Could NC attract more TV and film projects thanks to changes in new state budget?

North Carolina has a strong history with the film and TV industries.

From popular shows such as “One Tree Hill” and “Dawson’s Creek,” to movies such as “The Hunger Games” and “Dirty Dancing,” locations around the state have given blockbuster productions some of their most iconic backdrops through the years.

That’s largely due the state’s history of offering financial incentives to productions, including through the N.C. Film and Entertainment Grant — a program run by the state film office, part of the N.C. Department of Commerce.

The program was created in 2014 with a $10 million allocation from the General Assembly. Since then, the program has experienced several changes, including moves in 2017 to increase the program’s funds and make them recurring, and to avoid a sunset, or expiration, date of July 2020 for the program.

Now, the grant program is changing again as the new state budget, which Gov. Roy Cooper signed into law last month, adjusts the financial qualifications TV and film projects must meet in order to receive financial incentives from the state.

For more information on the new changes and how they could affect the state’s film industry, The News & Observer talked with Guy Gaster, director of the state film office.

Here’s what we learned.

What is the NC Film and Entertainment Grant?

The N.C. Film and Entertainment Grant Fund is a program established to “provide funds to encourage the production of motion pictures, television shows, movies for television, productions intended for online distribution and commercials and to develop the filmmaking industry” in North Carolina.

The program funds the state’s major film incentive: a 25% rebate on qualifying expenses and purchases made by productions made in-state.

▪ The program was established in the 2014 state budget, and officially went into effect on Jan. 1, 2015. Originally, the grant was allocated $10 million per year and was set to expire on July 1, 2020.

▪ In 2015, the state upped the program’s funding to $30 million per year.

▪ In 2017, the state increased the program’s funding again, bringing it to $31 million per year. The state also eliminated the sunset, or expiration, date for the program.

Originally, the program funded the rebate for productions that met the following minimum financial qualifications for in-state spending:

▪ $5 million for a feature-length film.

▪ $250,000 per episode for a video or television series.

▪ $250,000 for a commercial for theatrical or television viewing.

The amount of money productions could receive in rebates were limited to:

▪ No more than 25% of the qualifying expenses for the production.

▪ No more than $5 million for a feature-length film.

▪ No more than $5 million for a television or video series.

▪ No more than $250,000 for a commercial for theatrical or television viewing.

In 2018, the state adjusted the financial thresholds productions were required to meet in order to qualify for the rebate on production expenses, and increased how much money feature-length films and television series could receive in rebates. The state at that time also created a subcategory for made-for-TV movies in the program.

How does the state budget change the grant program?

With the new state budget signed into law last month, more changes have been made to the financial thresholds and rebate payouts of the program.

The changes generally lower the financial threshold to qualify for the rebate, while increasing the maximum amount of money television productions can receive under the rebate.

The minimum in-state spending productions must meet in order to qualify for the rebate are now:

▪ $1.5 million for feature-length films, down from $3 million previously.

▪ $500,000 for made-for-TV movies, down from $1 million previously.

▪ $500,000 for one episode of a TV series, down from $1 million previously.

▪ $250,000 for a commercial for theatrical or television viewing or online distribution, the same amount as it was previously.

Television productions can now receive up to $15 million in rebate money for a single season of a show. That’s up from $12 million previously.

The maximum rebate payouts for other productions remain the same as they were under the 2018 changes:

▪ Feature-length and made-for-TV films can receive a maximum of $7 million.

▪ Commercials can receive up to $250,000.

These changes do not change the yearly allocation of funds to the program, keeping it at a recurring $31 million, with any unused funds carrying over from fiscal year to fiscal year.

The changes also do not affect the types of expenses that qualify for the in-state spending rebate.

Will the changes attract more film and TV projects to NC?

Gaster, head of the state film office, said it will take at least a year to see the full picture of how the changes have impacted the state’s film industry, but he thinks it could expand the pool of productions that consider North Carolina for filming.

“By lowering those minimum spend requirements, it does potentially make the program more accessible to additional projects that before would have been excluded, that maybe did not have the budgets that were required previously,” Gaster said.

Gaster said the changes could help his office recruit more productions to the state and stay competitive in the film industry, compared to neighboring states and other regions of the country.

“A lot of our recruitment efforts will remain the same,” Gaster said. “But it certainly does offer some additional clients to talk with and make sure that they’re aware of the changes, as well as the establishment of the industry here and why North Carolina is a great place to be all-in.”

What is eligible for the rebate?

The 25% rebate incentive — which you can also think of as a refund — is available for “qualifying expenses and purchases made by productions while in-state.”

Gaster said examples of qualifying expenses could include:

▪ Payroll for employees of the production.

▪ Any rentals the production makes in-state.

▪ Hiring out services from local businesses.

▪ Purchases at local businesses.

“Anything that can be traced back to being purchased in the state, for work being performed in the state essentially qualifies as part of that direct in-state spend,” Gaster said.

Gaster said the expenses are confirmed by an accountant as in-state spending in order to qualify for the rebate.

How does the film industry impact NC?

Gaster views the state’s film industry as a key piece to the state’s economic development.

Because the film grant program only offers rebates for in-state spending, Gaster said it encourages productions to spend money at local businesses near their filming locations or contract local services, driving money directly into local communities and economies.

“One of the benefits that this program has that maybe some others don’t, is it really encourages spending with in-state vendors, which are mostly small businesses, where a lot the spending takes place,” Gaster said.

This year, the industry reached a record level of investment in the state, with projects spending $409 million in-state as of mid-August.

According to the state film office, that’s the largest tally for the industry since the creation of the N.C. Film and Entertainment Grant in 2014, and it beats the previous record for film spending in the state, set in 2012, when spending totaled $373 million.

“They spend, they come in and infuse a good amount of cash into the local communities right away,” Gaster said. “This isn’t something that’s saying $409 million to be spent over the course of five years. You know, this is money that is being spent now within the communities.”

The state’s film industry also provides job opportunities for people throughout the state.

In 2021, the productions filming in the state are estimated to create more than 25,000 job opportunities for North Carolina’s “highly skilled film professionals and background talent.”

“I think a lot of times when people think of production, they may just think of the actors, maybe the directors and the camera operators,” Gaster said. “But a film or television series typically have a cast or a crew of over 100 film professionals that are primarily behind the camera and making helping make sure everything goes off.”

Locations used for filming can also experience increased economic activity after production wraps, as some locations become tourist destinations for viewers who want a glimpse of where their favorite movies or TV shows were filmed.

Gaster cited Southport, where the Nicholas Sparks film “Safe Haven” was filmed, and Lake Lure, where “Dirty Dancing” was filmed, as some of the state’s enduring film-related tourist destinations.