Our chapter on federalism explains how states use tax breaks and other incentives to compete for business. Variety reports that Iowa recently lost movie location shoots when it suspended its production tax credit.
Incentives don't need to be eliminated or scaled back to scare away production. These days, producers start looking at other locations as soon as a governor indicates a desire to tinker with a tax credit.
"What the industry always wants most of all is certainty," says California Film Commission director Amy Lemisch. "They want to know what they're going to get, what the rules are and that they won't change."
California got an added bit of certainty last month when Gov. Jerry Brown signed a law extending the state's $100 million-a-year tax credit through the end of the 2014-2015 fiscal year.
New Mexico wasn't so lucky. In January, Gov. Susana Martinez came into office vowing to drastically scale back the state's popular incentive program, which had attracted such big-budget films as "Cowboys & Aliens" and "Terminator: Salvation."
In the end, the state preserved its 25% tax credit and added a still-generous $50 million annual cap. But the damage was done.
"For first eight months of the new administration, nobody really knew what was going on, so therefore the number of pilots and (other projects) is way down from what it usually is," says Lance Hool, CEO of the newly opened Santa Fe Studios. In the meantime, "the money for the rebates sits there, waiting to be used."