It may surprise Chicagoans to hear, but Movie Studios don’t care about the Illinois tax incentive. In general, the only studio films that come to Illinois are those that have already established themselves with the “Cheaper than New York to film” Chicago look, like ‘The Dark Knight‘, or those films that actually need Chicago, ‘Public Enemies’.

Last week, the Illinois House attached an amendment to Senate Bill 4 (SB4) that would cause the film tax credit to expire in five years.  This would appear to be a huge blow to Chicago, but was the credit really successful to begin with?

As an early adopter of tax credits, the early 2000’s did in fact attract numerous big budget studio films like ‘Batman Begins‘, ‘Road to Perdition‘, ‘Oceans 11/12‘, and more – until other states began to out-compete, like Connecticut, Massachusetts, Georgia and Louisiana.

From its inception, the Illinois Tax Incentive missed some key points: the first was the program would expire each year and had to be renewed; the second was that the credit had to be sold to a local tax payer in order to be converted to cash, and third, the 20% IL credit only applied to resident wages (up to the first $100,000) and goods/services.  The first was corrected with an amendment that made the credit permanent (which SB4 would undo), the second remains unchanged, the third was modified by increasing the credit to 30%, but still only for resident wages (up to $100k) and goods/services purchased in the state.  The $100k wage caps directly inhibit the ability of resident filmmakers and craftspeople from building their careers and condemns them to life of low/scale pay, even on large budget films.

The problem with most state film incentives is that their underlying statutes are often vague (a hodgepodge of legislative wrangling), and they often try to be all things to all people.  States (and the local film communities they serve) need to decide what business they want to be in.  Do they want to be in the mega-budget studio business (budgets in excess of $80m)?  Do they want to be in the premium independent space (between $25m – $60m), or do they want to serve the lower budget indie space (less than $25m)?

Each category is budgeted differently and therefore has different tax credit needs.  Mega-budget studio films require incentive programs that [1] have no caps on the credits you can earn; [2] qualify for the salaries of high-cost talent; and [3] need to be cash rebates.  Unless it’s absolutely necessary, studios don’t want to deal with brokering transferable tax credits at an unknown discount; they want the whole rebate dollar-for-dollar, or a redeemable dollar like Louisiana at 85 cents or Massachusetts at 90 cents on the dollar.

An article in Crain’s on Sunday believes that the new Superman movie that’s shooting in rural Plano, IL is proof that the credit is working; Warner Bros. however would not respond to their requests for comment about the tax credit or shooting in IL. My guess, don’t kid yourself. Studios aren’t moved to shoot by the IL tax incentive.

Even if Illinois manages to remove the amendment from SB4 and “rescue their credit”, it’s not going to make a difference to studios, premium independents (whose bankers only lend against cash rebates), or primetime networks.  The credit is not conducive to long-term planning, its cash value is not certain, and it now carries the stigma of being in political jeopardy.

Toronto-based Cinespace is trying to build an $80 million dollar mega-studio in Chicago.  They’re looking to refurbish the ol’ Ryerson Steel Plant, an industrial Brownfield site they picked-up for $20m.  Unfortunately, even if the Illinois incentive is saved, it’s not going to save the Chicago film industry, or its sound stages.

The film business wants clarity and certitude in a tax credit program.  If a state’s film program has a sunset clause or appears to be in political danger, then this undermines long-term planning.  In addition, if the program does not accommodate talent costs, then forget about studios, premium indies, and episodic television series (whose talent costs will rise if the series is successful, forcing the production to move to a more talent-friendly state).

I’d really like to see Chicago and IL succeed, but it’s going to take more than SB4 not passing.


  1. Sounds Like a Band-Aid incentive-good enough to maybe keep films that want to look kind of like New York(or generic large american city) but aren’t its Canadian version Toronto, or the Canadian version of Chicago Winnipeg.

    Which kind of preclude most 20-60 stuff(canada is cheeper), or big studio stuff(which these days seem to be structured so that setting doesn’t matter that much-other then Batman and yes Twilight i have have hard time remembering a big studio movie thats dependent on a location that isn’t a tax break in disguise).

