Alabama took center stage at the 95th Academy Awards with Birmingham native Daniel Scheinert’s big wins for the movie he co-wrote and co-directed, “Everything Everywhere All at Once.”

But for Alabama to be a player in hosting Hollywood’s biggest stars and directors – even those who are homegrown — it will need to open the taxpayer’s wallet, according to those closest with the state’s film industry.

Alabama’s entertainment industry incentive, created in 2009, has been untouched for close to a decade when the program – otherwise known as the Alabama Film Tax credit – was capped at $20 million annually.

“The incentive is almost always used up,” said Lois Cortell, senior development manager with the city of Montgomery and whose duties includes administering MGM Film Works. “It’s gone by March. Rarely does it last long.”

‘Not a priority’

Competition from other states is growing, as states look to bring bigger and more expensive films to their states. Fifteen states since 2021, have either enacted measures to implement or expand film tax incentives, according to the National Conference of State Legislatures.

Tourism officials and some of those aligned with the state’s three film offices in Mobile, Birmingham and Montgomery say that other states are poised to race ahead of Alabama in luring film productions. They are pushing for lawmakers to increase its $20 million annual cap in tax credits allowed to filmmakers.

“The $20 million is not sustainable,” said David Clark, president & CEO with Visit Mobile, who advocates the income tax credit hiked to $150 million, which would put it on par with Louisiana. “We have producers who cannot start their films here.”

But Alabama Gov. Kay Ivey’s administration led by Commerce Secretary Greg Canfield, whose agency administers the program and the Alabama Film Office, says changes in the film tax credit is not coming this legislative session.

State lawmakers have not introduced a bill in recent years to increase the film tax incentive.

Canfield said the economic incentive focus for Alabama lawmakers is for the reauthorization of the Alabama Jobs Act and Growing Alabama Act, which are laws set to expire this summer. The programs are heralded by state officials for providing the tax incentives needed to entice job growth. Mayors of the state’s largest cities are advocating state lawmakers to raise the $350 million cap on incentives aimed at recruiting manufacturing companies to Alabama.

“Changes to the existing film credit are not a priority for this session,” Canfield said.

Economic activity

Alabama’s film tax credit is a rebate to production companies; 25% rebate is offered on expenditures incurred in Alabama, and 35% of payroll paid to Alabama residents. A production has to spend at least $500,000 to qualify but must not exceed $20 million.

Most blockbuster films produced in Georgia, where there is no cap on incentives offered to film producers during a given year, often eclipse $100 million or more.

Alabama’s program, by comparison, is not as generous than other states like Louisiana, where 40% of eligible expenses are refunded to producers. That is, if a production company spends $20 million on eligible state expenses, it will get $8 million back in credits.

The rebate is allowed to be used to offset Alabama income tax liability of the production company. If the amount of the rebate exceeds the production company’s Alabama income tax liability, then the excess will be refunded to the company.

Related:

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The income tax break is the most popular portion of the incentive. Since its program began 14 years ago, 115 taxpayers have claimed $97 million in income tax rebates, $102,527 in sales tax exemptions and $291,686 in lodging tax exemptions, according to the latest report from the Alabama Department of Commerce on the film incentive.

Critics of film tax credits, which include economists and researchers who analyze programs for state agencies, say the tax breaks do not benefit the states and film tax credits are spent by producers outside the state.

Good Jobs First, a Washington, D.C.-based watchdog that tracks incentive programs, reports that states continue to giveaway tax money to out-of-state film crews to the detriment of taxpayers. They argue that for every $1 a film company gets in tax incentives, the public recovers around a dime.

“When Alabama incentivizes a motion picture company, the firm will likely purchase from firms outside the state, creating less economic activity within the state,” said Jeremy Hill, director for the Center of Economic Development and Business Research at Wichita State University, who worked in Georgia during the years that it got its film incentive program going.

The Alabama program was panned by researchers in 2017, the last time the legislature took a critical eye at tax incentives. A study by University of Tennessee economists, tapped by the Alabama Department of Revenue as part of an effort that year to review a handful of the state’s tax credits, gave the film tax credit a “D” rating.

That’s a wrap? Repeal of Alabama’s film tax credit on hiatus

In short, the study claimed the economic benefits the film tax incentive provided to Alabama “are very small.” They determined the program simply was not worthwhile to continue.

Credit increase

Film advocates claimed that if the incentives were removed, it would end film production in Alabama.

Since 2018, the state has provided 81 productions with tax credits, including 14 last year that with a combined expenditure of $73 million in Alabama, according to the information provided within the Department of Commerce’s report.

