Legal Challenge to Arizona’s Film Tax Credit Program
Opponents of a state tax credit program are asking a judge to block it from going into effect, arguing the law illegally subsidizes the movie-making industry.
Lawmakers approved a film tax credit program in 2022 that offers up to $125 million to film companies in refundable tax credits if they make movies in Arizona, in the hopes of growing the state’s movie-making industry.
Under the program, film companies can receive tens of millions of dollars from the state if they make movies in Arizona. But, the Goldwater Institute argues the program violates the Arizona Constitution’s gift clause.
“We’re challenging one specific program, one specific targeted program that drains the public treasury and gives advantages to private film companies,” attorney Jon Riches told Maricopa County Superior Court Judge Adele Ponce at a hearing on Friday.
Riches also noted that nothing in Arizona’s law requires film companies to release the movies they film in Arizona to be able to collect money from the program. He said there’s no proven value to the state that comes out of the program.
“The objective fair market value is zero. Even if it has some nominal value, it’s grossly outweighed by the millions of dollars that are provided under this program,” Riches said.
The plaintiffs are asking Ponce to enjoin the law from going into effect.
On the other side of the coin, lawyers for the state are asking for the case to be dismissed.
Attorney Andrew Pappas defended the law on behalf of the Arizona Commerce Authority and said “tax credits are not gifts.”
Pappas warned that striking down the film tax credit program would set a broad precedent.
“The precedent they are trying to make is one that says that any taxpayer can challenge any other taxpayer’s tax return for any credits, deductions, exemptions and so on. That is totally, totally untenable,” he said.
Legal Challenge to Arizona’s Film Tax Credit Program
Opponents of a state tax credit program are asking a judge to block it from going into effect, arguing the law illegally subsidizes the movie-making industry.
Lawmakers approved a film tax credit program in 2022 that offers up to $125 million to film companies in refundable tax credits if they make movies in Arizona, in the hopes of growing the state’s movie-making industry.
Under the program, film companies can receive tens of millions of dollars from the state if they make movies in Arizona. But, the Goldwater Institute argues the program violates the Arizona Constitution’s gift clause.
“We’re challenging one specific program, one specific targeted program that drains the public treasury and gives advantages to private film companies,” attorney Jon Riches told Maricopa County Superior Court Judge Adele Ponce at a hearing on Friday.
Riches also noted that nothing in Arizona’s law requires film companies to release the movies they film in Arizona to be able to collect money from the program. He said there’s no proven value to the state that comes out of the program.
“The objective fair market value is zero. Even if it has some nominal value, it’s grossly outweighed by the millions of dollars that are provided under this program,” Riches said.
The plaintiffs are asking Ponce to enjoin the law from going into effect.
On the other side of the coin, lawyers for the state are asking for the case to be dismissed.
Attorney Andrew Pappas defended the law on behalf of the Arizona Commerce Authority and said “tax credits are not gifts.”
Pappas warned that striking down the film tax credit program would set a broad precedent.
“The precedent they are trying to make is one that says that any taxpayer can challenge any other taxpayer’s tax return for any credits, deductions, exemptions and so on. That is totally, totally untenable,” he said.
Legal Battle Over Arizona’s Film Tax Credit Program Heats Up
Phoenix, AZ — A contentious legal showdown is unfolding in Maricopa County as opponents of Arizona’s film tax credit program seek to block its implementation, claiming it unlawfully subsidizes the movie-making industry. The program, approved by lawmakers in 2022, offers up to $125 million in refundable tax credits to film companies that produce movies in the state, aiming to bolster Arizona’s burgeoning film sector.
At a hearing on Friday, attorney Jon Riches, representing the Goldwater Institute, argued that the program violates the Arizona Constitution’s gift clause. “We’re challenging one specific program that drains the public treasury and gives advantages to private film companies,” Riches stated, urging Maricopa County Superior Court Judge Adele Ponce to enjoin the law from taking effect.
Riches emphasized that the law does not mandate film companies to release their productions in Arizona to qualify for the credits, raising concerns about the program’s tangible benefits to the state. “The objective fair market value is zero,” he asserted. “Even if it has some nominal value, it’s grossly outweighed by the millions of dollars that are provided under this program.”
In stark contrast, attorneys for the state, including Andrew Pappas, defended the program, arguing that tax credits should not be classified as gifts. Pappas warned that a ruling against the film tax credit could set a dangerous precedent, allowing any taxpayer to challenge the tax returns of others based on credits, deductions, or exemptions. “That is totally, totally untenable,” he cautioned.
As the legal battle unfolds, the future of Arizona’s film industry hangs in the balance. Supporters of the tax credit program argue it could attract major productions and create jobs, while opponents contend it represents an unjustifiable drain on public resources. The court’s decision could have far-reaching implications for both the film industry and state tax policy.
The case continues to draw attention as both sides prepare for further legal arguments, with the potential to reshape the landscape of film production in Arizona.
