Tax Breaks Could Be in the Future for Big-Budget Movies

Tax Breaks Could Be in the Future for Big-Budget Movies

New legislation could expand California's film and TV incentive program

A new bill introduced to the State Legislature Wednesday morning could extend and expand California’s Film and Tax Credit Program.

For the first time, big-budget movies and network TV shows would be eligible for incentives under AB1839, which was authored by Assemblymen Raul Bocanegra and Mike Gatto, along with 50 other Assembly members and 9 State Senators.

For the past decade, California has scrambled to preserve its signature movie and TV industry as other states and countries have lured away big productions with their incentive programs.

Also read: Hollywood Tax Credit Fight: Will California Finally Support Blockbusters and Broadcast?

The bill’s provisions include:

* Lifting the budget cap on feature films eligible to apply for the program. A film of any size will be able to apply to the program, however only qualified expenditures of up to $100 million will be eligible for the credit.

* Allowing all new 1-hour television series, regardless of where they air – broadcast, cable, Netflix etc. – to be eligible to apply for the program. Allowing television pilots to be eligible to apply for the program.

* Extending the Program for five additional years.

* Offering a 5 percent increase in the tax credit for filming done outside of the Los Angeles Zone (to a total of 25 percent).

* Offering a 25 percent credit for television shows relocating to California in the first year.

* Modifying the requirement that 75 percent of production days occur in California to 75 percent of principal photography days occur in California, to ensure more jobs are created here.

Also read: New Film Czar Ken Ziffren Calls Runaway TV, Film Production a ‘Devastating Blow to the Middle-Class’

The legislation is backed by Los Angeles Mayor Eric Garcetti, as well as a coalition that includes production guilds and the film industry’s lobbying arm, the Motion Picture Association of America. If it passes the state senate and general assembly, then a signature decision by Gov. Jerry Brown is expected by next Labor Day.

“This expanded and improved program will go a long way towards making California more competitive with other state’s programs,” said Bocanegra, who is chairman of the Assembly Committee on Revenue and Taxation. ”Right now, we’re getting our lunch handed to us by these other states. We simply can’t sit by and watch this $17 billion a year sector of our economy continue to leave California.”

Since the program was created in 2009, it has saved or created as many as 51,000 well-paying jobs from leaving the state, and generated $4.5 billion in economic activity statewide, according to Bocanegra.

“Every single economic analysis of the program shows that it’s a net economic generator for the state,” he said. “It creates revenue and tens of thousands of jobs, it’s a win-win.”

Also read: Why Comcast Always Wins: Money, Friends and Influence

Currently, more than 40 states and a dozen countries offer some form of tax incentives, and the consequences are being acutely felt in the entertainment capital.

Of the 30 highest-budgeted films in 2013, only two were largely shot in California. At the same time, according to the Los Angeles Mayor’s Office, the number of one-hour television productions has fallen by 64 percent. Feature film production has plummeted 56 percent since a peak in 1996, while television production has dropped 39 percent from a high in 2008.

Most states’ incentive plans have more money to offer than California’s. New York’s program, for example, is capped at $420 million annually.

Since it was introduced in 2009, California's plan has been renewed twice but it is due to expire in 2015. Producers have complained that it has been difficult to plan ahead because of the uncertainty of the renewals.

The multiple authors on the legislation is in part to signal its broad support across the state. That's seen as critical for passage, since critics charge that the bill benefits only Hollywood. The bill's 5-percent tax bonus for shoots outside the L.A. area is designed to win support in Central and Northern California, as well.

“I am very pleased that my colleagues in the Assembly recognize that film productions have huge economic impacts in communities across the state,” said Democratic Assemblyman Rob Bonta of Oakland, a principal co-author of the bill.

Also read: Film, TV Shoots Surge in 2013, But Hollywood Production is Hemorrhaging

The California Film & Television Production Alliance welcomed the bill's introduction.

“When production goes elsewhere, so do the jobs, tax revenue, and spending that are critical to the strength of our state's economy,” the coalition said in a statement. “In order to once again be competitive, California must put in place a meaningful, expanded credit that will bring back jobs, increase revenue, and support small businesses and vendors all across the state. … Too much is at stake for the people of California to let this heritage industry slip away.”

The alliance is a coalition of guilds, unions, producers, small businesses, and associations that have worked together for more than a decade to promote film and television production in the state.

 

  • renamoretti1

    Please no more handouts to the Studios so that they can continue to make their bad films on the taxpayer's dime!!! What is this, France?!!

    • worker

      silly ignorant troll.

      • renamoretti1

        I see you unloaded the Big Arguments…

        Oh wait, you didn't!! Perhaps because your only argument is to try and bully those who disagree…

        Sad for you indeed… :(

        But here goes again: Please stop subsidizing the making of bad movies by big conglomerates!!!

        And that goes for ALL States.

