California bowed to the changing geography of film production on Thursday with an historic bill that will provide $500 million in tax incentives for productions that stay in the state.
After years of watching one of the state’s core industries, entertainment, flee to Canada, England, New York, Louisiana and other states and countries that offered huge tax incentives, the legislature finally – and after intense lobbying efforts — passed the incentive program as part of the state budget.
The “Ugly Betty Bill,” so named for the show that fled Los Angeles for New York’s incentives, includes a 25% refundable tax credit for film productions shooting in the state.
The program is funded for five years at $100 million per year beginning in fiscal year July 2009/10 through the 2013/14 fiscal year. Credits may not be utilized until tax years beginning in Jan. 2011.
The bill also includes a temporary $3,000 tax incentive to businesses with 20 or fewer employees for each new full-time job they create.
The bill – known as AB X315 in the state Senate — includes a 20% income tax credit for the first production costs totaling $75 million. Indie films with budgets under $10 million and TV shows returning from other states will receive a 25% credit.
Those incentives are relatively low compared with the whopping 35-42% credits offered by states such as New York, Louisiana, and Michigan.
The state has always been reluctant to adopt tax incentives because of the revenues it would suck from the state, since production is one of California’s core industries.
Jamie Cella, president and chief executive of Culver Studios, said California’s plan will create jobs and make the state competitive, but the Golden State will not be the cheapest place to make movies and TV shows.
“The bottom line is people will stay here and take advantage of this credit rather than going to Michigan,” he said.
Cella spearheaded the campaign for New York’s incentive program in 2004 and worked closely with Krekorian and Assemblymember Karen Bass to craft “Ugly Betty.”
He noted that producers will chose to stay in California for the 25%, but also to take advantage of the vast resources and infrastructure that already exists here.
“In California, if you need 600 extras tomorrow, it’s easy to get,” he said. “It’s kind of hard to find 600 people in New Mexico on a day’s notice,” he said. “The studios are going to make the television show or movies no matter what. The question is where they’re made and who gets the work. California residents and California vendors or someone else?”
But production tax credits have also come into question for how much they benefit the host state. The Curious Case of Benjamin Button in New Orleans cost Louisiana taxpayers over $27 million under the state’s credit plan. And legislators in Michigan are rethinking their generosity after local businesses complained of paying new taxes and surcharges.
There have been other problems in the Bayou state as well, despite the fact that 80 major film and television projects shot there last year. In 2007 Louisiana’s former film commissioner Mark Smith pleaded guilty to accepting $65,000 in bribes to help inflate tax credits. He is currently awaiting sentencing.