January 23, 2025

What’s Going on with the Challenge to AZ’s Incentive?!

2025 has started off with a bang as BANKABLE is monitoring a legal challenge to Arizona’s Motion Picture Production Program (MPPP)! The MPPP is a refundable tax credit program that allows production companies the opportunity to recapture 15%-25% of qualified production expenditures spent in Arizona. The Program applies to movies, television shows, commercial or music videos if more than 50% of the project is filmed in the State and the project uses a qualified production facility.

Reinstituted in January 2023, the aforementioned requirements differ from earlier iterations of the Arizona Incentive. Noted during the legislature’s debate over the Program, the State’s goal isn’t just to bring productions to Arizona but also to build a more sustainable and producer-friendly location for filming.

However, in a challenge filed last week, the Goldwater Institute, a free-market public policy research and litigation organization, seeks to deem the legislation creating the Incentive an unconstitutional violation of the State’s Gift Clause. Article 9, Section 7 of the Constitution (the “Gift Clause”) provides that neither the State nor any of its political subdivisions “shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.” In laymen’s terms, the Incentive violates the Gift Clause unless it serves the public purpose and gives the State adequate consideration for its investment. The Goldwater Institute claims that the MPPP is neither in the interest of AZ taxpayers nor provides an adequate payback to the State for its investment in the film/television industry.

The scariest part of this challenge is that it could be used to challenge all economic development incentives in Arizona (and other states with similar clauses). Producers should pay close attention to this case as it develops. While the State is working to build a new trade for its citizens, organizations such as the Goldwater Institute are fighting back to take that opportunity away.

Stay tuned for more information on this developing story as it progresses through the Superior Court for Maricopa County.