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The Associated Press March 1, 2011, 12:02PM ET

Senate OKs bill to track film subsidy program

The Senate approved a proposal on Monday to tighten a subsidy program for film production in New Mexico and help study whether the incentive benefits New Mexico's economy.

The state provides a 25 percent refund on expenditures in New Mexico on film and television projects, but the subsidies have come under sharp scrutiny during the legislative session because Republican Gov. Susana Martinez wants to reduce the rebate to 15 percent, saving an estimated $25 million next year.

"If this bill were to pass, we would know exactly what is spent on film and what our return on investment is," said Sen. Tim Keller, an Albuquerque Democrat who sponsored the measure.

The Senate unanimously approved the bill and sent it to the House for consideration.

The measure doesn't change the rebate rate, but imposes new restrictions for expenditures to qualify for a refund. The changes, Keller said, should encourage the hiring of more New Mexico companies and individuals to work on film projects.

Vendors of services, such as photography, editing and wardrobe for a film project, will be required to have a physical "brick-and-mortar presence" in New Mexico for expenditures to be eligible for the state's subsidy. The change will help ensure that subsidies aren't provided if a film project uses an out-of-state company -- possibly with a mailing address in New Mexico -- as a broker for production services in the state, according to the bill's supporters.

The legislation will require film production companies to withhold New Mexico personal income tax from nonresident actors as a condition to receive a refund for its payments to an actor.

Eric Witt, executive director of the Motion Picture Association of New Mexico, said the industry supports the legislation and the new tax withholding requirement because production companies receive their rebates only after taxes are paid on the film project. Currently, a production company can use its approved tax credits to cover corporate or personal income tax obligations.

Keller said the bill will require the Economic Development Department to track film expenditures and ensure the state has adequate information to assess the effectiveness of the incentive program. Film production companies must submit a wide range of information to the state, including the total number of hours worked by New Mexico residents on a film project.

Pending in the House is a bill that would limit yearly film subsidies to $45 million and Witt said the industry is trying to persuade lawmakers to increase that to at least $60 million.

The state's rebates have varied annually, hitting about $65 million last year.

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