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Royal Oak

July 14, 2010

Gaming, animation company benefits from tax incentive

By Jeremy Carroll
C & G Staff Writer

How the tax incentive works

Film production credits, known as the film tax incentive, give back up to 42 percent of the amount of a production company’s expenditures that are incurred in producing a film or other media entertainment projects in Michigan.

A specific project would first apply to the Michigan Film Office for approval, and begin after the office gives the go-ahead. Expenses would then be given to the state, where various items could be credited for 30 percent, 40 percent or 42 percent of total expense, depending on where the employee is from or the city in which it was filmed.

In a hypothetical scenario, if Royal Oak’s PixoFactor were hired by a video game company in California to do a $500,000 project, the company itself would apply for the credit and have PixoFactor do the work and pay the company in full. They would then seek a credit for $200,000, or 40 percent, because PixoFactor uses Michigan employees, and the work was completed in a non-core community as defined by the Michigan Film Office.

— Jeremy Carroll

ROYAL OAK — The Michigan film tax incentive is back at work in Royal Oak, but Clint Eastwood and Sigourney Weaver are nowhere to be found.

Instead, the star here is Sean Hurwitz and his team of designers and animators at PixoFactor Entertainment.

“There is an enormous amount of talent that has left the state,” said Hurwitz, president of the company. “(Los Angeles) is filled with Michiganders. And we would love to bring them back.”

The film incentive passed by the state Legislature in 2008 gives up to 42 percent of expenses back to films made in Michigan, and it has attracted a large number of high-profile movies to the state, including films starring Eastwood and Weaver that filmed in downtown Royal Oak, among other metro Detroit spots.

But what many don’t realize is that the incentive can also be applied to animated projects and video games, something in which PixoFactor specializes.

Hurwitz said he hopes the company will be able to secure the first-ever state incentive project for a video game when they apply to work on a game featuring legendary golfer Ben Hogan for the Nintendo Wii system.

“As of now, we don’t have any approved projects (for video games),” said Ken Droz, communications consultant with the Michigan Film Office. “But we have big hopes for video games.”

Droz said the production time is longer for video games than it is for movies, which provides a longer financial impact than a movie that might film for a couple of weeks.

Hurwitz said for them, it’s all about being local. They opened up shop in September 2009.

“Movies can blow into town, but when the producer goes back to L.A. and earns the income off the movie, he’ll pay taxes in California,” he said. “Our investors, our employees are claiming their income on taxes here in Michigan.”

With approximately 20 employees in their downtown studio, Hurwitz said they also use freelancers that work from home on projects. If they are able to secure major projects, they anticipate a hiring blitz.

One such opportunity is the development of an animated television series for the comic book “The Hunter.” Hurwitz said they are currently putting the finishing touches on a pilot for the comic book by Dare, and if it is picked up, they will hire immediately.

“We will get another 25-30 artists, like that,” Hurwitz said, snapping his fingers.

A former commercial real estate agent, Hurwitz said he is a testament to the power of the generous tax incentives. PixoFactor itself has benefited greatly from it, but if the incentives disappear, the company may be forced to leave the state.

“Our company is not dependent on the tax incentive,” Hurwitz said. “But Pixofactor in Michigan is probably dependent on the tax incentive.”

You can reach C & G Staff Writer Jeremy Carroll at jcarroll@candgnews.com or at (586)279-1110.