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Producers of the western movie \u201cRust\u201d may have to forgo a robust economic incentive as they try to sell the film to distributors and fulfill financial obligations to the immediate family of a cinematographer who was fatally shot by Alec Baldwin during rehearsal in 2021.<\/p>\n
New Mexico tax authorities denied an application this spring by Rust Movie Productions for incentives worth as much as $1.6 million, according to documents obtained by The Associated Press. A late July deadline for producers to appeal the decision is approaching.<\/p>\n
Meanwhile, Baldwin is scheduled to\u00a0go on trial<\/a>\u00a0starting next week on an involuntary manslaughter charge in Halyna Hutchins\u2019 death. The lead actor and co-producer of \u201cRust\u201d was pointing a gun at Hutchins when it went off, killing her and wounding director Joel Souza.<\/p>\n Melina Spadone, an attorney representing the production company, said the film production tax incentive was going to be used to finance a\u00a0legal settlement<\/a>\u00a0between producers and Hutchins\u2019 widower and son.<\/p>\n \u201cThe denial of the tax credit has disrupted those financial arrangements,\u201d said Spadone, a New York- and Los Angeles-based senior counsel at Pillsbury Winthrop Shaw Pittman. She helped broker the 2022 settlement that rebooted the stalled production of \u201cRust\u201d in Montana with some of the original cast and crew, including Baldwin and Souza. Filming wrapped up last year.<\/p>\n Terms of the settlement are confidential, but producers say finishing the film was meant to honor Hutchins\u2019 artistic vision and generate money for her young son.<\/p>\n Court documents indicate that settlement payments are up to a year late, as attorneys for Hutchins\u2019 widower determine \u201cnext steps\u201d that include whether to resume wrongful death litigation or initiate new claims. Legal representatives for Matthew Hutchins did not respond to telephone and email messages seeking comment.<\/p>\n The prosecution of Baldwin and the film\u2019s tax incentive application both have financial implications for New Mexico taxpayers. The Santa Fe district attorney\u2019s office says it spent $625,000 on \u201cRust\u201d-related prosecution through the end of April.<\/p>\n The state\u2019s\u00a0film incentives program<\/a>\u00a0is among the most generous in the nation, offering a direct rebate of between 25% and 40% on an array of expenditures to entice movie projects, employment and infrastructure investments. As a percentage of the state budget, only Georgia pays out more in incentives.<\/p>\n It includes a one-time option to assign the payment to a financial institution. That lets producers use the rebate to underwrite production ahead of time, often layering rights to the rebate and future movie income into production loans.<\/p>\n Among the beneficiaries of the rebate program are the 2011 movie \u201cCowboys and Aliens\u201d and the TV series \u201cBetter Call Saul,\u201d a spinoff of \u201cBreaking Bad.\u201d As for current productions, New Mexico is the backdrop for a new film starring Matthew McConaughey and America Ferrera about the rescue of students in\u00a0a 2018 wildfire<\/a>\u00a0in the town of Paradise \u2014 the most destructive in California\u2019s history.<\/p>\n Charlie Moore, a spokesperson for the New Mexico Taxation and Revenue Department, declined to comment specifically on the \u201cRust\u201d application, citing concerns about confidential taxpayer information. Applications are reviewed for a long list of accounting and claim requirements.<\/p>\n During a recent 12-month period, 56 film incentive applications were approved and 43 were partially or fully denied, Moore said.<\/p>\n Documents obtained by AP show the New Mexico Film Office issued a memo in January to \u201cRust\u201d that approved eligibility to apply for the tax incentive, in a process that involves accounting ledgers, vetting against outstanding debts and an on-screen closing credit to New Mexico as a filming location. Taxation officials have final say on whether expenses are eligible.<\/p>\n Spadone, the attorney for \u201cRust,\u201d said the denial of the application is \u201csurprising\u201d and could disrupt confidence in the tax program with a chilling effect on rebate-backed loans that propel the local film industry.<\/p>\n Alton Walpole, a production manager at Santa Fe-based Mountainair Films who was not involved in \u201cRust,\u201d said he faults the movie\u2019s creators for seemingly cutting corners on safety but officials have an obligation to review its tax credit application based on legal and accounting principles only \u2014 or risk losing major projects to other states. Movies are inherently dangerous even without firearms on set, he noted.<\/p>\n \u201cThey\u2019re going to say, \u2018Wait, are we going to New Mexico? They could deny the rebate,\u2019\u201d Walpole said. \u201cThey\u2019re watching every penny.\u201d<\/p>\n \u201cPopular<\/a> opinion? I\u2019d say don\u2019t give them the rebate. But legally, I think they qualified for it all,\u201d he said.<\/p>\n At least 18 states<\/a>\u00a0have enacted measures to implement or expand film tax incentives since 2021, while some have gone in the opposite direction and sought to\u00a0limit the transferability<\/a>\u00a0and refundability of credit.<\/p>\n Under Democratic Gov. Michelle Lujan Grisham, New Mexico has raised annual spending caps and expanded the film tax credit amid a multibillion-dollar surplus linked to record oil and natural gas production. Film rebate payouts were $100 million in the fiscal year ending in June 2023 and are expected to rise to nearly $272 million by 2027, according to tax agency records and the Legislature\u2019s budget and accountability office.<\/p>\n Democratic state Sen. George Mu\u00f1oz has criticized the incentive program and asked whether taxpayers should be responsible for unforeseen expenses.<\/p>\n \u201cIf we\u2019re going to do tax credits and there\u2019s a problem on the film or the set, do they really qualify or do they disqualify themselves?\u201d said Mu\u00f1oz, chairman of the lead Senate budget writing committee.<\/p>\n \u201cRust\u201d does not yet have a U.S. distributor as producers shop the newly completed movie at film festivals.<\/p>\n<\/div>\nSubscribe to the CEO Daily newsletter to get global CEO perspectives on the biggest stories in business. Sign up for free<\/a>.<\/div>\n