Ohio’s increasing film tax credit key to a sustainable state film industry
By Alex Semerano
Partner, Director-CFO Services
Pease & Associates, LLC
The filming of The Avengers brought movie making to the spotlight on the corner of East 9th and Euclid Avenue in Cleveland in 2011. Robert Downey Jr., Chris Evans and Scarlett Johansson offered a preview of what Hollywood’s impact to this city could be. Native Cleveland directors Joe and Anthony Russo also shot Captain America: The Winter Soldier in 2013, featuring a memorable fight scene on the West Shoreway.
Marvel Studios selected Cleveland for both projects, not only because of the city’s likeness to Manhattan, where the stories are set, but by the attraction of over $14 million in tax credits granted by the state. Since then, several hundred movies, documentaries, commercials and other media formats have been produced throughout the state, with movies ranging from Draft Day, Fun Size, and Dog Eat Dog in Cleveland to Carol, The Public, and The Old Man & The Gun in Cincinnati. What began as a $10 million tax credit in 2009 to encourage and develop a sustainable film industry in Ohio has steadily increased to the $40 million credit available today with plans to support $100 million within the next few years.
The motion picture tax credit available in Ohio, one of 35 states offering similar incentives, provides for a refundable or transferable tax credit of 30 percent of production-eligible in-state spending, which includes cast and crew wages. There is no per-project spending cap and production must spend at least $300,000 to qualify. Production projects include feature-length films, miniseries, series, music videos, and television commercials. A production interested in shooting in Ohio must submit an application and budget to the state’s film office. Once approved, they are awarded a letter from the state guaranteeing their credit. Upon completion of the project, production companies must have a certified audit by an accounting firm to verify qualified production expenses prior to receiving the rebate check or transferable credit.
Recent legislative changes since the last renewal of the credit mandate documentation of financial ability to undertake and complete a motion picture by demonstrating secured funding equal to at least 50 percent of the total production budget. In addition, eligibility was extended to certain live stage theater productions and Broadway productions after initial performance in a qualified state production facility such as Playhouse Square.
The beginnings of the incentive program can be traced back to president and CEO of the Greater Cleveland Film Commission and producer of Band of Brothers, Ivan Schwarz. Upon joining the commission in 2007, Ivan has worked to bring a sustainable media industry to Ohio through a statewide effort in creating and passing the Ohio Motion Picture Tax Credit necessary to generate jobs, develop an industry workforce, and build an infrastructure necessary to attract and maintain media productions. As a result of these efforts, Cleveland State University recently opened a new school of Film & Media Arts, the first standalone film school in Ohio.
Since 2010, Pease & Associates has developed a niche in this area of practice by providing certification of tax-eligible production expenses as well as assisting in forming entity structures necessary to achieve investor’s tax objectives. Producers and other media-related companies work hand-in-hand with the firm’s partners and senior managers, who are committed to personalized added value. The firm has developed an industry reputation by focusing on quality and timely delivery of its services as well as serving as a strategic tax advisor to project producers and investors.
The possibility of increasing the tax credit to $100 million in upcoming legislation would transform the Buckeye State into one of the most competitive in the nation for attracting movie productions, leading to a sustainable industry through the creation of companies catering to the industry, such as media technology campuses complete with sound stages and offices for supporting vendors, in addition to the creation of permanent specialized jobs. This will, in turn, significantly increase ancillary revenue already generated by retailers, restaurants, hotels, caterers and other businesses that benefit when a production sets up shop nearby. Outside of deserts and mountains, the state of Ohio and, in particular, Cleveland, offers the look of classic America through its numerous attractive locations, including the lakefront and the ability to easily transition from the city to the country, qualities that producers often look for when choosing a location to invest in.
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