How a Bad Bunny Beer Ad Got Puerto Rico Tax Money to Shoot in LA
With hundreds of beaches and year-round summer weather, Puerto Rico seemed the perfect setting for a tropical-themed Corona beer ad—all the more, with the commonwealth contributing almost $800,000 in taxpayer subsidies to bring it to life.
Bitten LLC, a local media production consulting firm, told the commonwealth’s film commission that the production would generate 46 local jobs and book 120 hotel nights.
The tax credit application was part of a Corona brand campaign, “La Vida Más Fina,” created in 2020 by the ad agency MullenLowe. But the work in Puerto Rico focused primarily on capturing landscapes and background plates. Filming the stars—rappers Bad Bunny, a Puerto Rico native, and Snoop Dogg—occurred in a studio in Los Angeles, and the video component for television was directed over Zoom, according to people who worked on the campaign.
Film tax credit programs, offered in 38 states and Puerto Rico, were designed to attract movie and television series productions to places producers might not otherwise consider. States have raced to top each other as officials tout the credits as vehicles to create jobs and support independent filmmakers.
But hundreds of millions of dollars in subsidies have been provided to create advertisements for some of the world’s biggest consumer product companies, including
“These are resources being diverted to something that doesn’t need to be subsidized,” said JC Bradbury, an economics professor at Kennesaw State University in Georgia who has researched film incentives. “It’s purely unjustifiable in any type of economic ground, and it’s horrible policy.”
Twenty-nine states and territories allow incentives to produce commercials. Sometimes, ad agencies apply for the credits while, in other instances, companies get the money directly.
Because many recipients owe little or no taxes in those states, and therefore can’t use the credits, 14 states and Puerto Rico allow recipients to sell them for cash. That allows heavy buyers such as
Bloomberg Tax requested records of tax-credit recipients and buyers in all 15 jurisdictions that allow transfers. Only Illinois provided a comprehensive list. Six provided partial information. The others didn’t respond or denied the requests citing taxpayer confidentiality. The Massachusetts tax department said it is “not required to do research or to answer interrogatories.”
Georgia didn’t disclose recipients or buyers of credits, or the total value of tax credits issued for commercials. But based on general statistics it provided for commercials shot in the state, if each commercial got the typical credit of 20% of production costs, recipients could have received more than $7 million in tax breaks from 2019 to 2023.
Taxpayer-supported ads
Illinois issued AbbVie three tax credits for ads that the company made to promote Humira, its flagship prescription medication for autoimmune diseases and inflammatory conditions, records show. That includes two credits, for about $630,000, issued in 2020 and 2021, when the House Oversight Committee was probing AbbVie’s pricing and marketing strategies for the drug.
“We don’t look at content, just like we don’t read every single script of every single episode of every single TV show,” said Peter Hawley, director of the Illinois Film Office. “If we don’t say this is an official, accredited production, they are not eligible for the tax credit. That would be our way of vetoing production, but we do not get into censorship.”
AbbVie sold those two credits to Ozark Services, a subsidiary of
Proponents of film tax credits say it doesn’t matter if the recipient is an independent filmmaker or a retail giant as long as the companies spend money in the state and hire workers.
“If McDonald’s is making a commercial, and they do, they hire people to make that commercial, but they are the applicants, that’s perfectly appropriate,” said Christine Dudley, former Illinois Film Commission director, and director of the Illinois Production Alliance.
That group recently published a report stating that the incentive has generated nearly $7 in economic activity for every dollar in subsidies. The estimate applies to television productions, commercials, and films alike, Dudley said.
Ninety percent of productions wouldn’t have been filmed in Illinois without the credit, the report suggests. And although the majority of applications are for commercials, the subsidies allocated to these productions account for approximately 11% to 13.5% of the total paid out.
Overall, there have been more than 1,000 film tax credit transfers in Illinois since 2019—115 of which were worth more than a quarter of a million dollars.
Kellanova has obtained at least 40 credits since 2019 for ads promoting, among other products, Chocolate Frosted Flakes and Pringles. Kellanova declined to comment, citing a pre-earnings report blackout period.
Illinois issued McDonald’s a $315,490 credit in 2019 toward its million-dollar investment promoting the Micro Mac, an April Fool’s Day parody burger for “tiny” appetites.
That is just one among more than 30 tax credits worth a combined $7.3 million Illinois granted to McDonald’s to advertise chicken, Happy Meals, the relaunch of the McCafe, and the Micro Mac.
