On December 28, 2015, the Fifth Circuit Court of Appeals ruled that under the First Amendment, the State of Texas may deny tax breaks to film makers if the State of Texas deems that a film is insulting to the state.

The Texas Moving Image Industry Incentive Program (the “Incentive Program”) is a grant program established by the Texas legislature for production companies that produce movies in Texas. The Incentive Program is administered by the Music, Film, Television and Multimedia Office (the “Office”) in order to “promote the development of the film, television, and multimedia industries in Texas.” The purpose of the Incentive Program is to “increase employment opportunities for Texas industry professionals, tourism and to boost economic activity in Texas cities and the overall Texas economy.” To qualify for a grant, a production company must meet certain statutory requirements. Even if a production company meets these requirements,

the Office is not required to act on any grant application and may deny an application because of inappropriate content or content that portrays Texas or Texans in a negative fashion, as determined by the Office, in a moving image project. In determining whether to act on or deny a grant application, the Office shall consider general standards of decency and respect for the diverse beliefs and values of the citizens of Texas.

TEX. GOV’T CODE ANN. § 485.022(e) (West 2012).

On March 11, 2014, Machete Productions LLC, producers of the action movies “Machete” and “Machete Kills” filed a request with Judge Scott Jenkins of the 53rd District Court for an injunction against the Incentive Program after being denied tax breaks under the Program. Alleging First Amendment violations, Machete Productions LLC claimed Texas officials overseeing the Incentive Program disqualified “Machete Kills” from receiving production grants because of the film’s “perceived political nature and content of the film.”

“Machete” and “Machete Kills” center on actor Danny Trejo’s character Machete Cortez, a former Mexican Federale who gets hired to do hatchet jobs in the U.S. The Texas Film Commission rejected “Machete Kills” under Incentive Program due to “inappropriate content or content that portrays Texas or Texans in a negative fashion.”

On Monday, the Fifth U.S. Circuit Court of Appeals affirmed a lower court’s decision in favor of the State of Texas stating:

“A government funding provision will not compromise First Amendment values as long as it “[does] not silence speakers by expressly threaten[ing] censorship of ideas,” or “introduce considerations that, in practice, would effectively preclude or punish the expression of particular views.”

Despite the denial of an Incentive Program grant, “Machete Kills” was still filmed in Texas, produced, and released. In addition, Machete Productions LLC did not dispute that it was free to engage in protected First Amendment activity without the benefit of an Incentive Program grant, and in fact did engage in such activity by making the film.

Copyright 2015.  Article written by Scott Compton, J.D.  Scott Compton is an intellectual property specialist based in Houston, Texas and can be reached at scompton@buchelaw.com.  www.buchelaw.com

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