Goldwater Institute Takes Legal Action Against Arizona’s Hollywood Tax Scheme

By Daniel Stefanski |

The Goldwater Institute, a prominent watchdog organization in Arizona, has initiated a significant legal challenge aimed at the state’s tax subsidies for filmmakers. This lawsuit, titled McEwen v. Arizona Commerce Authority, was filed in the Superior Court of Maricopa County.

In their complaint, the Goldwater Institute asserts that the Arizona Motion Picture Production Program, which allocates millions in refundable tax credits to private film companies, violates the Arizona Constitution’s Gift Clause. The legal team contends that this subsidy program, both in theory and in application to specific film projects, is unconstitutional.

Parker Jackson, a Staff Attorney at the Goldwater Institute, discussed the motivations behind the lawsuit. In a detailed blog post, he reflected on the events of 2022, noting that legislators, amidst a surplus of $5.3 billion, revived a subsidy program for the film industry. Jackson criticized the newly enacted Arizona Motion Picture Production Program, which promises up to $125 million annually in refundable tax credits to approved film productions. He highlighted the implications of ‘refundable’ credits, where companies can receive cash if tax liabilities are exceeded, indicating a potential for greater financial burden on taxpayers compared to previous programs.

As the state prepares to issue its first credits, Jackson noted that delays due to administrative processes and strikes in the film industry have postponed the rollout. The Arizona Commerce Authority is now poised to approve subsidies amounting to $1.2 million per project.

Jackson concluded his blog post by emphasizing the constitutional limitations on state subsidies, arguing that such financial aid should not occur unless taxpayers receive direct benefits. He stressed that while contracting for services at fair market rates is permissible, outright donations and subsidies are not allowed under Arizona law.

Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.