For Corona’s commercial, the production reported $2 million in resident expenses and non-resident expenses of $47,000, according to data provided by the Puerto Rico Film Commission. Bitten LLC said local talent was used for technical roles such as grips, electricians, production coordinators and assistants, craft services, set dressers, location managers, wardrobe, and assistant directors. It’s not clear whether any of the credits helped pay Bad Bunny, one of the world’s highest-paid musical artists, though the program allows up to 40 percent of the salaries of locals to be covered.
José Sánchez Acosta, director of the island’s film commission, said not all production needs to happen in Puerto Rico to qualify for the tax break.
“Development stages such as scriptwriting and doctoring, as well as post-production like editing and distribution, can be done outside of Puerto Rico. In fact, it’s quite common,” he said. However, pre-production tasks such as hiring, location assessment, permits, and filming must take place here [in Puerto Rico].”
Bitten is led by Nadia Barbarossa, who formerly worked at the Puerto Rico Film Commission overseeing applications for film tax credits as well as audits and certifications. Since 2020, the company has applied for tax credits on behalf of two Corona commercials, an American Express Co. production, and “Black Panther: Wakanda Forever.” Barbarossa said she was not available for an interview and could not respond to a dozen emailed questions because she was not authorized.
Constellation Brands Inc., Corona’s corporate parent, didn’t respond to several requests for comment.
A Robust Market
A few days before Christmas in 2019, McDonald’s sold eight Illinois film tax credits to Walmart, the most frequent buyer of these credits in the state. Records show that from 2019 to 2023, Walmart bought tax credits worth $20.6 million from small to medium-sized film companies, as well as from major corporations like
“Buying credits is a low-risk way of doing tax planning because no one’s gonna say, ‘Oh, those credits aren’t good.’ At that point, it’s simply math,” said Charlie Middleton, an international tax lawyer and former senior tax executive at Walmart.
Walmart didn’t respond to questions and Kraft Heinz declined comment.
In New Jersey, Apple has bought five film tax credits worth a cumulative $21.7 million since 2019. Over the same time, the U.S. Bank National Association purchased $4.7 million in New Jersey credits, along with $41.4 million in Illinois credits. Neither company responded to questions.
For issuers of film tax credits, it doesn’t matter whether the credit issued is transferred to another corporation or to an individual taxpayer. “That money is not leaving the state, they are not taking that money. Even if you sell the credit to someone else, they’re using it to pay their Illinois tax liability,” said the Illinois Film Office’s Hawley.
The market for film tax credits, whether through direct sales or brokers, is robust. In Puerto Rico, every film tax credit the commonwealth has records for since it started tracking them in 2023 have been sold, typically between 90 and 95 cents on the dollar, records show. In other jurisdictions such as Georgia, the credits generally fetch more than 90 cents on the dollar, depending on market conditions, said Jeff Horsley, a partner at Cherry Bekaert Advisory LLC in Atlanta.
States Pour in More Money
Film tax credit programs were waning before the Covid-19 pandemic. Michigan, for example, repealed its program in 2015. Lawmakers have tried to revive it, as recently as recently as 2023, without success.
When states saw an influx of federal money during the pandemic, some started reinstating or growing these programs, said Arlene Martinez, deputy executive director of Good Jobs First, a nonprofit organization focused on economic development and government transparency. Six states enacted laws in 2023 to expand their programs. “States were expanding them and states that had canceled them, they started to bring them back,” she said.
New York’s fiscal 2024 budget increased funding for the state’s film program from $420 million to $700 million. The tax credit also went from 25% to 30% and was extended through 2034. Notably, productions now can receive a tax credit on salaries for actors, directors, writers, and producers. New Jersey, California, New Mexico, and Minnesota have similarly expanded their programs.
One program, though, might not grow: Puerto Rico’s. A proposed expansion was put on hold by the territory’s finance and debt oversight board, citing financial constraints. In a statement, the board said it is still “in the process of evaluating the fiscal impact of the request to increase the industry credit cap.”
State governments are confronted with a persistent challenge: In order to maintain film industry activity, “they must keep on hanging off a subsidy year after year,” said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research.
“You can’t run an economy based on paying 40% of the wages of the firms in the economy,” Bartik said. Even if companies create some well-paying jobs, he said, “it’s just a very costly way of creating jobs.”
— With assistance from
To contact the reporter on this story:
To contact the editors responsible for this story: