A new network television series filmed on Oahu premiered last week, bringing new public awareness to the state tax credits that helped finance the show and other Hawaii film productions last year.
“Rescue: High Surf” debuted on Fox with a fictional story about a beach lifeguard who resuscitates a surfer named Reef from Florida who surfs Pipeline for the first time in the first episode.
“You’re a blessing to the Reef,” says lifeguard Captain Harlan “Sonny” Jennings, played by New Zealand actor Robbie Magasiva, on the show. “Welcome to the North Shore.”
Hawaii taxpayers helped fund the 2023 series with an estimated $215,162 in tax credits, according to a report submitted to the state Legislature earlier this year.
For the first time in the grant program’s 27-year history, the Hawaii Film Bureau’s report lists the names of film projects with estimated credit claims. Previously, credit recipients were only listed by type of work, such as movies, episodic shows, and commercials.
The estimated largest credit for 2023 was $5.7 million for the live-action remake of Disney’s 2002 animated film “Lilo & Stitch.”
The second-highest was the fifth and final season of the rebooted “Magnum PI” with $4.9 million. The TV show was canceled by NBC last year after CBS decided to cancel it after four seasons. The final episode aired earlier this year.
Another now-canceled TV series, “NCIS: Hawaii,” also has a large share of the estimated 2023 credits, with seasons two and three totaling $3.7 million. CBS announced the cancellation in April.
Roll more credits
Last year, 28 films totaling $21 million are expected to be billed, including eight commercials, seven feature films, seven TV series, three TV movies, two TV specials and one documentary. .
Red One, a Christmas action-adventure comedy starring Dwayne Johnson, is one of the feature films and has an estimated debt of $2.6 million.
Portions of the commercial and corresponding estimated charges were for Aulani Resort ($88,438), First Hawaiian Bank ($123,705), and Kona Brewing Company ($308,696) .
Two television specials aired the 61st Merrie Monarch Festival ($120,465) and the 103rd Kamehameha School Song Contest ($65,752).
To qualify, a production must have at least $100,000 in qualifying expenditures, and the credit will be a portion of such expenditures (22% on Oahu and 27% on neighboring islands).
The program is aimed at promoting growth in industries that support jobs, and currently has an annual credit cap of $50 million. Credits are refundable. That is, the state pays the production for the value of the credit in excess of the production’s tax liability.
Total estimated credit claims last year were $21 million, down from $68 million in 2022, according to the state Department of Business, Economic Development and Tourism.
Under this program, if earned credits exceed an annual cap of $50 million, productions can receive unpaid credits in subsequent years, subject to availability. Therefore, in addition to the $21 million in 2023, an additional $27.4 million credit will be distributed from past carryover balances, leaving an additional $1.6 million this year.
Hawaii’s film tax credit program was established in 1997 and has since been amended numerous times by lawmakers, usually to expand incentives, although strong support from the industry has been offset by some critics. I did.
questionable benefits
The Hawaii Tax Foundation says the program is a “waste of state funds” and there is no rational basis for increasing and extending the deduction other than to keep pace with increasing incentives in other states.
A 2021 analysis by the University of Hawaii Economic Research Institute recommended the program end in 2030, citing access to the state’s natural and cultural centers as the main reason production companies shoot movies in Hawaii. .
Local economist Paul Brewbaker of TZ Economics has also long questioned the merits of the program, saying the reboot of “Hawaii Five-0,” which ran from 2010 to 2020, had an attractive film tax value. He noted that it is unlikely to be produced in Georgia, where the exemption exists. .
“I suspect that Hawaii has not only been influenced by the film industry for the past 40 years,” Brewbaker said in an email.
DBEDT conducted a cost-benefit analysis of the program over several years and concluded that it makes economic sense for the state.
The agency’s latest study, released in February and based on 2022 credits, shows how much production companies spend in the local economy, including wages paid to local cast and crew, compared to the amount of tax given to them. He said the amount far exceeds the amount paid in deductions.
