The Good, the Bad, and the Unknown of Texas' New Film Incentives

Harrison Ford as Jacob Dutton and Helen Mirren as Cara in 1923, streaming on Paramount+. Lawmakers and industry professionals hope that the new Texas Moving Image Industry Incentive Fund will attract more projects like the Taylor Sheridan-created historical drama, which shot partially in Austin. (Image Courtesy of Trae Patton/Paramount+)

After months of guest appearances at committee hearings by A-listers like Matthew McConaughey and Woody Harrelson, and a cameo by Yellowstone chief architect Taylor Sheridan, Texas lawmakers have approved a huge change to the state's film and TV incentive program.

In the closing days of the legislative session, the Senate approved the House's changes to Senate Bill 22, establishing the Texas Moving Image Industry Incentive Fund, the successor to the successful Texas Moving Image Incentive Program (yes, TMIIIF replaces TMIIIP, not at all confusing). Bill author and Senate Finance Committee Chair Joan Huffman, R-Houston, and House sponsor Rep. Todd Hunter, R-Corpus Christi, have both lauded it as a way to get more production to Texas, and the state's film, TV, advertising and digital media industries have all breathed a sigh of relief that the state seems to be investing in their future.

But beyond the headlines, what does SB 22 actually do?

The Good

• The Money. This is the big one. SB 22 sets aside $1.5 billion over the next 10 years – $300 million per biennium – which is a dramatic increase from the $200 million appropriated by lawmakers last session, and an even greater jump from the paltry $32 million set aside in both 2016-17 and 2018-19.

• A Predictable Sum. The problem with TMIIIP was that it was part of the regular budget cycle, and so at the whim of the legislature. That volatility was very off-putting to producers, as it meant they couldn't forecast how much would be in the kitty two years from now. That's a big issue for TV shows that like to make a multiyear commitment, and knowing that there'll be $300 million in the fund at the start of every fiscal biennium (and hopefully somewhere around $150 million left at the start of the second year so the find doesn't go dry) will make Texas an easier sell to financiers.

• It's Still a Rebate. TMIIIP's big selling point was that it was a rebate, not a grant or a transferable tax credit, so the money was for proven eligible in-state spending, rather than an up-front handout for which the state may or may not see the benefit.

• More Cash for Veterans and Rural Counties. The text of the bill includes what are called uplifts, an extra percentage over the baseline. For example, a project filming in underutilized and economically distressed areas will get an extra 2.5% on eligible spending, as will one for which 5% of its crew are veterans who are Texas residents. Best part? Those uplifts are stackable, up to 31% of eligible spending.

• A Little Something for Post-Production. One of the big complaints about TMIIIP was that it was great for production costs but didn't help on post-production, meaning that projects were less likely to be soup-to-nuts hecho en Tejas. Now, projects will get an extra 1% if at least 25% of eligible in-state spending goes on post-production, including editing, VFX, and score, which could be a big boost for local composers and musicians.

The Bad

• More Money, But Not That Much More Money. The original language of the bill was for $500 million per biennium, not $300 million. That drop came during negotiations in the House, and the Senate signed off. It's still $50 million a year more than was currently available, but it's $100 million less than people in the industry were expecting and hoping for.

• Indies Do Worse Than Studios. Not all applications are created equally. A movie with a budget of between $250,000 and $1 million or digital interactive media production of between $100,000 and $1 million is only eligible to receive 5% of its budget as a rebate, while a $1.5 million-plus movie or game gets 25%. A long running complaint about TMIIIP is that the sums involved for smaller projects are so negligible that it costs more to hire an accountant for the application than they'd get back, and this re-enforces that problem.

• More Money for Faith-Based Films and "Texas Heritage" Projects. There's been a lot of national coverage of how SB 22 has a content clause, but the reality is that the Texas Film Commission has been able to turn down an application based on arbitrary rules – about making Texas look bad, for perceived obscenity, and so on – since 2007 (you can thank then-Senate Finance Committee Chair Steve Ogden, R-Bryan, for that).

What it didn't have was extra cash for certain kinds of projects, and SB 22 actively incentivizes specific categories of movies through uplifts. In this case, 2.5% for what are nebulously called "Texas Heritage Projects" and 2.5% for faith-based projects. Does anyone think that a film about, say, a member of the Comanche tribe contending with their belief system after surviving the Red Fork Massacre is going to be eligible? Probably not. This just sounds like a giveaway for cowboy flicks and Angel Studios-style proselytizing.

• A Lack of Local Workers. One of TMIIIP's big selling points is that it is a job creator for Texas professionals. For most of its existence, a project had to have at least 70% of its cast and crew be in-state residents to even apply. Two years ago, that dropped to 55%, much to the dismay of the craft unions. SB 22 drops that even further to 35%, rising by five percentage points every biennium before capping out at 50% in 2031.

The worst part of the negotiations was that lawmakers who missed that 70% were constantly told (not least by Hunter's office) that there would be something in the bill when it left committee, and there was not. Then they were told that one of those uplifts would be added as an amendment, and that never happened.

While there's great disappointment that the minimum has dropped so low with no uplift, the hope is that producers will just see the cost savings of hiring qualified local cast and crew (no hotels, no per diem) but there are no gaurantees.

• The Name. There were plenty of other acronyms to be had. We already have TMIIIP, so how much effort would it have taken to come up with something other than TMIIIF?

The Unknown

• Where the Money Comes From. If you see under "The Good," the main benefit is that TMIIIF is that it takes the funding out from the regular budget cycle. It does so by taking the money out of the tax base before it hits the treasury. Easy, right? Well, that's a sticky question, as the constitutionality of that process is a little hazy, and the bill passed in part because everyone tacitly agreed to not ask any difficult questions.

• Money to Film on Historic Sites. A measure mostly pushed by the San Antonio delegation, a 2.5% uplift for shooting on Texas historic sites. The presumption is that this will draw from the list of 41 historic sites operated by the Texas Historical Commission, potentially with the Alamo and the surrounding missions (which are operated by the General Land Office) added for good measure. However, the reality is that the demand will probably be very low, and many of these sites are not appropriate for filming anyway due to their sensitivity. After all, historical preservation must come first.

• Can They Actually Spend All That Money? This is the real enigma here, and may involve the long game. After years of underfunding TMIIIP, last session lawmakers gave it that massive boost to $200 million for the biennium. The only problem is that they still have a lot of that left. During hearings, representatives of the Texas Film Commission estimated around $60 million in the kitty, and while that number may drop as more applications are processed, it could mean unspent funds in TMIIIP.

In part, that's because film and TV producers got so used to being told "no" that they weren't even bothering to apply. While news of TMIIIF's advantages over TMIIIP will spread, it will take time as the development process is notoriously slow. Even backers of the bill aren't expecting a sudden flood of new shows to appear September 1 when the program takes effect, so it could be a couple of years before any real benefits are seen.

• Is the Texas Film Commission Really Ready for This? The TFC is a small office, and until they can hire more employees to handle this new program, the existing staff will probably be handling more phone calls in between writing new rules. Expect the ramp-up to be rough as the office handles the good, the bad, and the unknown of this expansion.