Kentucky Improves Film and TV Incentives

By Fiona Young-Brown

Diane Lane and John Malkovich were the stars of “Secretariat,” a Walt Disney Pictures movie release in 2010 that was the first to take advantage of Kentucky tax incentives for film and television production. Incentives were increased by the 2015 General Assembly to make the state competitive with other Southern locales that are seeing billions of dollars of business activity.
Diane Lane and John Malkovich were the stars of “Secretariat,” a Walt Disney Pictures movie release in 2010 that was the first to take advantage of Kentucky tax incentives for film and television production. Incentives were increased by the 2015 General Assembly to make the state competitive with other Southern locales that are seeing billions of dollars of business activity.

Kentucky became more financially attractive to film and television production companies on May 7 when Gov. Steve Beshear signed House Bill 340 to improve a series of financial incentives the state offers.

Qualified productions may take a refundable income tax credit of as much as 30 percent – up from a previous 20 percent – of approved production expenditures, which can include set construction, rental of properties, wardrobe, photography, sound services, editing and other post-production services, and more. Talent costs now are included as a production expense.

An additional 5 percent incentive is available for the use of Kentucky resident labor and for filming in “enhanced incentive counties.”

These production incentives are available to companies that spend at least $250,000 to produce films or television shows in Kentucky. For commonwealth-based companies, the spending threshold is $125,000.

“House Bill 340 gives Kentucky a strong advantage when competing with other states for outside film projects,” Beshear said. “Increased film production in Kentucky means a boost to local economies and an opportunity to highlight the Bluegrass state on both big and small screens across the world.”

Kentucky previously passed a series of film-production tax incentives in 2009. At the time, the package was attractive to out-of-state filmmakers and helped make the state more competitive. Walt Disney Pictures became the first to take advantage of the benefits with a $1.2 million tax credit.

The bill passed just as the studio, which had been waiting and wanted to shoot here, was about to announce filming of “Secretariat” in Louisiana. Instead, large chunks of that movie, starring John Malkovich and Diane Lane, were filmed at Keeneland, Churchill Downs and other spots in the state.

But Kentucky’s incentives soon slipped behind when states such as Georgia and Pennsylvania passed similar but more lucrative bills. The commonwealth film industry has bemoaned the situation as projects became harder to fund and movies moved elsewhere.

Situated in Kentucky but shot elsewhere 

Television filming was hard to attract also, and even shows set in Kentucky were not made in the Bluegrass. The successful 2010-2015 FX channel series “Justified,” centered on a U.S. deputy marshal based in Lexington with story lines that played mostly in Harlan County, used locations in Pennsylvania and California. It generated occasional amusement among sharp-eyed Kentucky viewers who noticed characters drive past palm trees in downtown Lexington.

Likewise, the History Channel’s very popular 2012 Kevin Costner miniseries “Hatfields and McCoys” made only minor use of neighboring West Virginia before flying off to Romania for principal photography.

Hopefully, that is set to change with the new availability of greatly improved incentives for filmmakers who choose to film in Kentucky. Legislators, representatives from the Department of Travel and Tourism, business leaders, and members of the area’s film community all worked together to create the updated package.

Mona Juett, deputy commissioner for the Kentucky Department of Travel and Tourism, describes the new incentives as “very competitive.”

HB 340 was introduced by state Rep. Rick Rand of Bedford (House District 47). Involved also with the 2009 film and TV incentives, Rand worked closely on HB 340 with other legislators, local industry experts, first lady Jane Beshear and the Kentucky Tourism Development Finance Committee.

“These shows and films can bring thousands of jobs and drive tourism to shooting locations during and after the final product, which has a positive impact on businesses in local communities,” Rand said. “There is also an unspoken prestige that comes with landing a major motion picture like ‘Secretariat’ and having the spotlight on Kentucky, giving the state an opportunity to feature its people and beauty.”

Mrs. Beshear testified this year that Kentucky had fallen behind 30 other states in its ability to attract the film industry.

Multibillion-dollar industry in the South

Rand points to Louisiana and Georgia as examples of Southern states that have had particular success in building their TV and movie production industries.

Since Louisiana enacted incentives more than a decade ago, New Orleans has built such a strong production community that it is sometimes called Hollywood South. In August 2014, Georgia reported that, thanks to hit TV shows like AMC’s “The Walking Dead” and numerous films, the state supports more than 75,000 jobs in the sector. Furthermore, the report states, that industry’s impact on the state economy weighed in at an impressive $5.5 billion.

To put that into perspective, film and broadcast’s impact on Kentucky’s economy was a mere $3 million in 2007, before introduction of the first incentive bill. By last year, that had grown but only to a still-paltry $15 million. The new credits, Rand says, brings Kentucky incentives up to levels seen in many other states.

The incentives are already being heavily promoted by Juett and her staff. A media campaign began in April with full-page ads in “The Hollywood Reporter” and “Variety” magazines. Representatives from the state will soon be flying to Los Angeles to meet with industry executives and producers. There will also be a series of roundtable meetings around the state, giving local actors, filmmakers and crew members the opportunity to learn more about how they might benefit from the expected influx of productions.

Someone who is pleased to hear about the bill’s passage is Brian Cunningham of Louisville’s ThoughtFly Studios. In the past few years, Cunningham and his partner Matt Niehoff have built a successful production company, creating promotional films for such businesses as Maker’s Mark and Churchill Downs. The pair recently wrapped filming of their second feature film, “Loss Prevention,” shot entirely on location in Louisville with a host of local talent as well as WWE’s Al Snow and Australian action star Vernon Wells, known for his roles in “The Road Warrior” and “Commando.”

Experienced hands are an incentive, too

“The biggest impact this will have, hopefully, is that it will bring more production/postproduction and give incentive for using more local talent,” Cunningham said. “That means income via working as crew, equipment rentals, and postproduction video and audio services. It also means more demand for specialized roles which will encourage more talent to come to and remain in the area.”

He echoes his colleagues in the local film community by emphasizing that more projects will ultimately lead to a more skilled and more experienced labor pool, something that, in turn, makes Kentucky more attractive as a location for entertainment production business.

In 2013, Cunningham released “Monsters Wanted,” an award-winning documentary charting a couple’s journey to making their dream of a major Halloween attraction a reality. He is pleased the documentary genre received special and advantageous inclusion in the film production incentive package.

Documentaries become eligible for credits under the new business inducements with a minimum expenditure of $20,000. For Kentucky-based companies, the threshold is even lower at $10,000.

Documentaries “are always a labor of love before they’re a financially viable investment,” Cunningham said, “so knowing that documentaries will be supported via these tax incentives will hopefully allow more ‘passion projects’ to get off the ground.”

A variety of other businesses not directly involved in productions also stand to gain from HB 340. Hotels, restaurants and catering companies are just a few examples of those who stand to gain work and contracts from projects. The single two-week “Secretariat” shoot in 2009 infused an estimated $6 million into the local economy, Juett said. Nearly any film, either directly or indirectly, is great publicity for the state and is “a huge plus” for the growing tourism industry.

Juett said two feature film productions have already been approved to receive HB 340 incentives. As further evidence of the state’s growing attractiveness to filmmakers, she cites the increased traffic to the Kentucky Film Office’s webpage listing potential locations.

Although it is still early, these factors seem to be supporting Rand’s prediction that “enhanced film incentives will make it more difficult for other states to compete with us.”

Those interested in learning more about the film tax incentives should visit the homepage of the Kentucky Film Office at filmoffice.ky.gov/default.aspx.

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