Producers of the western movie “Rust” are facing a significant setback as they attempt to sell the film to distributors and meet financial obligations to the family of Halyna Hutchins, the cinematographer who was fatally shot by Alec Baldwin during a rehearsal in 2021. New Mexico tax authorities have denied an application by Rust Movie Productions for incentives worth up to $1.6 million, according to documents obtained by The Associated Press. The producers have until late July to appeal the decision.
Alec Baldwin, the lead actor and co-producer of “Rust,” is scheduled to go on trial next week on an involuntary manslaughter charge related to Hutchins’ death. Baldwin was pointing a gun at Hutchins when it discharged, killing her and injuring director Joel Souza. Melina Spadone, an attorney representing the production company, stated that the film production tax incentive was intended to finance a legal settlement between the producers and Hutchins’ widower and son.
“The denial of the tax credit has disrupted those financial arrangements,” said Spadone, a senior counsel at Pillsbury Winthrop Shaw Pittman. She played a key role in brokering the 2022 settlement that restarted the stalled production of “Rust” in Montana with some of the original cast and crew, including Baldwin and Souza. Filming concluded last year.
The terms of the settlement remain confidential, but producers have indicated that completing the film was meant to honor Hutchins’ artistic vision and generate funds for her young son. Court documents reveal that settlement payments are up to a year overdue, as attorneys for Hutchins’ widower consider “next steps,” which may include resuming wrongful death litigation or initiating new claims. Legal representatives for Matthew Hutchins did not respond to requests for comment.
The prosecution of Baldwin and the film’s tax incentive application both have financial implications for New Mexico taxpayers. The Santa Fe district attorney’s office reported spending $625,000 on “Rust”-related prosecution through the end of April. New Mexico’s film incentives program is one of the most generous in the nation, offering a direct rebate of between 25% and 40% on various expenditures to attract movie projects, employment, and infrastructure investments. Only Georgia allocates a higher percentage of its state budget to such incentives.
The program includes a one-time option to assign the payment to a financial institution, allowing producers to use the rebate to underwrite production in advance. This often involves layering rights to the rebate and future movie income into production loans. Beneficiaries of the rebate program include the 2011 movie “Cowboys and Aliens” and the TV series “Better Call Saul,” a spinoff of “Breaking Bad.” Currently, New Mexico is the backdrop for a new film starring Matthew McConaughey and America Ferrera about the rescue of students during a 2018 wildfire in Paradise, California.
Charlie Moore, a spokesperson for the New Mexico Taxation and Revenue Department, declined to comment specifically on the “Rust” application, citing concerns about confidential taxpayer information. Applications are reviewed for a long list of accounting and claim requirements. During a recent 12-month period, 56 film incentive applications were approved, while 43 were partially or fully denied, Moore said.
Documents obtained by the Associated Press show that the New Mexico Film Office issued a memo in January to “Rust” approving eligibility to apply for the tax incentive. This process involves accounting ledgers, vetting against outstanding debts, and an on-screen closing credit to New Mexico as a filming location. Taxation officials have the final say on whether expenses are eligible.
Spadone expressed surprise at the denial of the application, suggesting it could undermine confidence in the tax program and have a chilling effect on rebate-backed loans that support the local film industry. Alton Walpole, a production manager at Santa Fe-based Mountainair Films who was not involved in “Rust,” criticized the movie’s creators for seemingly cutting corners on safety. However, he emphasized that officials have an obligation to review the tax credit application based on legal and accounting principles only, or risk losing major projects to other states.
“Movies are inherently dangerous even without firearms on set,” Walpole noted. “They’re going to say, ‘Wait, are we going to New Mexico? They could deny the rebate.’ They’re watching every penny.”
“Popular opinion? I’d say don’t give them the rebate. But legally, I think they qualified for it all,” he added.
At least 18 states have enacted measures to implement or expand film tax incentives since 2021, while some have moved in the opposite direction, seeking to limit the transferability and refundability of credits. 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’s budget and accountability office.
Democratic state Sen. George Muñoz has criticized the incentive program, questioning whether taxpayers should be responsible for unforeseen expenses. “If we’re going to do tax credits and there’s a problem on the film or the set, do they really qualify or do they disqualify themselves?” said Muñoz, chairman of the lead Senate budget writing committee.
“Rust” does not yet have a U.S. distributor as producers shop the newly completed movie at film festivals.
Source: Associated Press