The state did not provide an itemized list of tax credits that went to individual films shot in Alabama. The most recent examples were provided by the state in 2017 and showed that the 2015 movie “USS Indianapolis: Men of Courage,” starring Nicolas Cage – shot aboard the USS Alabama battleship in Mobile – received the most in state tax credits since 2009, at $3.6 million.

Good Jobs First argues that film tax programs nationwide are not transparent enough – that very little is known about which production companies receive public money or how much. North Carolina is one of the few states that does itemize the credits dished out in their state. “Halloween Kills,” the 2021 horror movie, received $6.1 million from the state in tax credits, according to information provided by the North Carolina Department of Revenue.

Clark, in Mobile, said he believes Alabama needs to increase its film tax credit to better compete with North Carolina and next-door Georgia for big-budget blockbusters.

He said the benefits of the film tax credit are felt in the cities that host production crews. He said the $20 million cap is forcing the state to turn away film crews that will bring thousands of people to fill up local hotels and restaurants.

“We had 6,000 hotel room nights that occurred from three movies that have been shot in Mobile,” Clark said. “That’s why it’s important for the entertainment incentive cap to be raised and for people to be educated that this is an industry we can build if we raise the cap.”

He said by raising the cap to $150 million, it would equate to the creation of 10,000 new full-time jobs, and the potential to develop film production infrastructure in Alabama.

Meghann Bridgeman, president & CEO with Create Birmingham/Film Birmingham, said Alabama “has room for growth with an incentive expansion” that could lead to a larger number of small-to-mid-size budget films that might find Alabama more appealing to film “and less saturated and perhaps less expensive” than shooting in Georgia.

“Georgia’s success can be complementary to our incentive increase and future industry growth,” she said.

Indeed, Georgia is the gold-standard in the South for hosting blockbuster film production, but it comes at a massive cost to taxpayers. The Peach State, which has transformed itself into Hollywood East, has spent $4 billion in tax incentives to lure Hollywood productions since the state instituted incentives for film production in 2005.

Those expenditures have the blockbusters and a number of Marvel Studios productions: “Avengers: Infinity War,” “Avengers: Endgame,” “Ant-Man and the Wasp,” “Black Panther,” and portions of “Spider Man: No Way Home.”

Georgia’s program is so popular that even in its lowest year in 2009, the $89 million in tax credits is almost as much as Alabama has issued in its entirety since its program began.

“Georgia has a Home Depot that is dedicated to the film industry,” Clark said.

But incentives are only one thing that benefits Georgia, researchers note. The proximity of Atlanta-Hartsfield-Jackson International Airport, the world’s busiest airport for passenger air traffic since 1998, is a crucial non-tax incentive factor for production companies.

Alabama’s benefits

Canfield said he is pleased with Alabama’s program.

“Given the level of incentives available, Alabama utilizes its cap in an effective manner, and we have managed to attract our share, albeit a small share, of interesting film and television projects,” he said.

Canfield cited a few recent examples including “Jesus Revolution,” starring Kelsey Grammar, which was filmed on the Gulf Coast, and “A Nashville Legacy,” filmed in Birmingham that was featured on The Hallmark Channel.

The biggest blockbuster produced in Alabama in recent years was the 2017 horror movie, “Get Out,” produced by Jordan Peele, which grossed $255 million worldwide on a $4.5 million budget. It was filmed in Fairhope and Mobile.

“Close Encounters of a Third Kind,” filmed in 1977 in Mobile and Bay Minette, remains the king of blockbusters produced in Alabama. It grossed over $300 million worldwide. In 2007, it was selected for preservation in the National Film Registry.

Tommy Fell, director of the Mobile Film Office, said incentives are not the only thing filmmakers are seeking. He said a well-coordinated approach to manage the logistical puzzles of producing movies – such as closing off streets and finding filming locations – are crucial to landing films for an area.

Mobile has the state’s oldest local film office. Montgomery’s film office has been part of the Department of Economic & Community Development for the past decade. Birmingham launched its film office in 2017.

Huntsville is studying whether there is a need for a more defined film office and is participating in a study to determine its economic impact, according to city spokesperson Kelly Schrimsher.

“Our local crew, local talent, local vendors, local mayors with their government agencies in different areas, and of course, our local community as a whole provide productions with southern hospitality,” said Fell.

“There is always a way to get things done and there is almost a backlot feel to filming in the area,” Fell said. “Over the past 10 years and dating all the way to Close Encounters of the Third Kind, the area has always taken care of film productions by letting productions do their job in the same way that any other member of society would go to work.”

Coming Monday: Given the rise of film productions in Alabama, is it time for the creation of a film trail?