    Since all filming locations these days is what do you want to do for how much money, i suspect the incentive will help-but yeah your right its probabbly not make or break.

    (And I would bet good money the Nolan Batman movies film in Chicago becuse Nolan wants to film in Chicago not becuse he can’t afford New York. The Gotham is metaphorical.)

    • By dependent on setting i mean a real setting where its filmed or could be filmed. Avatar is totally about setting, but they didn’t film on a real alien planet. The Pirates movie have Caribean in the title but the Caribean is mostly a soundstage(though the stuff they film in hawaii i could grant you).

      Most huge films rally do even that anymore(or maybe they never really did).

      I mean Thor is set and filmed in New Mexico, but i suspect that may have something to do with incentives, and may have been changed in the script. I mean hes a god with a hammer does it really matter where the film takes place? If Parmount can amoatrize the hammer 25% in cash incentives, well it is the land of enchantment.

      In this kind of world getting a big picture might be just about the best marketable incentives. Anything less is probabbly squat.

  2. Thank you for writing this. I’m from Chicago and wanted to understand how our tax incentive worked from a financier’s perspective.

  3. The real question here, if the discussion is really to be expansive, is the merit of any subsidy to film. While producers may benefit to varying degrees as states play a beggar-thy-neighbor policy (and countries too), why are taxpayers subsidizing (even if only through opportunity costs) this activity? Maybe the industry would undergo its much needed rationalization if Illinois realized it’s not its job to facilitate the Dark Knight and help businesses that sell to film companies, or if New Zealand realized subsidizing The Hobbit only gets them on the hook, and filmmakers on their teats. Wage earners in those places just continue to help higher-paid workers get jobs that wouldn’t be available on the open market.
    I am a liberal who works in the TV/film industry and have worked on 20 movies in Canada. But subsidies are inefficient (only delaying changes that will come to the industry anyway), unfair and wrong.

    • The issue is in the picking and choosing of which credits to save and which should go. Ideally they should be zero-sum.

  4. Agreed. That is poor planning on the part of the local representation.

    Half a policy does more harm than good. The Australian incentives were launched by the Federal Government and were written into legislation as a long term incentive for the Australian film industry however the #1 challenge for film-makers is raising the cash for concept development, which is not cheap.

  5. A comment on the Crain’s post that I quoted in this article asked a pertinent question about how long will it be until on-location filming becomes obsolete, given that films like 300, Gladiator, and Sucker Punch are gradually perfecting CGI locations. When that does happen, how can cities and private owners monetize the use of their virtual locations?

    Copyright? Trademark? What do you all think? Try to consider it from both sides.

    • Not just 3D. A did on my last picture a couple of pictures can do a convincing enough job that your in real world locations. Not that hard really, and a lot cheeper.

      However the anwser to your question-Really you can’t. Who owns the copyright? The Building owners(somecases yes) The City? Given that most copyrights naturally kick out after around 70 odd years can you copyright perputitiy this stuff?(and most things people to travel to film are probabbly over 70 year old).

      To do a city wide ban on this kind of filming would probabbly be illegal in america without rewriting the copyright code, which i doubt anyone has a stomach. I could see that happening in europe but they would have to write so many exceptions to it that it would be really tricky to have any meaning.

  6. With all due respect to Mr. Steele and his cetral thesis, the producers behind the upcoming film THE AVENGERS might tend to disagree…

    To read what happens when a film studio learns that a tax incentive MIGHT end… from the Detroit Free Press, February, 22, 2011

    “‘The Avengers’ pulls out of Michigan, other films might follow after incentive change: Film producers not waiting to see how governor cuts tax incentives”

    Complete article:


