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New Mexico caps tax incentives for filmmakers

New Mexico's new Republican governor succeeded in her push to get state lawmakers to cap tax incentives for the film industry.
/ Source: Reuters

New Mexico's new Republican governor succeeded in her push to get state lawmakers to cap tax incentives for the film industry.

A bill on its way to Governor Susana Martinez's desk after the legislative session ended over the weekend would limit total state film incentives to $50 million a year.

But Martinez, who has called the incentives "a subsidy to Hollywood on the backs of our schoolchildren," did not succeed in getting the incentives cut from 25 percent to 15 percent as she wanted. The 25 percent rebate means that a quarter of any qualified film expenditures in the state are returned to film makers.

Both sides are claiming success, though clearly the state's film industry has taken a hit.

"Her attack on the film industry has already caused some companies to reconsider their investment decisions here," said Democratic Senator Eric Griego.

Under the $50 million cap, if a film is due more than that in tax credits in a single year, the filmmaker could collect in the next years as well. The highest refund to date was $76 million in 2009, and the average is around $65 million a year.

Some critics were wary of a cap, saying that cuts to film were premature without economic studies on the industry returns.

"We need to find out what's happening. This is for New Mexico, not Tom Hanks," said Republican Senator Rod Adair, referring to the Hollywood actor. Despite a lack of information, he said he felt "boxed into a corner" to vote for a cap.

The governor said she was encouraged by the legislative compromise. In a statement on Friday, she said the film cuts "protected classroom funding and healthcare for those most in need."

Scott Darnell, a spokesman for Martinez, said the cap could mean some $23 million a year in savings.

"This has been one of her highest priorities," Darnell said. "Had the film subsidy not been trimmed by roughly $23 million, cuts to public education could have been much deeper."

New Mexico's film incentives, as well as the development of technical studios and crew training, were expanded and promoted under former Governor Bill Richardson. The program ultimately drew hundreds of films to the state, including Oscar winners "No Country for Old Men" and "True Grit." "The Avengers" - featuring Scarlett Johansson, Robert Downey Jr. and Samuel L. Jackson -- is scheduled to begin shooting next month.

About 20 states currently give more or equally generous film incentives than New Mexico, including Louisiana, New York, and most recently, Utah, where a proposed incentive increase from 15 to 25 percent awaits the governor's signature.