20 plus FAQ’s about Nevada’s New Film Tax Credit and Infrastructure Program
As of: 5/11/23
VISION
Q: Who is the sponsor and who are the proponents of the bill?
A: Senator Roberta Lange is the sponsor, and the developer proponents are Birtcher Development, Sony Pictures Entertainment, and the Howard Hughes Corporation.
Q: What is the main purpose of the legislation?
A: To meet the challenges of the post-pandemic economy, Nevada must diversify its economy, create a new energized workforce, and provide educational opportunities for the talent of tomorrow. This legislation accomplishes all three objectives.
There are three primary components to the bill: 1) to create permanent long-term studio infrastructure for the expanding content creation industry; 2) to make Nevada’s film tax program competitive with other states in the production of major film and episodic television; and 3) to merge the film, television and digital industry with UNLV through the creation of the Nevada Media and Related Technology Education and Vocational Fund.
DEMAND
Q: What makes you believe that there is demand for this level of incentive?
A: The North American content industry is estimated to be more than a $150 billion annually and the availability of annual film tax credits is estimated at $5-7 billion a year. There are approximately 475 scripted television shows and hundreds of feature films produced annually in the industry. The gap between demand and available credits is what will drive producers to Nevada. Equally important is that California is a $3 billion film industry with only $330 of film tax credits available meaning that more that 90 percent of productions do not receive any film tax credits.
Q: California has increased its incentives to retain film and TV production companies through 2030. How does this bill compete with California?
A: It doesn’t compete and doesn’t have to. California is a $3 billion film industry with only $330 million in film tax credits meaning more than 90 percent of productions do not receive any film tax credit. Nevada will be positioned to compete with non-California production hubs across North America. The 30 percent transferable tax credit will make Nevada competitive with New Mexico (25 percent), Georgia (30 percent), New York (30 percent), Louisiana (25 percent), Massachusetts (25 percent), Illinois (30 percent), New Jersey (30 percent) and North Carolina (25 percent).
Q: Why is having one central metropolitan location with multiple sound studios good public policy?
A: In just about every state that has an established film tax credit incentivized content creation industry, the successful ones are generally located in central metropolitan areas and within proximity to one another. Southern Nevada’s competitive advantage is that it will be the most proximate studio stage infrastructure to Los Angeles and the relative ease and expense of air or ground transportation back and forth. Most importantly, as Nevada contemplates entering the content creation industry, the synergy captured in one physical location – instead of 10 or more small studios spread out over the State in smaller jurisdictions -- results in one broad ecosystem drawing on southern Nevada businesses, crews, and specialized equipment to sustain the project.
PROJECT INFRASTRUCTURE
Q: Where will the two infrastructure Zones be located?
A: Zone 1: “Las Vegas Media Campus” will be located at the UNLV-owned Harry Reid Research and Technology Park near 215 and Durango in unincorporated Clark County.
Zone 2: “Summerlin Production Studios Project” will be in Summerlin, some of which will occupy land in both the City of Las Vegas and unincorporated Clark County.
Q: What is the project cost for each of the projects at total buildout?
A: The Las Vegas Media Campus total Project cost is expected to exceed $800mil at total buildout. This is a speculative project designed to attract film related companies throughout North America. Birtcher’s General Partnership will be investing over $400mil of equity to develop this state-of-the-art campus. It is anticipated that the Summerlin Production Studios will be a similar sized investment and scale.
Q: How do the developers of Zones 1 & 2 plan to recover their financial investments?
A: These are core assets intended to be held for the long term whereby content creating tenants will be paying rent based on the availability of the 20-year film tax credits which in turn will provide investors of the infrastructure adequate time to recapture their principal and gain market return.
Q: If the bill is approved, when would construction commence and when would the studios begin production?
A: Once Governor Lombardo signs the bill into law, Zone 1 and Zone 2 developers would separately enter into Investment and Development Agreements with GOED, which could be executed as soon as the Fall of 2023. Following approximately 18 months of design and permitting, construction could commence as soon as the Spring of 2025. Assuming an 18-month to 24-month construction period, tenants could begin occupying space by late 2026 or early 2027 with film and content creation in 2027.
UNLV ROLE
Q: What role does UNLV play in the Las Vegas Media Campus located in Zone 1?
