Why Is California Tripling Film and TV Tax Credits While Other States Slash Them?

Why Is California Tripling Film and TV Tax Credits While Other States Slash Them?

The state increases its program to $330 million after losing almost $9.6 billion to runaway productions

California is about to more than triple its TV and film tax credit program to $330 million just as other states are eliminating their own incentives. California is betting the bold move can entice filming back to the state. But is California forging ahead foolishly, or will other states regret their decisions to scale back?

States like Arizona, Nebraska, South Dakota, North Dakota and Wisconsin have abandoned their incentive programs after lawmakers decreed that they failed to bring the economic boon the states were looking for.

Also read: California Super-Sizes Its Film, TV Tax Credit Program

North Carolina is the most recent to slash the funding in its $60 million incentive program after some politicians felt the state wasn't getting enough bang for its buck from shows like “Homeland” and “Eastbound and Down” and several other major features including “The Hunger Games,” “Iron Man 3,” and “Tammy.” The new state budget signed this week by Republican Gov. Pat McCrory only allots a $10 million grant to filmmakers.

“If you look at other states that have switched from a program like we had to a grant, you've seen productions high-tail it out of state faster than you can say Georgia,” Katy Feinberg, a spokeswoman for the North Carolina Production Alliance, told the Los Angeles Times. “We're devastated by the upheaval and destruction of a thriving industry here.”

“This isn't a business that fits every state equally,” Eric Witt, a film incentives and finance consultant, told TheWrap. Witt used to serve as chief of staff of former Gov. Bill Richardson of New Mexico.

New Mexico has significantly scaled back its own once robust program, an action Witt hopes to see reversed in the upcoming months.

“New Mexico took a hit with the administration that came in in 2011,” said Witt. “But the current administration is in support of the industry, it was a big economic draw. We lost hundreds of millions in production. You don't know what you have until it's gone.”

Also read: ‘Scarface,’ ‘Beach Boys Musical’ Among 26 Projects Qualified for California Tax Credits

Witt noted that the major mistake that many states are making is expanding and contracting incentives, making it difficult for producers to plan future projects which are often planned years ahead of time.

“That's the worst thing you can have is uncertainty,” said Witt.

It would be unwise, however, to see decisions made by North Carolina or other smaller states as indicative of a larger trend. For California, film and television production is a major economic contributor, not a cottage industry. Competition is still fierce. Tax credits, rebates or grants are still offered by 39 states and California's biggest competitors aren't downsizing their incentives.

“You have to view each state differently because they all have different goals in terms of what they're trying to achieve,” Steve Weizenecker told TheWrap. Weizenecker is an Atlanta-based attorney who specializes in TV and film tax credits and has represented both states that offer them and TV and film producers.

“And it's worth noting that New York and Georgia, two states that have taken a lot of business from California, aren't cutting back,” said Weizenecker.

Major players like New York and Georgia maintain incentives that are enticing enough productions to put a major dent in the Hollywood film economy and would continue to do so if the California legislature did not take action. Runaway production has cost California more than 47,000 jobs and $9.6 billion in economic output to rivals, according to a study done by the state's local governments. Of this summer's top ten movies at the box office, only the Universal Pictures comedy “Neighbors” was filmed in state.

Also read: 84 Percent of Projects Denied California Tax Credits Film Elsewhere

New York, which hands out $420 million annually, is home to nearly 30 television series and is a backdrop for more than 200 films annually. The industry is worth $7.1 billion a year to New York, which motivated the state to extend its tax credits through 2019.

Georgia's program is currently uncapped and covers up to 30 percent of a project's cost. Series like “The Walking Dead” and “The Vampire Diaries,” along with upcoming features like “Ride Along 2” and the “Vacation” reboot will film in the state. The southern location is also aiming to broaden the scope of its incentives so more low-budget features can qualify.

And that says nothing of the international competition offered up by countries like the U.K. and Australia that have lured major upcoming releases like “Star Wars” and “Mad Max: Fury Road.”

But California will be able to throw down against its competitors with its $330 million in addition to its other advantages; local crew, production, and post-production infrastructure, and, really, who can beat the weather?

“It once again makes California a viable place to film big budget movies and TV shows that generate thousands of jobs and millions in revenue and spending at businesses all across the state,” said Sen. Chris Dodd, chairman and chief executive of the MPAA. “It stands to bring billions of dollars into the California economy.”