Once upon a time… in Summerlin? Nevada considers record-smashing tax break for film industry

Nevada lawmakers are considering approving what could amount to a stunning $4.9 billion in tax breaks over 25 years for film companies like Sony Pictures.

Proponents of the proposed nineteen-fold expansion of Nevada’s Film Tax Credit Program say the investment will establish Southern Nevada as a premier filming location by making it competitive with states like Georgia and New Mexico.

Dubbed the Nevada Film Studio Infrastructure Act, Senate Bill 496, largely focuses on the development of two proposed production studios in Las Vegas — one in the southwest part of the valley on land owned by UNLV, and one at an undisclosed parcel of land somewhere in Summerlin. To support those two proposed studios, Nevada would offer approximately $190 million in transferable tax credits annually for two decades.

As for the state’s existing film tax credit program, which since 2017 has been available to productions happening anywhere in Nevada, it would have $15 million in transferable tax credits to dole out annually. That is a $5 million increase from its current funding level of $10 million.

Combined that means Nevada’s film tax credit program would jump immediately from $10 million to $55 million in the upcoming fiscal year, then move to $110 million in 2028, and then to a base of $190 million in 2030. After that, annual adjustments would be made based on the Consumer Price Index.

The Legislative Counsel Bureau, the nonpartisan staff serving the legislature, estimates the Nevada Film Studio Infrastructure Act could result in the state awarding nearly $4.9 billion in tax credits between now and 2048. That projection assumes the proposed studios meet their projected construction timelines and that the available credits are maxed out.

State Sen. Roberta Lange, D-Las Vegas, is sponsoring the bill and has urged her colleagues to “have the strength to look past the number.”

“It is a big number,” she acknowledged.

For comparison, the largest tax break approved by state lawmakers was the $1.3 billion in direct tax abatements, transferable tax credits and other incentives over 20 years awarded to Tesla in 2014 for its Gigafactory campus in Northern Nevada. The film tax credit program could potentially be three times that amount over a roughly similar amount of time.

Welcoming committee

Despite the unprecedented price tag — and the fact that Lange formally introduced the bill into the legislature just last week — several lawmakers have already signed on in support of the massive expansion of the film tax credit program.

Five Democratic and two Republican lawmakers signed on as primary sponsors or co-sponsors even before the bill’s first hearing. That bipartisan group includes state Sens. Fabian Donate (D-Las Vegas), Pat Spearman (D-North Las Vegas) and Heidi Seevers Gansert (R-Reno) — three of the five members of the Senate Revenue and Economic Development Committee, which held a hearing for the bill Tuesday.

The Summerlin Production Studios Project, as it is known as within the bill, is being developed by the Howard Hughes Corporation with partner Sony Pictures Entertainment. Howard Hughes Corp., though now based in Texas, has deep ties to Southern Nevada, having developed the master-planned community of Summerlin.

The Las Vegas Media Campus Project, as the other designated production zone is being called, is being spearheaded by Southern California-based Birtcher Development with UNLV as a partner. That project also involves educational and workforce programs designed to ensure that the growing industry can find the workers it needs.

Both proposed studios have commissioned heavyweight lobbyist groups. The Ferraro Group, whose namesake helped present the bill, is representing Birtcher while R&R Partners is among multiple lobbying firms representing the Howard Hughes Corp. in Carson City.

Questioning from the Senate Revenue committee to the bill presenters largely focused on the mechanics of how the program would operate. None of the five committee members — which in addition to Donate, Seevers Gansert and Spearman also includes state Sens. Dina Neal (D-North Las Vegas) and Carrie Buck (R-Las Vegas) — publicly questioned the strategy or soundness of the proposal or of film tax credit programs generally.

Buck told the presenters she looked forward to supporting the bill.

Film tax credits and other tax incentives for film and tv production are controversial but seductive to states across the country. The National Conference of State Legislatures last year reported that “states that have performed evaluations of their film tax incentive programs have commonly found that, despite the positive anecdotal evidence that accompanies big film projects, such programs do not provide a substantial return on investment.”

NCSL also noted that both left- and right-leaning think tanks have questioned whether they are good uses of taxpayer money. That dynamic emerged during SB 496’s hearing, with the left-leaning groups Progressive Leadership Alliance of Nevada and Battle Born Progress and the conservative Nevada Policy Research Institute and Nevada Republican Party atypically aligned in their opposition to the bill. Notably, those groups’ opposition was dwarfed by support coming from chambers of commerce, Southern Nevada cities and unions representing building and film trades.

Economic impact with a familiar ring

Michael Morgenthal of Sony Pictures told the Senate committee that the states that have seen the best return on investment in their incentive programs are those that established facilities with multiple soundstages and a large labor pool.

That sort of “long-term planning stability,” he said, lends itself to more steady production work, such as serialized television shows.

Morgenthal also broke down for the committee spending attached to a recent feature film production in Georgia: $5 million in labor for construction sets, $2.5 million on supplies like lumber for those sets, $2 million on local hotels, $1 million on catering, $500,000 on set dressing, $300,000 on local car rentals, and $2 million in per diem, likely spent at grocery stores, gas stations, bars and restaurants.

Birtcher representatives claim the two studios will create 26,800 total jobs: 10,000 in construction over the first five years, 6,800 direct onsite studio jobs, and 10,000 “indirect and included” jobs. The company is also estimating the total economic impact on Nevada after the tax credits to be $2.6 billion per year, or $51.3 billion over two decades.

Birtcher representatives said those figures came from two economic analyses. Neither of those reports was available on the legislative website as of late Tuesday.

Presenters also touted the positive impact Las Vegas-based tv shows and movies could have on tourism. That selling point has been a talking point in years past, with the Nevada Film Office testifying during the last legislative session that tourism was the primary economic benefit of its film tax credit program.

Nevada’s existing Film Tax Credit Program was established by the legislature in 2013, but the following year its funds were gutted to support a $1.3 billion tax incentive package for Tesla. The most notable film to emerge from the initial program was “Paul Blart: Mall Cop 2.”

Legislators did begin funding the program at a smaller scale two sessions later, but Nevada’s film industry has not taken off within the state and lawmakers have been floating the idea of reconsidering the program.

The Senate Revenue committee’s next scheduled meeting is Thursday.

SB 496 will not require a two-thirds majority to pass the legislature because it does not raise revenue, but it could potentially impact the budget. LCB fiscal analyst Michael Nakamoto explained to the committee that the state factors in tax credits as “negative revenue” when coming up with overall revenue projections — resulting in less money available for the state to budget. SB 496 also allows for some rollover of unused tax credits, which could impact the state budget year to year. 

The legislative session is set to end on June 5, leaving less than three weeks for the film tax credit bill to pass both houses and make its way to the governor’s desk for approval.