    Tp be sure, there are always exceptions, however, anyone involved with film and television will attest to the success of the current tax incentive in Illinois. Prior to its enactment, major projects were rare. Since it was enacted, Illinoi filming has suddenly flourished. And, since it was enacted without a sunset clause, it has increased even more… Those who saw real work in THE DILEMMA will attest to this. Or, the Soderborgh project. Or, the five (!) television projects which shot here in the spring of 2010. Those who worked on THE BEAST noticed the difference, I can assure you. Those who saw work because of THE CHICAGO CODE, as well. Those who have seen THE BOSS come to town to film, and the current PLAYBOY pilot, and the current pilot with two female detectives have probably noticed this difference. Many of us recall several years when the only major studio presence was E.R. skying into town to shoot a day or two of extriors… all year. The years 1995-2005 were pretty dismal for film in Illinois. The current state of affairs is a breath of fresh air.
    I also note that the backers of Cinespace very publicly proclaimed they would stop all construction and move elsewhere if SB0004 (with its added on sunset clause for the film incentive) passed. IU suspect they disagree with your premise, as well.

    in some instances, the presence of an incentive to choose where…

  7. Addendum — Sorry for the double-posting, and especially sorry for those typos in the post above…

    However, I remain mystified at Mr. Steele’s agenda. What I have heard again and again, and also seen by carefully following the trends in film incentives, is 100% the opposite of what Mr. Steele reports.

    I wish that states did not have to play this game, believe me. I also wish that taxing bodies (local taxing bodies) did not have to play the “TIF” game — awarding Tax Increment Financing to businesses (malls, car dealerships, retail stores) over and over, when they approach a local city council and explain they will “move to the next town over” if they do not receive a waiver of sales taxes, or of property taxes, or of income taxes.

    However, the barn door is open, and virtually every governing body does have to grant those types of businesses their TIFs. …Just to keep the business within their city limits… or county limits… or school board limits.

    Note that the recent controversy over the Sunset Clause on a film tax incentive was tacked on to a bill which specifically granted tax breaks to other businesses. In this case, the state was giving tax breaks to certain tire manufacturers, manufacturers of inner tubes, and also to certain (ahem) telecommuincations concerns (a Cable TV company, and Motorola). TO KEEP THEM HERE.

    The statistics show that the return on the film tax incentive is pretty terrific, in comparison with other entities (like those just mentioned above). Those who claim to know how to figure those things claim that every dollar spent on a film locally boosts $4 additional dollars into the local ecomomy, in the form of hotel rooms, gas, restaurant bills, parking bills, rentals, purchases, etc. Another figured it at closer to $6 for each dollar invested by the producers. Supposedly this is only matched by the likes of major conventions and tourism. I am no expert in this area, but those are the only two figures I…

  8. The column above first makes the claim that studios “don’t care about the Illinois tax incentive.” I would submit that they do, indeed, care, and that is why filming has increased here since some sort of incentive was offered.
    Next the column states that “in general, the only studio films that come to Illinois are those that have already established themselves with the ‘Cheaper than New York to film’ Chicago look, like ‘The Dark Knight‘, or those films that actually need Chicago, ‘Public Enemies’. I do believe that there are many films left out of this equation. I suspect that “The Dilemma” could have been made in many other urban cities, some that would have passed easily for Chicago, and others that could have cost them more.
    I disagree, and can cite many productions ignored by the above statements. However, I believe a much more accurate statement might be as follows: If Illinois wants to be among the states considered for the majority of non-California projects, it must offer some sort of incentive. If it does, it will get roughly the same consideration as Connecticut, Massachusetts, Georgia, Louisiana, Texas, New Mexico, and Arizona. If there is no consideration, then it will get the same consideration as (perhaps) Missouri does today. Almost none. Keep in mind that 44 states now offer incentives. Contrary to what the article asserts, Hollywood most certainly pays attention to which states have them.
    The fact is, the studios are obviously looking at the locations that offer them a monetary incentive, whenever it is possible or reasonable for them to do this. They will go where the break is. When they scout Chicago, and decide to go elsewhere, I have noticed it is almost always a state with another incentive. The studios DO care.
    Next, the column asks this: “but was the credit really successful to begin with?” I remember well the years when we had no incentives to offer. Filming went to Toronto, with its incentives and tax advantages and…