        • worker

          Ok, I'll bite. I say troll because your comments make it very plain that you are ignorant to the relevant issues at play in intelligent discussions of the California Film Tax Incentive programs and proposals. At the same time you exhibit troll-like behavior by spouting misguided and irrelevant statements without spending time and energy educating yourself about the issues and consequences of inaction. It's no one's job but your own to educate yourself before you shout out ignorance on public boards. You should expect a critical reception to your overwhelming hubris.

          So, as a charity…

          Studios are businesses. If they make bad films (and I agree they do make many – at least to my taste), it is because they have found many, many individuals who are happy and willing to buy tickets to said movies. Here's the off topic but appropriate logic: If you don't like “bad” movies don't pay to go see them.

          Here's the silly logic you exhibit: If you live in a state who employs tens of thousands of working people (also taxpayers) you should allow the part of that industry (in-state production & post-production) which generates enormous revenue for your state to wither away because you think the state should refuse to compete in the current marketplace because the industry makes movies you don't like.

          Plain silly. Not well thought out. Certainly not an intelligent statement by any stretch of the imagination.

          A few facts for free:
          The studios (many owned by large multinationals) don't give a rat's ass where production takes place. They are obligated to find the best, most cost effective solution. If Georgia or Louisiana or even another country like Great Britain offers a tax incentive that can make production more economical that is where the production and possibly the post-production will take place. No question. No debate. It's simple. You want the business you offer a competitive deal. So…California? Are you interested in retaining this business or not? If not say goodbye to tens of thousands of educated and experienced film workers who can work wherever the film shoots and give those states their state income taxes, say goodbye to all the revenues of countless small businesses who supply specialized services and products to the film industry, say goodbye to all the personnel who maintain those familiar enormous film production facilities and infrastructure that represent a signature industry to the state. Oh yeah…and say goodbye to a HUGE draw for tourism.

          Do yourself a favor renamorretti, think and educate yourself before you spout generic complaints that are completely irrelevant to the subject posed by the article you comment on.

          As a very middle class film worker and California tax payer I urge you to do some homework. The state WILL continue to hemorrhage film production work and the tax revenues it generates if it does not compete in the real world economics at play in today's market. Everyone wishes tax incentives were not necessary but they are crucial in today's marketplace and in fact are MUCH more cost-effective than the mass unemployment and loss of revenue that the state is currently experiencing in a key industry.

          If you do want the industry to leave California, don't mind paying more taxes to make up for a net loss in state revenues and don't mind losing yet another manufacturing industry to another state then by all means keep trumpeting your non-sensical logic and hope someone takes it to heart. We film workers like it here but we can move elsewhere. Believe it or not, it's a lot more cost effective to live in the states who are out competing California for the business.

          • renamoretti1

            Once again, you resort to invective.

            Do you really think calling me “uneducated” a dozen times makes your argument any stronger or actually makes me “uneducated”?

            I know every argument that you're making. They're the usual arguments of people asking for taxpayer handouts: “It will create/save jobs” “It has a huge economic impact” “it will save the industrial base” “it will make back the money in taxes”…

            But the reality, as shown again and again throughout the world is that those interventionist, statist policies from both the Left and the Right do not work. They have never worked.

            States do not have the wherewithal to pick the right horses in the economic race.

            If they did, we'd know about it!!

            Another point about your vision of current films being successful: Do you realize that the box-office figures you are reading actually come from studio PR Departments? You seem to take them as fact. If you had cared to find out more about what is really going on in the industry – but I'm guessing you were too busy calling people who disagree with you “uneducated” to do it – sorry couldn't resist ;) you'd know that the studios are quickly floundering.

            Many are closing down big parts of their businesses as they see their enterprise value shrink (for a striking example look at Paramount's enterprise value which has shrunk by 75% over the past four years of endless “mega-hits” – which strangely did so well they didn't even want to pay their outside investors their money back – see Melrose Investors vs. Paramount).

            Hollywood is very good at PR and pretending everything they do is gold. Yet, when you look at the bottom line, the only thing that keeps the current regimes afloat is taxpayer money.

            I say no way, no how!! The film industry will be healthier and we'll get better product to enjoy when the executives and owners will be forced to look at what they wrought. Propping them back up only creates extended suffering, both from people losing their jobs slowly in a shrinking industry and from viewers being offered crappy projects.

            As you said yourself, California crews are free to move and follow those jobs (it's what's happening with other industries paying the higher taxes caused by the State Government's largesses) then what's the problem? What makes them so special that other industries and workers have to pay for their jobs not to be subjected to the pressures other people have to deal with without taxpayer handouts?

          • renamoretti1

            One side note on tourism: Vancouver is host to many productions and I haven't heard of any rise in tourism there, so I'm not buying that point.

            California, because of its bad economic policies (including handouts to favored industries) is pushing business away from the State. More handouts won't solve the problem, even if for their people receiving the handouts, which I'm guessing you probably are given your anger at anyone who is expressing opposition to it, it's a great thing.

            It's just not a great thing for the rest of us. Just the opposite really…