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MT lawmakers debate increasing film tax credit; advocates say it boosts local businesses

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Actor Kevin Costner listened in the winter of 2017 while Montana Gov. Steve Bullock made a point during a conversation about the economics and politics of filming in Montana. Bullock was touring the set of "Yellowstone," a cable television series starring Costner, which was partly filmed at the Chief Joseph Ranch south of Darby in the Bitterroot Valley.

Kevin Costner was pictured this week perusing Scheels, a sporting goods store in Missoula, while lawmakers in Helena debated whether or not to extend and increase a tax credit designed to attract film moguls like him back to the state in the future.

On Friday, the Montana Legislature’s Revenue Interim Committee heard a presentation about the economic impact of Montana’s MEDIA Act tax credits. The law, enacted in 2019, has essentially broken even as far as the revenue it has brought in to the state government. That’s because while the state has doled out about $20.3 million in tax credits to film production companies, the state tax revenue generated by all film production companies and their spending has been about $20.3 million.

The Montana MEDIA Act tax credit was established by the state Legislature in 2019 with a cap of $10 million and later expanded to a total cap of $12 million beginning in tax year 2022. Because it's an incentive for production companies to film in Montana, eligible companies can get a 20% transferable income tax credit for both production and compensation expenses while in the state. Companies can also get an additional credit for meeting various other thresholds.

An economic impact consultant gave a presentation showing how 195 different productions have filmed in Montana since the law was created, and they spent $192 million in the state. Film industry advocates strongly urged the committee to explore raising the cap to between $50 million and $150 million to allow Montana to compete with other states. They claim that's necessary to encourage further growth of the industry, which they say supports Montana businesses, creates local jobs and doesn’t pollute the state’s treasured outdoor areas.

Two Republican members of the committee, Sen. Greg Hertz and Sen. Mike Lang, both expressed support for the idea of at least maybe introducing a bill next session to raise the cap.

“This is a difficult industry,” Hertz said. “It’s got a lot of competition across the United States. It’s a good clean industry. It helps Montana, it helps a lot of rural communities. The question here is how do we continue to nurture this industry without getting too excessive and having a big impact on our treasury?”

Hertz said, in his view, that lawmakers need to look at the issue and the cap may deserve some further increases.

Sen. Brian Hoven, also a Republican, said he is opposed to the tax credit because the amount of tax revenue generated to the state by only the film companies that utilized the tax credit was just $7.8 million. Therefore, in his view, the state is losing money because the tax credit cost the state $20.3 million.

“I think the film industry is very glamorous,” he said. “The film stars are here, they show up, they bring people to rural communities, there’s a lot of money. It’s exciting, it’s great. But unfortunately, it doesn’t bring money into the state treasury.”

Hoven said he’s read articles in the Wall Street Journal that provide evidence that film tax credits don’t pay for themselves. Hoven said the state’s director of the Department of Revenue under the administration of former Gov. Steve Bullock insisted on having a cap on the credit because he "knew it would be a drain on the treasury."

“To invest in this, we’re picking winners and losers,” Hoven said. “When we start giving to the film industry, we’re picking them to win.”

However, the impact to the state's coffers is not the full picture for the impact that film production has on Montana's economy. A report by the University of Montana found that a single season of Costner's hit show "Yellowstone" brought in an extra $70 million to the state's economy in one year.

Gina Lavery, a consultant hired by the state to analyze the impact of the film tax credit, said the film industry has a big “trickle down effect” on rural communities and small business in Montana. That’s because the highly paid staff members for production companies like the Paramount Network, which is filming “Yellowstone” in Missoula and Ravalli counties, spend money even on their off-days.

Lavery also said that not increasing the cap on the credit has hampered economic growth in Montana and may continue to do so in the future.

She noted that a film production company was all set to build a $20 million studio in Missoula, but backed out when the Legislature only increased the cap by $2 million last session.

“That type of investment, just the up-front construction alone would have generated $34 million for the state and $1.3 million in tax revenue to local jurisdictions and the state,” Lavery explained.

Allison Whitmer of the Montana Film Office said that “Yellowstone” is currently filming its fifth season here and will probably film most of its sixth season in Montana. Combined with Paramount’s filming of a new show called “1932” in Butte next year, Whitmer said those two shows alone will spend about $50 to $100 million in Montana over the next two years.

Hertz concluded that he thinks the Legislature should look at increasing the cap incrementally, and he also noted that there might be ways to ensure it benefits rural communities in Montana. Utah, for example, has a film tax credit that only applies if companies film in small, rural towns.

The full presentation and discussion can be found by fast-forwarding to the 10:25 mark online at bit.ly/3y0V1qc.

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