The positive impact of movies, television shows, and other productions that attract tourists to Hawaii is not quantified or incorporated into DBEDT’s reporting.
The $68 million charge in 2022 came from a $260 million contribution to the state’s gross domestic product, including $159 million in personal income, according to a study by DBEDT’s Research and Economic Analysis Division.
The DBEDT report also said that in 2022, the tax revenue generated by all works eligible for the credit will reach $35 million, which is about half of the amount paid for the credit.
“Every dollar of Hawaii’s film tax credit generated 52 cents in state tax revenue,” the report states.
Eligible expenditures by productions in 2022 include $33.8 million for equipment rental, $25.8 million for business services, $11.4 million for hotel accommodations, $7.5 million for catering, $5.9 million for construction, and $2.7 million for storage. Included.
The report also stated that in 2022, 26 film productions supported 12,003 jobs in Hawaii, including indirect job support. However, the report says 51% of these jobs are “production extras”, meaning the impact on employment is relatively small and some extras tend to be counted multiple times because they work on multiple productions. That’s what it means.
DBEDT also conducted a cost-benefit analysis using such an approximation to illustrate the idea that some productions would have been filmed in Hawaii without the tax credit program. It was calculated by using the industry’s average annual spending from 1987 to 1996, before the credit program was introduced, and adjusting that number for inflation through 2022.
On this basis, DBEDT said the positive economic impact of the $68 million credit would amount to $162 million on gross domestic product, including $100 million in personal income and $25 million in state tax revenue. .
The estimated 2023 tax credit claim of $215,162 is based on an estimate of eligible expenses totaling $978,009, according to the Motion Picture Bureau’s report to Congress. .
The report said production costs generated $105,625 in state tax revenue and employed 106 local residents and 29 non-residents.
Local hires include actor and Honolulu City and County lifeguard Kekoa Kekumano, who plays lifeguard Raka Hanohano on the show. Kekumano previously appeared in the movie “Aquaman,” the reboot “Hawaii Five-0,” and the HBO miniseries “The White Lotus.”
Another local actor, Zoe Cipres, also plays lifeguard Hina Alexander in “The Rescue.”
DBEDT praised the show in a news release Thursday, calling it “TV’s highest-rated fall drama in six years.” According to the station, the first broadcast on September 22 reached 4.7 million viewers, the fastest Nielsen viewership rating in Japan. The second episode was broadcast on September 23rd.
Tax credit changes
The requirement to publish the names of works claiming tax credits was implemented through a bill passed by Congress in 2022 and went into effect for works in 2023.
Some film industry representatives opposed this change.
“We have no objection to the information provided to Congress, but the media obtained this information and used it to defame qualified production companies in the same way that projects under Law 221 were unfairly targeted. I am deeply concerned that it will be taken advantage of,” Roy Tshioe said. said Island Film Group co-founder attorney Ricardo Galindez in written testimony on the 2022 bill.
Enacted in 2001, Act 221 provided a 100% income tax credit for investments in Hawaii technology companies to expand their industry. It was abolished in 2010.
The 2022 Act amending the film tax credit program also lowered the minimum production cost to qualify for the tax credit from $200,000 to $100,000. The maximum credit per production has also increased from $15 million to $17 million. It did not raise the $50 million annual cap, but extended the payment deadline from 2025 to 2032 for credits that could not be paid earlier due to the annual cap.
At least two bills last year proposed raising the annual cap to $60 million, but the bills failed. At least one bill proposed raising the cap to $75 million in 2023, but that also failed.
Bills for the film tax credit have soared from $32 million in 2016 to a peak of $80 million in 2018, prompting lawmakers to rein in the program. Industry advocates criticized the measure as having a negative impact on Hawaii’s film industry and have since called for the $50 million cap to be raised.
In a report to lawmakers earlier this year, DBEDT’s Office of Film said: “We should consider increasing the $50 million cap to expand employment and career opportunities and increase studio capacity and facilities. ”.
