NO HOLLYWOOD HANDOUTS
NEVADA NEEDS FUNDS FOR EDUCATION, NOT FILM STUDIOS
What is the Film Tax Credit Proposal?
Two studios, Sony Pictures and Warner Bros., have partnered with real estate giant Howard Hughes on a proposed multi-use development in Summerlin. The bill, AB238, would increase the current film tax credit program to an annual tax credit of $80 million for 15 years, or $1.2 billion in tax credits over the life of the program. This portion of the bill requires certain “below the line” expenditures on films as well as infrastructure.
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AB238, a holdover from the regular legislative session, has been proposed as a necessary bill to come back after failing to pass.
Tax credits let a company reduce how much it owes in taxes. For example, if a company owes $10 million in taxes but earns a $2 million tax credit, the company only pays $8 million.
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A transferable tax credit goes a step further. Because Nevada isn’t allowed to give direct cash subsidies to private companies, the state instead lets companies earn credits that they can sell to someone else, usually a casino or insurance company, for real money.
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Under AB238, Sony could earn $50 million in tax credits for building certain facilities. Sony could then sell those credits to another business, which would use them instead of paying that amount in state taxes.
In the end, Sony gets cash from the sale, and the state collects less in taxes overall.
What is a tax credit, and how is it 'transferable'?
Is this a good investment for Nevada?
No. Even by Sony’s own numbers, this deal doesn’t pay off for the state.
According to Sony’s Economic Impact Report from 2024, the return to Nevada’s general fund is hundreds of millions less than what the state would spend. Up to $485 million less.
The numbers don't add up.
Economics professor John Charles Bradbury, in a 2019 Contemporary Economic Policy journal article, found that every state’s film subsidy program had a negative return on investment — “with average return per dollar of tax credit issued being 27 cents.”
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Most of the economic impact is made from indirect, or “induced,” effect. This is economic activity between businesses and increases in household spending based on the new project. While the “induced” effect of economic activity is real, in states without an income tax, like Nevada, local governments and businesses may benefit, but not the state as a whole.
Will this benefit public services?
No, because the return on investment is so low.
Nevada’s budget operates on a hierarchy of priorities, with the state responsible for essential services, such as K-12 education, public safety, Medicaid, and other critical programs. 100% of the potential film tax credit is subtracted from General Fund revenues each fiscal year, regardless of whether the credit is claimed. Credits are eligible to roll over from year to year. This means that tax money that would otherwise be available for our firefighters or WIC is walled off for use by Sony and other movie studios.
Nothing.
The proposal currently benefits Southern Nevada exclusively. While the tax credits are against money that would otherwise be part of Nevada’s general fund, any potential benefits would be felt almost exclusively in Southern Nevada.
What's in it for Northern and rural Nevada?
But, aren't these 'good jobs'?
Nope.
These companies have a long history of union busting, only creating “gig economy" jobs to get around benefits, and then leaving states once a better offer comes around. And that's if they don't just hire out-of-state talent to begin with.
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Northern Nevada knows this story all too well. Tesla said they'd use in-state workers for their factory, and their major project was shut down multiple times after they brought in out-of-state workers.
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Studios set up shop and then flee for a better offer. It's why Georgia is facing job losses now that Disney is fleeing for London.
Absolutely! Nothing is stopping Howard Hughes or Sony from investing in Nevada.
Several programs exist to help incentivize industries to move to Nevada. Tax abatements, industrial bonds, STAR bonds, and several other programs are available to bring this project to fruition without writing a giant check from the State General Fund.
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Investment from industries is great. Handing out a giant check while education remains underfunded is not.
Could the studios move forward without these significant tax breaks?
Questions You Should Ask Your State Legislators
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How much of the economic effect is direct, indirect, or induced?
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What sort of transparency measures will be in place to track how these credits are generated?
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What happens when these studios flee for the next best deal?
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Where else has Sony and Warner Brothers proposed to locate a new studio complex in the event a film tax credit program is passed? What kind of promises have been made to those locations?