Section of Taxation Publications

VOL. 62
NO. 4 The State and Local Tax Edition

Contents | TTL Home


Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

State Film Tax Incentives and the Related Potpourri of Federal Income Tax and Tax Accounting Considerations

Michael H. Salama*

I. Introduction

Virtually every state in the United States offers some type of state tax credit, rebate, exclusion, or other form of tax incentive to attract, retain, or increase the business activity within the state in the view of creating jobs, stimulating economic activity, and expanding the revenue base. The incentives have largely focused on attracting manufacturing firms, and state governments have incorporated these efforts into their basic fabric and activities. The variety of incentives is quite broad though, and the types often offered include state low-income housing tax credits, research and development credits and incentives, tax credits to preserve historic structures, and film production incentives. In many instances, the states compete against one another to entice the same investment, and local statutory and administrative differences amongst the states regarding the same type of incentive are an outgrowth of this competitive environment. There are a number of tools available to states and municipalities to evaluate the economic impact of their respective incentives. For example, Minnesota IMPLAN Group, Inc. has developed a system to create robust social accounting matrices and multiplier models of local economies.

Part II of this Article provides an overview of the manner in which several film production incentives function, highlighting their differences to illustrate the manner in which states engage in direct competitive conduct to lure meaningful and valuable economic activity. Part III discusses various correlative federal income tax considerations that practitioners and financial management advisors should consider in planning for and managing one’s state tax credit and incentive profile. Finally, Part IV addresses several fundamental income tax accounting matters regarding the treatment of state credits and incentives to assist the reader in viewing these issues holistically.

*VP Corporate Tax Administration & Senior Tax Counsel, The Walt Disney Company


Published by the
American Bar Association Section of Taxation
in Collaboration with the
Georgetown University Law Center


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