A: In January, the UNLV Research Board of Directors unanimously agreed to enter into a 100-year ground lease with Birtcher Development that will feature a LMVC-UNLV integration and benefits program.
Q: What is in the “Integration and Benefits Program” agreement with UNLV?
A: The Las Vegas Media Campus, located in Zone 1, will provide approximately 1,000 square feet of on-site office -- free of rent for 100 years -- to house the to-be-created "LVMC-UNLV Media/Film/Television/Technology Integration Office".
This is an approximate value of $48,000 per year.
LVMC will also provide the Integration Program an annual cash payment to UNLVRF of $200,000 payable annually to help pay for a full-time program director, related overhead, and activities, with payment to commence upon the launch of the LVMC-UNLV Integration Office. The monthly payments are to begin the same month that Phase One of the LVMC commences construction.
The developers of Zone 1 (Birtcher Development) will make available to UNLV staff and its students on a "First Hold" basis, the utilization of rent-free studios, sound stages and film/television/video game publishing pre-production, production, and post-production facilities. Depending on the utilization and availability of space in the LVMC Project, the annual benefit to UNLV for the space could be $100,000 to $200,000 per year or more.
Birtcher envisions the UNLV Integration Office assisting with connecting its students with the production companies, content creators, and the national/global media/technology companies that will have relationships at the LVMC Project. It is also envisioned that UNLV will integrate the appropriate academic departments into the LVMC Project with their in-place programs as well as potential new curriculums such as animation, interactive media and games, and creative technologies.
The Integration Program is intended to inspire internships, jobs placement, career guidance, corporate sponsorships and partnerships, Nevada Media Lab collaborations with other state-wide schools, fundraising, endowments, grants, scholarships and creating IP, content, and commercialization opportunities.
THE BILL
Q: Explain the $190 million in annual film tax credits (FTC) and when they become available?
A: $15 million of the annual $190 million of film tax credits are available once the bill becomes law and are not earmarked for either of the two infrastructure Zones. In addition, $40 million of annual FTC’s in Zone 2 are also available once the bill becomes law and the Investment & Development Agreement with GOED has been executed.
The remaining $135 million of annual FTC’s are divided between the two Zones and will not likely be utilized until infrastructure is built and pre-qualified productions are completed which is expected to be in late 2027 or early 2028.
Q: Are film tax credits issued before or after a production is started?
A: If the project has been pre-qualified by GOED, film tax credits are only issued upon a successful final audit following the completion of that pre-approved project. Further, film tax credits must be used within six years of issuance.
Q: Can non-studio projects qualify for film tax credits under this legislation?
A: Yes. The bill allows content creators to qualify for $15 million of annual non-infrastructure credits, and by extending the date an additional 14 years, all content creators have more predictability in the availability of future film tax credits.
Q: Will there be a statutory cap on film tax credits on a per project basis?
A: The developers of Zones 1 and 2 will independently have the option to elect to impose a project cap of either a) $10 million for episodic TV/$30 million for feature films or b) no cap on per project production.
Q: Why do you need 20 years instead of 10 years to make this film tax credit program work?
A: In the underwriting of experienced lenders, 10 years has been determined to not be long enough. Lenders are evaluating the stability and security of a state’s long-term commitment to the industry thus essentially guaranteeing that a project can attract the desired film, tv and digital productions. Lenders realize that these are highly specialized buildings with limited adaptive reuse and therefore the program requires certainty and predictability.
Q: Do we have similar provisions as Louisiana does pertaining to “rollover” of unused tax credits to a future year?
A: Yes, provides for a cap and the number of years an unused film tax credit will be allowed to rollover.
HOW DO TAX CREDITS WORK
Q: Do the developers of Zone 1 (Birtcher Development) and Zone 2 (Sony Pictures Entertainment/Howard Hughes Corporation), qualify for film tax credits (FTC) or any other state or local tax incentives?
A: No. Only the tenant/producers who occupy the sound stages and creative space and have pre-approved projects from GOED are eligible to receive credits after their post-production audits are completed. The developers do not receive any subsidy from government agencies. Sony, as a content creator, will be eligible for film tax credits but not as a developer.
Q: Are there any tax abatements proposed in this bill.
A: No.
Q: How do film tax credits work?
A: Content creators or production company must apply to a state program seeking to obtain an approval as a qualified production prior to the start of production. Depending on the provisions of each state program, there is usually a corresponding audit procedure and schedule that identifies when a state will issue a credit or rebate to the content creator subject to percentage of project completion.