  9. Filming went to Toronto, with its incentives and tax advantages and exchange rate. It also went to Georgia (2003) at that time, because they were offering incentives. Illinois was not on the radar, because we offered nothing. It was actually during these bleak years that Louisiana (2002), New Mexico (2003), and Texas, and Louisiana, and even Arizona realized what the score was, and began to offer incentives. Illinois did the same, and actually jumped on board at the tail end of that. Then came Michigan, which upped the ante’ even more…
    Has it attracted film and television to the state? Here is a partial list, as I am going from memory, and I believe all of these were since the tax incentives were up in running. Which was 2005-2006 — The TV pilot for “Leverage.” The TV pilot for Family Practice; The TV pilot for Matadors; The Dilemma; Ca$h (lower budget feature film); The TV show The Beast; The Unborn; Wanted; Transformers; Public Enemies; Nothing Like the Holidays; The Informant; The Express; Friday the 13th; The Break-Up; The Amityville Horror; Baby On Board; The Chicago Overcoat; The TV show The Chicago Code; and, as I write this, The Boss (TV); The TV pilot episode for Cooper & Stone; The TV Pilot episode for Playboy; Source Code; Shakey; Contagion; Eagle Eye; Fred Claus; Witless Protection; TV Pilot for Ride-Along; TV Pilot for Pleading Guilty.

    Most years, we had no TV pilots come to town to film. In 2010, at one point, we had five pilots shooting simultaneously. Five. Right now, I believe there are two or three shooting. Keep in mind that some of those mean longer-term employment if they are picked up (The Chicago Code).

  10. Do we have to play this game? No. We could give up the money. But, I can assure you it will simply go elsewhere, to one of the other 43 states which do offer some sort of incentive.
    From an article by Kathy Cobb:
    “Chamberlain, from the Tax Foundation, acknowledged that states face a classic prisoner’s dilemma. Here, two crime suspects interviewed separately are offered reduced sentences if each rats the other out; if both stay mum, they’ll go free. But because they are separated, neither trusts the other to keep quiet—so each rats on the other in order to secure a lesser sentence, and ultimately both are worse off.
    “Incentives work the same way, Chamberlain said. If all states eliminated incentives, they would all be better off; films would still get made, and they would go to the most optimal locations, while states could focus scarce tax dollars on traditional public goods rather than on film incentives. But they’re unable to do so because they can’t trust other states to do the same, and doing nothing is even worse, because states lose economic activity to others offering incentives.”

  11. Finally, I believe we in Illinois have got it right. The incentive is just large enough to keep us competitive. It is not a cash rebate. It is not a forgiveness of income taxes. It has line-item scrutiny (which I believe must remain) by an office which is well aware of what occurred in Iowa (when a scandal erupted). It does forgive income taxes on a percentage of the dollars spent for local catering companies to provide food, and the money paid to put Angelina Jolie up at the local Sheraton. It does provide forgiveness of income taxes for the money spent on thousands of local Chicago extras when they show up on the Dark Knight. It gives a break for every dollar spent to rent production office space on the west side. It does provide a break when the film company rents a generator locally, or hires some teamsters to drive, or hires a lowly PA to show up and wear a radio. It gives a break for those dollars spent gassing up all of those rigs. Dollars spent here in Illinois.

    • Bruce, thank you for your articulate response to my article. I think your prisoners dilemma analogy is dead-on (I may use it in a later piece!)

      I think your perspective that production in IL improved following enactment of the incentive is valid, but my point is that because of the way the incentive is drafted, Ilinois is missing-out on a lot production business that they don’t have to give-away-the-farm to procure. As an actor, you might be particularly sensitive to the fact that you are excluded from the incentive program after your rate exceeds $100k, which is fine if you don’t want your career to exceed SAG’s Schedule F rates. As presently structured, the IL incentive encourages Los Angeles based producers to hire the BTL crew locally, but to bring supporting cast in from LA — the producer is already getting group rates on hotels, meals, etc. (and per diems are negligible) so they might as well put them up and generate more credits. By contrast, Louisiana’s credit encourages outside producers to work with their local actors and build their careers beyond Schedule F.

