Over the last 17 years, the Texas Moving Image Industry Incentive Program has relied on limited and variable appropriations from the Texas legislature to attract in-state production. Now a proposal for a tax credit system would potentially increase the amount of money made available – but industry and legislative insiders worry that the proposal could undermine the good TMIIIP has done for the Texas film, TV, commercial, VR, and gaming industries.
It’s rare that the sleepy Texas House Culture, Recreation, & Tourism committee votes on a billion dollar bill, but that’s precisely what happened on April 13 when all eight members present voted to send a massive film and TV tax credit bill to the House. But sources close to the industry are worried the well-intentioned initiative could backfire.
The rest of the day was filled with smaller ticket tourism and wildlife bills, like whether electric bikes should be banned from state parks, and designating Mineral Wells as the official Wellness Capital of Texas. However, the committee also voted to send House Bill 3600 by Rep. Four Price, R-Amarillo, to the full House, a bill with a potential billion dollar price tag.
After all, it’s long been said that one of the big impediments to growing Texas’ film, TV, and gaming industries is lack of big incentives. That’s why advocates for the creative industries have spent the last decade and a half pushing to grow the Texas Moving Image Industry Incentive Program. That effort may make it a little surprising that those same advocates are looking askance at a program they worry could undo some of TMIIIP’s good work.
The proposal in HB3600 is to establish a new Texas Multimedia Production Program. Overall, it’s based on the Film Tax Incentive, the highly successful tax credit program adopted by Georgia, but with several key differences: the biggest being that, unlike Georgia, Texas doesn’t have personal income tax, the largest single sum in calculating credits in the Peach State. So the authors have had to package together credits on other taxes, such as the franchise tax, to make the Texas scheme competitive.
If established by lawmakers, TMPP would would sit alongside TMIIIP, with several key differences.
• How much it costs: TMIIIP is funded as a budget item under the biennial budget. The downside of this is that, when the appropriation runs out (as already happened this biennium), there’s no more money until the next legislative session. The TMPP would not require an appropriation, but calculations by the Legislative Budget Board attach a $1 billion fiscal note for the next biennium – more than triple the cost of TMIIIP in its entire 17-year history.
• Who it does and doesn’t include: TMIIIP covers film, television, commercial, video game, animation, visual effects and extended reality (AR, VR, MR) projects. The TMPP cuts that down to film, television, national or multistate commercial, and educational and instructional videos, and would only include projects that spend over $15 million. Cutting gaming out will evoke fears of what happened with TMIIIP in 2017, when the gaming and movie/TV lobbies ended up at odds over whether they should have to share the fund, and lawmakers ended up cutting the appropriation by over half.
• How the money is paid: TMIIIP is not an incentive to start a project, but rather a rebate program, paid out after the project is completed and has submitted its accounts for review. The TMPP would be a tax credit that could be sold on. That resale opportunity is the important part, as many productions don’t actually need a tax credit, as they’re not paying taxes in a state over several years. Instead, there’s a large secondary market for such tax credits – however, it’s often at pennies on the dollar, so the production company may only get a fragment of the value.
• The residency requirement: TMIIIP requires that at least 70% of cast and crew are Texas resident, and 60% of the production take place in state. The TMPP would drop both those requirements to 25%. That’s a significant difference, not least because one of the big selling points for TMIIIP to even conservatives was that it was Texas money going to projects that were hiring Texas talent, and keeping that talent here. The fact it set a high bar for minimum in-state spending was also a key reason why advocates and lawmakers could tout a five-to-one return on investment on TMIIIP. Prioritizing in-state spending helped fight off allegations that TMIIIP is just a Hollywood giveaway – allegations that would be easier for opponents to make about the TMPP.
It’s the residency issue that has some industry insiders most worried. In discussions, a compromise 55% proposal has been broached. Also, it’s been noted that Sen. Charles Perry, R-San Angelo, who has authored the Senate version of this bill (SB 1613) may be open to upping the minimum – possibly as early as this Wednesday, when his version is scheduled for a hearing in the Senate Natural Resources & Economic Development Committee. More importantly, there are big questions over whether Gov. Greg Abbott (under whose office TMIIIP is run) will be supportive of such a dramatic cut in the requirement.
The timing of HB3600 is complicated. After nearly two decades of TMIIIP being a political punching bag, it’s no longer controversial, not least because productions like Yellowstone has brought massive productions to areas that previously had no or limited experience of the business. However, projects like Yellowstone have changed the tone of the discussion around the industry (“The Republicans love Tyler Sheridan,” as one source close to the conversations put it). So there’s a reticence about coming out in flat opposition. However, the complications of who gets the money, and how much would leave Texas, are reflected in the cool response from most quarters.
There’s also an underlying concern that, well, if it ain’t broke, don’t fix it. TMIIIP is a proven and (unlike other systems in other states) scandal-free program that has worked for nearly 20 years. TMPP would require building a whole new system from the ground up, a laborious process. At this point, groups like leading industry advocacy nonprofit the Texas Media Production Alliance are putting their greatest energy into increasing TMIIIP’s appropriation for the next biennium, and finding more stable long-term funding mechanisms than the whim of lawmakers in any particular session.