New Mexico's $50 million cap on state film incentives each year doesn't take effect until Friday. But already there are signs that it's under pressure.

Gov. Susana Martinez decided this week to grandfather in 17 TV and film projects under existing rules governing how New Mexico pays out rebates under its film production tax-credit program, the state's main film incentive.

The Avengers, the $200 million blockbuster being filmed at Albuquerque Studios, was among the productions grandfathered in. So were Season 4 of TV shows Breaking Bad and In Plain Sight, which already have wrapped up production, and the sci-fi horror flick Odd Thomas, which is being shot around Santa Fe.

The Avengers production alone could qualify for a rebate of more than $20 million if it applied for its film rebate in the new fiscal year that starts Friday. That would leave just $30 million for other grandfathered productions and any new projects that decided to apply for rebates.

"I think it does put some pressure on the cap," said Tom Clifford, policy and research director at the New Mexico Taxation and Revenue Department. "But we think, based on what we have in the pipeline, there is still significant room under the cap and would allow new productions to qualify."

State lawmakers voted to cap what New Mexico pays out to film productions each year to close a budget gap for the year that starts July 1. In previous years, New Mexico has spent much more than $50 million on film incentives, including $65.9 million in the state budget year that ended June 30, 2010.

Under current rules, TV and film productions that qualify for the film production tax credit receive a single payment for a quarter of what each production spends in "qualified expenses," a broad category that could include lumber purchased in New Mexico to help build a set, meals bought from a local caterer or receipts from a local car-rental company for vehicles used by producers.

Under the new rules, qualifying productions would receive one, two or three payments over successive fiscal years, depending on the size of the rebate. Rebates under $2 million would qualify for a single payment; those between $2 million and $5 million would receive two payments; and those more than $5 million would get three payments.

Also, some expenses that qualify as partially refundable under current rules won't qualify under the new guidelines —for example, some hotel expenses and some spending on food and leased vehicles — because caps will limit how much of that spending is eligible for the partial refunds, Clifford said.

This week's decision comes after tense negotiations between the Martinez administration and movie studios, which argued that the signed agreements they had with New Mexico predated the adoption of the new rules and were legally binding.

"What we decided to do ... is to honor the commitments," Martinez's chief counsel, Jessica Hernandez, said of the state's agreements with the projects. "They made it clear to us that they wanted to avoid litigation. That was our goal too. The film companies were very pleased with this resolution."

Email messages sent to movie production companies Wednesday seeking a response went unanswered.

How the Martinez administration decided this issue was being watched closely by the film industry.

Since taking office in January, Martinez has dramatically altered New Mexico's dynamic with Hollywood. During the eight years of former Gov. Bill Richardson's tenure, the state landed many high-profile projects, including a few Oscar winners and blockbusters. Critics of the new rules say they could hurt New Mexico's standing in the hypercompetitive film world as the state competes with others trying to woo productions.

Already, there are signs that productions eyeing New Mexico are looking elsewhere.

"Louisiana has certainly received inquiries from productions that felt our incentive program was more stable and predictable than those with uncertain futures, such as New Mexico and other states," Christopher Stelly, director of film and television for Louisiana Entertainment, said last week via email. "And naturally, we try to help the productions interested in Louisiana in any way we can and we will provide them with as much assistance as possible."

Contact Trip Jennings at 986-3050 or at tjennings@sfnewmexican.com.