Opponents of $125 million Arizona film tax credit ask judge to block the 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.