State of Arizona - Motion Picture Tax Incentives Program

Arizona Commerce Authority URL: http://www.azcommerce.com/Film/Incentives/

Pre-approval must be obtained from the Arizona Department of Commerce (Commerce). Commerce will transmit the pre-approval letter to the Arizona Department of Revenue (Revenue).  Production must begin within 90 days after pre-approval to maintain eligibility. Commerce cannot pre-approve tax credits that exceed $9 million in tax credits for an initial application.  The minimum investment threshold for producing a motion picture, commercial advertisement or music video for eligibility of tax credits is $250,000.

Transaction privilege tax exemption (TPT): At the time of purchase the qualified company must present to the retailer a current Revenue issued exemption certificate, to qualify for the state and county TPT exemption.

Machinery, equipment and other tangible personal property: Eligible tangible personal property sold or leased to a qualified motion picture production company and used directly in motion picture production including the storage, use or consumption in Arizona of eligible tangible personal property used directly in the production by a qualified motion picture production company.

Job printing, engraving, embossing or copying: Eligible sales to a qualified motion picture production company for job printing, engraving, embossing or copying that will be used directly in motion picture production.

The lease or rental of lodging space: Eligible leases or rentals of lodging space to a qualified motion picture production company.

Sales of catered food, drink and condiments: Eligible sales of catered food, drink and condiments to a qualified motion picture Production Company.

Construction contracts for buildings or other structures: Eligible contracts for the construction of any building, or other structure, associated with motion picture production in Arizona. An Infrastructure project does not qualify for TPT and use tax exemptions, but receives a tax credit of up to 15% of the base investment spent by the applicant for the construction of a qualified infrastructure project in Arizona subject to the following: The combined allocations for soundstage construction shall not exceed $5 million tax credits in any year.  Allocations made for support and augmentation facilities shall not exceed $3 million tax credits per project.

Income tax credits equal to 20% or 30% of the company’s investment in qualifying production costs: These tax credits can be used to offset Arizona tax liability on a dollar for dollar basis on qualifying production costs directly attributable to the production of a motion picture in Arizona. The tax credits for a qualified motion picture production company are equal to:

Credit Amount 20%: Production Costs $250,000 - $1,000,000

Credit Amount 30%:  Production Costs More than $1,000,000

The company can apply for and Commerce may issue post-approval to a company after verification that the company has met eligibility requirements during the production of the qualified production once the $250,000 investment threshold has been met.  Post-approval and an allocation of tax credits can be applied for no more than once a calendar month.

There is no limitation on the amount of TPT and use tax exemptions available to the qualified company, nor is there a limit on the total amount of TPT and use tax exemptions per calendar year.

When production is finished, the company must submit a Completion Report to Commerce. Once accepted, a priority placement number is awarded which determines the order in which Commerce allocates that calendar year’s cap. The total amount of credits pre-approved for a single application shall be applied against the calendar year cap in which pre-approval occurred. The pre-approval letter/qualification will be valid for a 24-month period.

If a calendar year’s cap is exhausted by October 31st, Commerce may accept applications, except for commercial advertisements or music videos, on or after November 1st for an allocation of tax credits from the next calendar year’s cap.

However, the pre-approval letter issued to the company will not be effective until the first business day of the next calendar year.

Five percent of each calendar year’s cap is set aside for production of commercial advertisement or music video applicants.

When the initial application is made, if sufficient cap is not available the company may either accept any remaining allocation amount and any TPT and use tax exemptions, or:

1.    Proceed with pre-approval for the application knowing the production will not receive tax credits at this time and accept any TPT and use tax exemptions. 

2.    Irrevocably decline any remaining tax credit allocation amount for that calendar year and accept any TPT and use tax exemptions

3.    Withdraw the initial application and apply in the next year when sufficient cap may be available.

Useful Websites: 

AZ Film Office: http://www.azcommerce.com/Film/

Production Incentives: http://www.azcommerce.com/Film/Incentives/Home.htm

Film Office Director: http://www.azcommerce.com/Film/Film+Office+Staff.htm