      • Jeff – Thanks so much for your response to my responses. I am curious — RE: Louisiana’s incentive. Does it place a different “cap” on actor’s project pay? Do you know exactly how it encourages producers to make more local roles available? Are there also other features which reward a producer for offering up more roles? I am going to send a quick message to the Illinois Production Alliance, and ask them to take a look at your column, and also hopefully at this thread as well. The incentive has already been tweaked in the past, and I see no reason why it cannot be tweaked in the future. (Perhaps, after the recent political turmoil has died down a bit -grin.)

        Believe me, I am not in favor of giving away the farm. I do believe some incentives around the country have done that. I think that Michigan’s was ridiculously high (up to 42%, and most big-budget studio projects easily qualified for a 40% tax break.)

        I also know some projects are likely to choose their locale based on matters beyond “which state offers us the best deal.” So many factors can play into that, even a star’s personal bias toward one state over another, or a director’s personal bias based on a previous bad experience (supposedly Ron Howard had to be persuaded to come here, after he had vowed never to shoot in Chicago again, because of something that happened while filming Backdraft many years ago.) Illinois will never be able to offer the grand vistas of a Monument Valley. But it can offer producers many other environments which may suit a lot of films. Sadly, we have a bit of a bad rap in Hollywood, according to many I have talked to. We have had to work hard to try to overcome that. (I am not speaking of me personally, I am referring to the local SAG office, Aftra office, teamsters, the IPA, and even the Casting Directors. Recently, one of the three major casting directors spoke to this issue, while I sat in an audience. This CD spoke of how they promoted the…

  12. You nailed it on the head when you referred to the state needing to know what it is targeting.

    I was the state film commish for Florida (05-08) when we re-wrote Florida’s incentive program. Up to then it didn’t work for producers at any level – and we had been hit with multiple hurricanes that left producers who wanted to shoot in Florida facing high insurance costs.

    First, we decided to focus on what we felt brough the most JOBS to Florida – and those were TV series and the lower-budgeted indie and botique studio films. We already had an excellent cast and crew base (as IL does). Big studio films, though we always were out to land them too, tend to bring in all of their cast, key crew and many supporting crew positions. Nice flash and glitz, but not the jobs return.

    Then we offered a cash rebate bonus of 5% for producers shooting between June 1st and November 30th — our ‘off-season bonus’ (from a marketing standpoint, better than calling it the ‘hurricane season bonus’, but that’s what it was!) It more than offset the cost of additional hurricane insurance for productions.

    We fixed the other problems with the incentive, and instantly we had a long line of productions aiming to come to Florida. In fact, our new problem was two-fold: we ran out of funds every year (in fact, the day they became available); and TV series couldn’t apply for multiple years. That finally got fixed this year by the new administration, with plenty of funding, and we have a ton of production going on here and frankly are running out of local crew to staff the shows… a nice problem to have, actually.

    We also included a queue for our indigenous filmmakers, with rules more friendly to the smaller indie film. In a state with a lot of film schools like ours, we want those graduates to stay in Florida to make their films!

    Your ideas about incentivizing out-of-state workers just can’t be shown to benefit the state — there’s not enough of an economic bang…

  13. Great article, thanks for posting. As another Chicago actor its my observation that its unlikely the $100K salary cap is directly impacting local actors as the opportunities for those $100K roles are limited by other business factors. Its probably true that its not helping matters but if it were bumped up significantly I still doubt we’d see many locals suddenly experience a surge in their marginal tax rates.

    Couple of questions about the sale of these vouchers… When they are sold is there a sales tax collected? Are these transactions handled directly between the voucher holder and purchaser or is there a broker pocketing a fee?

    Just put you in my RSS feed and look forward to continued good reading.

    • @Tim, there is no sales tax on a tax credit transfer, but the production does need to report it as income. Productions can sell certified credits directly to the end user, but usually there is a broker involved, especially if the production received a tax credit advance from a lender.


Please enter your comment!
Please enter your name here