Michigan Film Office Releases Economic Impact Study

As we approach the first anniversary of the enactment of the Michigan film production incentives, the Michigan Film Office recently released an Economic Impact Study describing the impact on Michigan-based productions and making some projections for the future.1

In April 2008, Michigan adopted “best in the nation” film incentives, including a refundable Michigan Business Tax (“MBT”) credit of up to 42% on most expenses incurred in Michigan producing motion pictures or other certain media entertainment projects. During that year, 32 Michigan-based film productions were completed as opposed to only two in 2007. The 32 productions accounted for just over $65 million in direct spending in the State as compared with approximately $2 million in 2007.

The authors of the study applied a multiplier to the dollars spent in Michigan, to estimate that the overall economic benefit to the State related to the completed films was close to $94 million. The report also states that these productions employed 2,763 Michigan residents.

Other Developments

The study as well as other reports from the Michigan Film Office indicate that Michigan-based film productions and related expenditures will continue to increase in 2009. In addition to the 32 completed films, the Michigan Film Office has approved nearly 50 applications for the film production credit and is currently reviewing many more.

Furthermore, three film production studios are in the planning stages or already under construction in Southeast Michigan. According to the Michigan Film Office, parties have also expressed interest in building studios and soundstages outside of Southeast Michigan. Expenditures related to this type of permanent facility should qualify for the 25% infrastructure tax credit which was implemented at the same time as the more well known tax credit for film production expenses. Facilities of this type and the related permanent jobs should help firmly establish the film industry in the State.

While there has been talk of the Michigan legislature imposing an overall cap on the film production credit, to date the only legislation introduced failed to pass before the legislature adjourned at the end of the 2008 session.

Summary of Incentives

The following is a brief summary of the Michigan film production incentives enacted in 2008. All are subject to certain conditions and limitations. Feel free to contact a member of Dykema’s Michigan Film Incentives practice for details.

  • 40% refundable tax credit against the MBT for qualified film production expenses incurred in Michigan (42% if expenditures are made in any of 103 designated core communities).
  • 30% refundable tax credit for qualified “below the line” personnel expenditures for crew members hired from outside Michigan.
  • 25% MBT tax credit for investments in a qualified film or digital media infrastructure project, such as a studio or soundstage, located in Michigan (capped at an aggregate of $20 million per year).
  • A business creating new jobs in the film and media production industry may qualify for a credit under existing Michigan Economic Growth Authority (“MEGA”) programs.
  • 50% MBT tax credit for expenditures related to on-the-job training of certain “below the line” personnel.
  • Free use of state land for a film production.
  • Several financing incentives; none of which are funded for fiscal 2009.