BONUS INSIDER

VALLEYWOOD OR BUST

Arizona is one of 38 states offering film incentives. But is the program worth the investment?

By Mignon A. Gould – Associate Editor, Phoenix Business Journal

Mar 13, 2025

In the westernmost battle of the Civil War, a pair of marooned enemy soldiers must band together to avoid certain demise in the Sonoran desert.

That's the plot of "The War Between," a fictional film based on the real Battle of Picacho Peak, which was waged about 50 miles northwest of Tucson in 1862.

Burbank, California-based writer Ron Yungul conceived the idea for the film more than a decade ago after watching the director's cut of "The Good, the Bad, and the Ugly," the legendary 1966 film starring Clint Eastwood.

"They had a long sequence of an artillery duel out in the desert, and I thought that was just sort of fantasy," explained Yungul, who found motivation for his story once he realized a Civil War era skirmish did actually take place in the Arizona desert.

Armed with a six-figure budget, filming took place over about 18 days in the Tucson area last April. A mostly local cast and crew was employed. The production also contracted with local companies including Monsoon Production Services and Mescal Movie Set — both located in Tucson. They even worked with the Navajo tribe.

Director Deborah Correa didn't share the exact budget of the film, slated for a fall 2025 release, but she said the project was pre-approved for 20% in tax credits — a base of 15%, plus an additional 2.5% in bonus credits for going local with both labor and post production, respectively.

The production generated more than two weeks worth of economic impact, while expending resources into film industry professionals, actors, production and casting companies, set and costume designers and makeup as well as lodging and dining facilities. Correa said that the production even called for horse wranglers and armorers.

So what's the direct value of the production of a film like "The War Between"? What intangible benefits are provided to the residents of Arizona? And do the benefits outweigh the cost?

Those questions and more are now being asked in Arizona, as a battle brews over the state's nascent $125 million film incentive program.

How Arizona's film incentive program works

The Arizona Commerce Authority's Motion Picture Production Program, or MPPP, was created more than two years ago through HB 2156, which allows $125 million in refundable tax credits for qualified film projects — including feature films, television shows, commercials and music videos.

MPPP provides an opportunity for filmmakers to retrieve 15% to 20% of expenses incurred on projects produced in Arizona if 50% or more of the project is produced in an Arizona production facility. Some caveats apply: the facility must be at least 10,000 square feet or at a practical, on-location spot within the Grand Canyon State, and participants are required to submit a pre-approval application to determine eligibility.

According to an annual report released by the ACA on Dec. 31, 2024, the goal of the MPPP is to promote the workforce development and expansion of the commercial motion picture industry in Arizona.

The economic impact of these productions is being felt across the state.

Film productions spent an estimated $29.1 million in the Phoenix metro in 2024, according to the Phoenix Film Office's Economic Impact Report released in February.

During that timeframe, 777 projects were produced over the course of more than 1,100 shoot days. Over 3,000 local crew members and 1,800 talent were hired and more than 4,700 hotel nights booked. This is an increase from $18.1 million in economic impact generated from 518 projects during 2023, according to the report, which takes into account all aspects of film production and includes expenditures on local goods and services.

The economic impact "demonstrates how important the industry is to our local economy, from creating job opportunities for our local skilled crew and talent to supporting our local film vendors and small businesses," said Phoenix Mayor Kate Gallego in a statement.

Meanwhile, Tucson reported more than $4.1 million in direct spending from film productions, according to its annual report.

But not everyone is sold on the benefits of Arizona's film incentives. A recent lawsuit filed by conservative think tank the Goldwater Institute could mean a wrap for the program.

Behind the Goldwater Institute's lawsuit

On Jan. 15, Goldwater Institute filed a civil lawsuit on behalf of Arizona taxpayers Deborah Mcewen and Jan Mittelstaedt. The board of directors of the ACA and its representatives, the Arizona Department of Revenue and Gov. Katie Hobbs are among the defendants named. 

The suit calls for effectively "blocking the Department of Revenue from issuing any credits under the program," said Parker Jackson, an attorney with the Goldwater Institute in Phoenix.

Per the complaint, the case challenges “the constitutionality of a state program that subsidizes the film industry and private film companies to the tune of millions of dollars in refundable tax credits each year.” The lawsuit cites an infringement on the gift clause, which “prohibits the transfer of public funds to private entities without a public purpose or without adequate consideration.”

The case alleges that the incentive program creates an undue burden on taxpayers that “allocates substantial taxpayer resources to private companies without serving a valid public purpose and for which Arizona’s taxpayers do not receive direct benefits in return.”

None of the defendants had responded to the lawsuit as of March 7, and the ACA has previously declined to provide comment while it was reviewing the claims.

The ACA's annual report on the MPPP shows that the program issued nine pre-approval certifications totaling about $2.1 million in credits between Dec. 1, 2023 and Nov. 26, 2024. A handful of other applications were pending at that time, while other applications have been withdrawn.

