New Mexico Denies Film Incentive Request For 'Rust' Movie After Alec Baldwin's Fatal Shooting

SANTA FE, N.M. — Producers of the Western film “Rust” may have to give up a solid economic incentive as they try to sell the film to distributors and meet financial obligations to the immediate family of a cinematographer who was fatally shot by Alec Baldwin during a rehearsal in 2021.

New Mexico tax authorities last spring rejected a request by Rust Movie Productions for $1.6 million in incentives, according to documents obtained by The Associated Press. A late July deadline for producers to appeal the decision is approaching.

Baldwin's trial is set to begin next week on involuntary manslaughter charges in the death of Halyna Hutchins. The “Rust” star and co-producer was pointing a gun at Hutchins when the gun went off, killing her and wounding director Joel Souza.

Melina Spadone, an attorney representing the production company, said the film production tax incentive will be used to fund a legal settlement between the producers and Hutchins' widower and son.

“The denial of the tax credit disrupted those financial arrangements,” said Spadone, a New York- and Los Angeles-based senior attorney at Pillsbury Winthrop Shaw Pittman. She helped negotiate the 2022 deal that restarted production of “Rust” in Montana with some of the original cast and crew, including Baldwin and Souza. Filming wrapped last year.

Terms of the deal are confidential, but producers say completing the film was intended to honor Hutchins' artistic vision and generate money for his young son.

Court documents indicate that compensation payments are up to a year behind schedule while attorneys for Hutchins’ widower determine “next steps,” including whether to resume the wrongful death litigation or file new claims. Legal representatives for Matthew Hutchins did not respond to phone and email messages seeking comment.

Both the Baldwin lawsuit and the film's tax incentive claim have financial implications for New Mexico taxpayers. The Santa Fe District Attorney's Office said it had spent $625,000 on “Rust”-related lawsuits through the end of April.

The state's film incentive program is one of the most generous in the country, offering direct rebates of between 25 and 40 percent on a range of spending to encourage film projects, employment and infrastructure investment. As a percentage of the state budget, only Georgia provides more financial aid.

It includes a unique option to assign the payment to a financial institution. This allows producers to use the rebate to underwrite the production in advance, often incorporating the rights to the rebate and future film revenues into the production loans.

Recipients of the rebate program include the 2011 film “Cowboys and Aliens” and the TV series “Better Call Saul,” a spinoff of “Breaking Bad.” In current productions, New Mexico is the setting for a new film starring Matthew McConaughey and America Ferrera about the rescue of college students during a 2018 wildfire in the town of Paradise, the most destructive in California history.

Charlie Moore, a spokesman for the New Mexico Department of Taxation and Revenue, declined to comment specifically on the “Rust” request, citing concerns about taxpayers’ confidential information. Requests are reviewed based on a long list of accounting and claim requirements.

During a recent 12-month period, 56 film incentive applications were approved and 43 were partially or completely denied, Moore said.

Documents obtained by the AP show that the New Mexico Film Office sent a memo to “Rust” in January approving the tax incentive application, part of a process that involves accounting records, verification of outstanding debts and on-screen end credits indicating that New Mexico is a filming location. Tax authorities have the final say on whether expenses qualify.

Spadone, the Rust attorney, said the rejection of the application is “surprising” and could disrupt confidence in the tax program with a chilling effect on the rebate-backed loans that power the local film industry.

Alton Walpole, a production manager at Santa Fe-based Mountainair Films, which was not involved in the making of “Rust,” said he blames the film’s makers for apparently neglecting safety, but that officials have an obligation to review the tax credit application based solely on legal and accounting principles or risk losing major projects to other states. Movies are inherently dangerous, even without guns on set, he noted.

“They're going to say, 'Wait, we're going to New Mexico? They might not give us the discount,'” Walpole said. “They're watching every penny.”

“Public opinion says they should not be given a discount. But legally, I think they are entitled to it,” he said.

At least 18 states have passed measures to implement or expand film tax incentives since 2021, while some have gone in the opposite direction and sought to limit the credit’s transferability and repayment.

Under Democratic Gov. Michelle Lujan Grisham, New Mexico has raised annual spending caps and expanded the film tax credit amid a multibillion-dollar surplus tied to record oil and natural gas production. Film rebates totaled $100 million for the fiscal year ending June 2023 and are expected to reach nearly $272 million by 2027, according to records from the tax agency and the Legislature’s Budget and Accountability Office.

Democratic Sen. George Muñoz criticized the incentive program and questioned whether taxpayers should be responsible for unexpected expenses.

“If we have to give tax credits and there’s a problem on the film or on the set, are they really eligible or are they disqualifying themselves?” said Muñoz, chairman of the Senate’s main budget-writing committee.

“Rust” does not yet have a distributor in the United States, as the producers are showing the recently completed film at film festivals.