Q: $190 million in annual tax credits is a big jump from current law. How do you justify that?
A: Current Nevada law has a $10 million annual cap in film tax credits which has proven to be non-competitive with established production hubs in other states. The private investment of over $2 billion is an enormous commitment in infrastructure that is designed to create a permanent industry in Nevada which cannot be done competitively with a smaller tax credit.
In year one of this program, only $55 million of film tax credits will be available. Nevada will not reach its maximum of $190 million annual infrastructure tax credits for several years after the bill is signed into law.
EDUCATION & VOCATIONAL FUND
Q: Can you explain the 3 percent carveout included in the bill.
A: Of the 30 percent film tax credit, 3 percent (or 10 percent of the total credits) are being contributed back to the Nevada Media and Related Technology Education & Vocational Fund “Vocational Fund” by each content creator/project. 27 percent remains with the creators/projects and the 3 percent will be held in the Vocational Fund” administered by a 7-member board representing members of the Legislature, the Governor, and the Zone 1 and 2 developers.
The Nevada Media Lab, a proposed 50,000 square foot building, will serve as a critical portal between the Media Campus and southern Nevada’s middle schools, high schools, community colleges, universities, vocational and other community organizations. The Nevada Media Lab is the central place where local skilled labor will be trained to serve in this newest sector in the Nevada economy.
ECONOMIC IMPACT
Q: Some states are curtailing their film tax programs because independent reports are revealing that states in fact are losing money by issuing film tax credits.
A: States that have aggressive film tax credit infrastructure programs have been the success stories compared to those without an infrastructure commitment. Because Nevada is one of the last states to put in place a competitive program, this bill has been designed with features that have worked best for states of similar size (Louisiana, Arizona, and New Mexico). It has been proven that infrastructure-based tax credits have been significantly more successful than non-infrastructure related film tax credits. Infrastructure-related tax credits create more permanent industry with higher paying jobs as is evidenced in Los Angeles where over 70 percent of sound stages are used for episodic television resulting in more year-round filming versus shoots of less than 30 days for typical independent or 30-60 day studio productions.
Q: What happens if the developers build the studios, but the content creators never come?
A: The State of Nevada is not obligated to fund any credits if the developers and/or productions do not meet the bill’s criteria. The state bears no risk if the film tax program goes unused.
Q: If the full tax credits were issued under the framework of SB XXX, does that mean the State of Nevada would have $3.8 billion of debt on its books for 20 years?
A: The program will be listed as a “contingent liability” on the state’s balance sheet. The annual net cost to the state will be approximately 50 percent of the annual tax credits after the direct and indirect benefits are realized, estimated to be $1.5 billion annually. In addition, there is a significant positive benefit to the State because of film induced tourism and enhanced Nevada image and brand placement in film and television productions.
ECONOMIC CONTRIBUTION TO THE STATE
Q: What is the return on investment for this 20-year program?
A: According to two independent economic analysts, one national and one Nevada-based, the economic impact of the $190 million annual film tax credit program over 20 years is approximately $55 billion. The net cost to the state of Nevada over that same period is approximately $2 billion. This is a 27x positive impact to Nevada.
Q: What is the total projected content creation expenditures for both projects at full buildout?
A: LVMC: $570mil/year and approx. $11.4bil over 20 years. (Determined by using the industry estimate of total production costs being 6 times the gross tax credit given to a qualifying production)
Summerlin Film Studios: $480mil/year and approx. $9.6bil over 20 years.
Non-infrastructure productions: $90mil/year and approx. $1.8bil over 20 years.
Total content expenditures: $1.14bil/year and $22.8bil over 20 years.
Q: How many jobs will this bill create?
A: It is estimated that during the construction period alone, there will be approximately 8,000 to 10,000 union and other constructions jobs created. Once the infrastructure is built and studios are operational, approximately 16,000 total jobs will be created in southern Nevada as a result of the activity associated with the new Film Tax Credit and Infrastructure Program.
SUPPORTERS
Q: Does organized labor support this bill?
A: Enthusiastically yes.
Q: Is Mark Wahlberg involved in this bill?
A: Yes. Mr. Wahlberg supports this effort to establish studio infrastructure in Nevada and the push to make Nevada a new headquarters for the film and TV industry.