame them.”

In early February, House Bill 2385 --- a bill seeking to amend state statute 41-1509 creating a tax reimbursement program for motion picture productions --- was heard at the Arizona House Ways and Means Committee, but the bill is now dead, according to its key sponsor, Representative Walter Blackman, a republican.

Rep. Blackman declined to comment for this article.
The big question: Would a tax incentive program be a boon for the Arizona Economy?

“It really does depend on the production,” Mr. Gruberman said of his opinion.

“But I’ve known shows that completely rebuilt towns, shot their scenes, then walked away, leaving brand new structures for the locals to enjoy. As a filmmaker, I’ve rented equipment, vehicles, hotel rooms and locations. I’ve purchased food, supplies, gasoline and wardrobe. I’ve paid over a million dollars in salaries, payroll taxes, health insurance, workman’s comp, union dues, all to local workers. And, that’s just little old me doing indie projects.”

--- Joe Gruberman

Mr. Gruberman explains a tax-incentive program is a cost-reduction program for any business able to participate.

“People call that temporary work but, like construction, the constant influx of projects turns temporary work into year-round employment,” he pointed out. “No one ever calls roofers or carpenters temp employees. In addition to all that, post-production and animation houses start to spring up. We already have several. And, they hire workers full-time.”

Robert Charrette, chairman of the Arizona for Film Tax Credit committee, says he believes a voter-approved measure such as this one is something that can bear fruit for years to come.

“It is being done around the country, why not here?” he asked pointing out the benefits of the funding to groups the tax incentive is supposed to benefit.

“This is something, if it passes, they don’t have to go back to Legislature and get approved every year. This is money that is going to grow and grow until it reaches the point of diminishing returns.”