Arizona’s $125M Film and TV Tax Credits Bill Becomes Law

Arizona will hand out up to $125 million a year in tax breaks to Hollywood, joining the ranks of just a handful of states with nine-figure caps in their incentive programs.

Under a program that Gov. Doug Ducey allowed to become law Wednesday without his signature, productions that shoot in Arizona will be eligible for a refundable tax credit of 15 to 20 percent of expenses. The Arizona Motion Picture Production Program will start at $75 million in 2023 and grow to $125 million by 2025.

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To qualify, producers must use an Arizona production facility or, if the project is primarily filmed on location, must mostly shoot and conduct pre- and postproduction in the state. The program features a tiered credit system: productions that spend less than $10 million will get a base tax credit of 15 percent, while those that spend more than $35 million will get 20 percent. Projects with budgets from $10 million to $35 million are eligible for 17.5 percent of their spending to be offset by the incentives.

Productions are also eligible for a 2.5 percent bump on labor costs for hiring Arizona residents or if they are a long-term tenant (five years) of a qualified production facility. A feature spending $15 million in the state could be eligible for a tax break between 17.5 percent and 22.5 percent depending on local residents hired for a return of at least $2.5 million.

While studios are capped at receiving $25 million in tax breaks, they could get the credit in the form of a cash refund if it’s larger than their tax liability.

“This is certainly a game changer,” said Ryan Broussard, vp sales and production incentives at Media Services. “$75 million is gigantic.”

Lawmakers who pushed for passage of the program noted the economic activity fostered by New Mexico’s film and TV tax incentive program, which recently doubled its cap to $110 million. They wanted in on the action.

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In 2021, New Mexico saw a record $624 million direct spending by productions like Better Call Saul. With refundable tax credits from 25 to 35 percent, the state offers one of the most generous tax breaks in the nation to Hollywood. Netflix and NBCUniversal have both recently built production studios in New Mexico, committing $2 billion and $500 million, respectively, to produce content in the state.

Productions that don’t qualify for New Mexico’s program or don’t find stage space can now opt to shoot in Arizona.

“They’re trying to be competitive with New Mexico, not only because their landscape is creatively competitive but also because New Mexico is so busy,” Broussard said. “There’s sure to be fallout.”

The program resurrects in some form a more limited film tax credit that the state had from 2005 to 2010. It was killed after Arizona’s Department of Commerce reported that the program led to a loss of $6.3 million in 2008.

Legislative analysts who reviewed the program similarly found this time around that the state will not see a return on its investment. They noted that in-state productions, like local commercials, that would have shot in Arizona regardless of the tax breaks are now eligible for a credit of at least 15 percent.

Parts of Steven Soderbergh’s Traffic, Todd Phillips’ The Hangover Part III and George Clooney’s Confessions of a Dangerous Mind shot in Arizona. The productions, however, mostly filmed in other states with tax incentives.

“For the last 20 years I’ve been here, we’ve gotten tons of calls from major studios wanting to shoot here but due to lack of incentives, they either quickly moved on or would come to us for a small portion of a larger project,” said Peter Catalanotte, director of Film Tucson. “We’ve always had interest but without incentives, we could never grab an entire series or feature film. Now we have them, we’re confident this is going to change.”

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