Incentive applications have continued to be submitted in the interim, perhaps hinting at an influx of interest in the program. Four applications totaling a pre-approval amount of $752,186 were submitted between Dec. 12 and Dec. 23 of last year, according to public documents included in the Goldwater lawsuit.

While the MPPP remains in its infancy, ACA President and CEO Sandra Watson indicated in her annual report that it can be "reasonably expected that, should production and soundstage construction activity increase, Arizona can expect additional and enhanced economic benefits resulting from the program." She added that an increase in industry activity "will be important to realizing" the program's goals in the years to come.

Filmmaker Randy Murray, the co-owner of Randy Murray Productions and president of the Arizona Film Coalition, said HB 2156 was written in 2022 in anticipation of legal pushback and that “very specific care was taken to make sure that the taxpayers would get their money back over the run of the law.”

“I do know that Senator Gowan and his team who wrote the bill that became this law were very aware that they were probably going to be sued,” Murray said. 

The good, the bad, and the ugly of tax incentives

Incentivizing film projects in the state could spur job creation and boost the economy. That's the intent of more than half of the states in the country that currently have, or have had, some type of incentive to promote film productions.

This year, 38 states offer a film tax incentive. The top 10 states with tax benefits for filmmakers are California, Georgia, Illinois, Kentucky, Louisiana, Massachusetts, New Jersey, New Mexico, New York and West Virginia, according to Wrapbook, an accounting platform for film, TV and commercial production.

Goldwater Institute looked at the economics of film tax credit programs across the country, alleging they "almost universally" cost taxpayers more than they benefit the state, Jackson said.

Arizona's film incentive program marks a recent reboot after a 15-year hiatus.

Arizona had film incentives between 2005 and 2010, but the program eventually disbanded after a report found that the program cost more than it generated in taxes. The program created 730 direct and indirect jobs with $16.9 million in compensation ($5.29 million of which was direct). However, a 2008 annual report estimated state and local tax revenue generated that year was only $2,317,566, while tax credits received by applicants totaled $8,641,589.

Louisiana, the No. 5 state on Wrapbook’s list, has had its film tax credit program since 1992. The program became a target for elimination in 2024 as the state’s governor Jeff Landry put forth a tax reform proposal, according to Biz New Orleans. This occurred in the midst of rap artist turned media mogul Curtis “50 Cent” Jackson investing in a production facility in Shreveport. The program was saved, but underwent a $25 million cut that lowered the cap of the program from $150 million to $125 million, according to Variety.

Similar uncertainty has been felt by the Texas Moving Image Industry Incentive Program. Since 2010-2011, the Texas program has seen its budget reach a nadir of $32 million and a high point of $200 million in 2024-2025. A proposed budget for 2026-2027 considers another huge leap to $489 million for the program, coinciding with popular showrunner Taylor Sheridan bringing his programming to the Lone Star State.

Meanwhile, studios and filmmakers are creating competition between states by searching for the best incentives.

"Studios and streamers are chasing that incentive number. The first thing they'll ask you is, 'What's your in-state rebate? Is it 20%? Is it 30%? Is it 40%?' That's going to lead the way in their decision-making,” Troublemaker Studios general manager Nixon Guerrero told Austin Business Journal. “When we give them our answer and our max is 22.5%, it's not the easiest sell."

Beyond tax revenue and employment, states are eager to capture the indirect benefits of the film industry, such as tourism.

One study from Champion Traveler, an online vacation travel guide, found that on average, a popular movie increases tourism to the featured location by 31%. The tourism impact can last three to four years.

The Grand Canyon State vs. The Land of Enchantment

While popular production states like California, Georgia and New York have minimum spend requirements ranging between $250,000 and $1 million, Arizona does not have a minimum. That puts Arizona on par with New Mexico, which in the past has been a preferred desert filming location in lieu of Arizona because of its enticing incentives.

Arizona recently lost a production opportunity when the pilot for HBO’s “Duster” — a TV series from J.J. Abrams, set in the Southwest — was recruited to be shot in Tucson. The production of the full series instead moved to New Mexico because Arizona lacked incentives at the time, Murray previously told the Business Journal.

According to Wrapbook, New Mexico offers a base credit of 25% and a maximum credit of 40% with a $120 million annual cap. Those incentive percentages exceed Arizona's, offering a powerful draw.

The lure of the film incentives in New Mexico — which was dubbed “The Land of Enchantment” by Lillian Whiting in the title of her book on New Mexico in 1906 — also intrigued northern California filmmaker Correa, the director of "The War Between."

“Arizona loses a lot of business because New Mexico has a much more competitive tax incentive,” Correa said. “Arizona needs to amp up their percentages to be more competitive.”

But it was not enough to entice Correa to direct “The War Between” in New Mexico.

She decided to forgo New Mexico's more competitive incentives for Arizona's authenticity, when she saw that the film could be shot on location at the historic Picacho Peak site.

The dilemma offers a real-world example of how states and filmmakers alike weigh the intangible benefits of the film industry against the economic realities of the business.

“People will leave Arizona to [film in] New Mexico, and they think that it's comparable terrains," Correa said. "I disagree. I think Arizona is very unique."