In response to my recent post on how to improve the Illinois Film Tax Credit, a reader asked if I thought the industry “felt snubbed” by Michigan Governor Snyder’s recent comments about their film tax credit.  Rather than responding in the comments of that post, I thought the answer warranted a larger discussion of political stability and tax credits.

Q: What are your thoughts on the MI film tax incentive now that the cap has been lifted. Did Gov. Snyder snub the industry too much with his former negative remarks about the tax incentive?

A: The good news is that the Industry is not a collective hive-mind, like the Borg. Studios and indies have different motivations and tolerance levels with regard to political and statutory risk. That said, most industry professionals don’t get snubbed – that would be an emotional response to a media construct. We “the industry” prefer a more pragmatic “risk tolerance” approach to political saber rattling.

In my experience as a financier, it can take up to a year before a film finally goes into production, then another 3 months of prep, photography and wrap, followed by another 3-6 months to file and get your tax credit certified (even longer if you’re earning tax credits for post-production.)

That means the producer, financiers, bond-companies, insurers, and studios need to project 18-24 months of political stability to be reasonable certain they’ll actually get the tax credit they’re entitled to.

If a jurisdiction is undergoing political hostility toward their film tax credits (or other tax credits like energy, housing, technology, etc.) then producers and financiers cannot (and should not) take that risk – and “tax credit insurance” is not a solution.

States like Louisiana, Georgia and Illinois that often modify their credits in an effort to improve them, do not pose a statutory risk. States with openly hostile politicians in the executive or legislative branches don’t necessarily pose a risk if the tax credit is not up for review, but if it is, then that is a risk.

It’s because of these factors (and more) that I have never recommended a producer (or fund) send films to Michigan, even in its heyday. Their film tax credit program has had problems on every level, from its inception; it’s the antithesis of political stability.   At this point, Gov. Synder’s remarks are par for the course and help remind us why we shouldn’t shoot in Michigan (regardless of how juicy that tax credit percentage looks on the surface.)