Film Industry fund exhausts full $38M FY22 tax credit budget on 4 projects
The Department of Economic Development and Commerce’s (DDEC, in Spanish) Film Industry Development Program has already assigned the full $38 million in tax credits available for Fiscal 22 to just four productions, before the start of the year on July 1, News is my Business confirmed. The situation has surprised local industry executives and drawn the attention of the Puerto Rico Senate.
The Film Industry Development Program said those four tax credit decrees that have already been allocated will generate $145 million in new investments for the island.
“All the incentives available through the Incentive Code, including those for the movie and creative industries, are granted based on the investment represented by the project submitted for evaluation; among other criteria, their return on investment,” said Rosi Acosta, director of the program, in a written statement to News is my Business.
The Puerto Rico Incentives Code states that operations dedicated to film projects may request a tax credit for production expenses in Puerto Rico, which must be no less than $50,000 for full-length films and $25,000 for short films or documentaries.
Also eligible for the tax credits are industry suppliers and industry-related infrastructure projects such as studios, labs, and facilities to produce film projects whose budget for direct costs exceed $500,000.
“The pandemic has generated an incremental demand in the consumption of audiovisual content, and it’s for this reason that the applications received exceed the amount of tax credits that we have available,” Acosta said in the statement.
“Likewise, the pandemic has adversely affected film budgets globally, and the budgets that are presented have increased between 10% and 20%,” she said.
Tax credits apply to up to 40% of production expenses in Puerto Rico (excluding payments made to foreigners); and an additional credit of up to 15% for feature films or multi-episode series, or documentaries in which a local producer oversees the film project and the director, cinematographer, editor, production designer, post-production supervisor, or the line producer are locals, up to a maximum of $4 million. A credit of up to 20% is also granted for production expenses in Puerto Rico paid to foreigners.
During Fiscal 2020, the DDEC had endorsed 31 film projects that represented about $100 million in investments, close to 3,500 direct and indirect jobs and almost 3,000 hotel room nights, according to published reports. Statistics for Fiscal 2021 were unavailable.
Legislature to investigate
The seemingly premature allocation of the $38 million film incentives budget — which is down from the $50 million to $100 million available in prior fiscal years — has drawn the attention of the Puerto Rico Legislature, which on Monday filed a resolution to investigate the matter.
Resolution 258, presented by Senate President José Dalmau, orders a probe into the availability, and use of the funds assigned to creative industries under Act 60 of 2019, known as the Puerto Rico Incentives Act.
“We’ve received information that the DDEC’s Film Office has indicated to proponents who wish to request the tax benefits provided by law, that at the moment it is impossible for them to approve new applications under the law because they have reached the annual cap established for Fiscal Year 2021-2022,” according to the resolution.
“Given that barely five months have elapsed since the current administration [took office], it is worrisome that the full amount of tax credits available for the fiscal year that begins on July 1, 2021, has already been exhausted. Therefore, the approval of this Resolution is necessary,” according to the resolution.
Industry experts consulted by News is my Business said Law 60 and current incentive regulations place no limitation in terms of advanced timing for project submission for approval before the DDEC.
However, when projects are presented a production schedule is submitted along other requested information.
Sources told News is my Business that there are ongoing efforts led by the Executive branch along the Legislature to secure approval for additional funding for film incentives from the Financial Oversight and Management Board for Puerto Rico.
While a list of the projects that received the tax credit decrees was unavailable, News is my Business has learned that several large-scale productions are already underway and in the pipeline.
Those projects include the Fox reboot of the 80s television series, “Fantasy Island,” currently in production in Río Grande and other locations by Sony Pictures Television, Gemstone Studios and Fox Entertainment; “The Plane,” starring Gerard Butler and produced by Lionsgate and Di Bonaventura Pictures, slated to begin in September; and the sequel to “The Wedding Crashers,” which will reportedly begin rolling on the island in August and will be released on HBO Max.
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