Producers of the Western movie Rust are facing the possibility of losing out on a significant economic incentive as they seek to sell the film to distributors while fulfilling financial obligations to the family of the cinematographer who tragically lost her life during a rehearsal in 2021. According to documents obtained by the Associated Press, Rust Movie Productions had its application for tax incentives worth up to $1.6 million denied by New Mexico tax authorities earlier this year. The producers have until late July to appeal the decision.

Meanwhile, lead actor and co-producer Alec Baldwin is set to go on trial next week, facing an involuntary manslaughter charge for the death of cinematographer Halyna Hutchins. The fatal incident occurred when Baldwin accidentally discharged a gun that he was pointing at Hutchins, resulting in her death and the injury of director Joel Souza.

The tax incentive denial has created complications for the film's production company, as it intended to use the incentives to finance a legal settlement with Hutchins' widower and son. Melina Spadone, an attorney representing the production company, stated that the denial of the tax credit has disrupted the financial arrangements made for the settlement. The terms of the settlement remain confidential, but the producers have emphasized that completing the film is a way to honor Hutchins' artistic vision and generate funds for her young son.

Court documents reveal that settlement payments have been delayed by up to a year, as Hutchins' widower's legal representatives determine the next steps, including the possibility of resuming wrongful death litigation or initiating new claims. Representatives for Matthew Hutchins have not responded to messages seeking comment.

The denial of the tax incentive has not only impacted the film's production but also carries financial implications for New Mexico taxpayers. The Santa Fe district attorney's office has already spent $625,000 on Rust-related prosecution expenses. The state's film incentives program, known for its generosity, offers a direct rebate ranging from 25 to 40 percent on various expenditures to attract movie projects, employment opportunities, and infrastructure investments. It is one of the main factors that make New Mexico an appealing filming location.

While New Mexico has approved numerous film incentive applications in the past, it is also known for thoroughly reviewing each application based on accounting and claim requirements. During the last year, 56 film incentive applications were approved, while 43 were partially or fully denied.

Industry professionals have expressed concerns about the potential impact of the denial on future productions. Alton Walpole, a production manager from Santa Fe-based Mountainair Films not involved in Rust, criticized the film's creators for potential safety lapses but stated that tax credit applications should be reviewed based solely on legal and accounting principles. He believes that denying the rebate could deter future projects from coming to New Mexico.

New Mexico's film incentives program has been expanded in recent years, with annual spending caps raised under the administration of Democratic Governor Michelle Lujan Grisham. The state's film rebate payouts reached $100 million in the fiscal year ending in June 2023 and are projected to rise to nearly $272 million by 2027.

As Rust continues to seek a U.S. distributor, the denial of the tax incentive adds another challenge to its journey. The film's completion is eagerly anticipated, not only for its artistic value but also as a significant contributor to the local film industry and the state's economy.

In the ever-changing landscape of film production, the Rust case raises important questions about the responsibility of taxpayers and the eligibility of productions for incentives in the event of unforeseen expenses and tragedies on set.