It may surprise Chicagoans to hear, but movie studios don’t care about the Illinois tax incentive.
In general, the only studio films that come to Illinois are those that have already established themselves with the “cheaper-than-New-York-to-film” Chicago look, like ‘The Dark Knight’, or those films that actually need Chicago, “Public Enemies.”
Last week, the Illinois House attached an amendment to Senate Bill 4 (SB4) that would cause the film tax credit to expire in five years. This would appear to be a huge blow to Chicago, but was the credit really successful to begin with?
As an early adopter of tax credits, the early 2000’s did in fact attract numerous big-budget studio films like “Batman Begins,” “Road to Perdition,” “Oceans 11/12” and more — until other states began to out-compete, like Connecticut, Massachusetts, Georgia and Louisiana.
From its inception, the Illinois tax incentive missed some key points.
The first was the program would expire each year and had to be renewed; the second was that the credit had to be sold to a local tax payer in order to be converted to cash; and third, the 20 percent credit only applied to resident crew wages (up to the first $100,000) and goods/services, but not to actors, directors or producers.
The first was corrected with an amendment that made the credit permanent (which SB4 would undo); the second remains unchanged; the third was modified by increasing the credit to 30 percent, but still only for resident crew wages and goods/services purchased in the state (not for actors, directors or producers).
The problem with most state film incentives is that their underlying statutes are often vague (a hodgepodge of legislative wrangling), and they frequently try to be all things to all people.
States (and the local film communities they serve) need to decide what business they want to be in. Do they want to be in the mega-budget studio business (budgets in excess of $80 million)? Do they want to be in the premium independent space (budgets between $25 million-$60 million), or do they want to serve the lower budget indie space (less than $25 million)?
Each category is budgeted differently and therefore has different tax credit needs.
Mega-budget studio films require incentive programs that [1] have no caps on the credits you can earn; [2] qualify for the salaries of high-cost talent; and [3] need to be cash rebates.
Unless it’s absolutely necessary, studios don’t want to deal with brokering transferable tax credits at an unknown discount; they want the whole rebate dollar-for-dollar, or a redeemable dollar like Louisiana at 85 cents or Massachusetts at 90 cents on the dollar.
An article in Crain’s on Sunday purports that the new “Superman” movie that’s shooting in rural Plano, Ill. is proof that the credit is working; Warner Bros., however, would not respond to their requests for comment about the tax credit or shooting in Illinois.
My guess: don’t kid yourself. Studios aren’t moved to shoot by the Illinois tax incentive.
Even if Illinois manages to remove the amendment from SB4 and “rescue their credit,” it’s not going to make a difference to studios, premium independents (whose bankers only lend against cash rebates), or primetime networks.
The credit is not conducive to long-term planning, its cash value is not certain, and it now carries the stigma of being in political jeopardy.
Toronto-based Cinespace is trying to build an $80 million mega-studio in Chicago. They’re looking to refurbish the ol’ Ryerson Steel Plant, an industrial Brownfield site they picked-up for $20 million.
Unfortunately, even if the Illinois incentive is saved, it’s not going to save the Chicago film industry, or its sound stages.
The film business wants clarity and certitude in a tax credit program.
If a state’s film program has a sunset clause or appears to be in political danger, then this undermines long-term planning.
In addition, if the program does not accommodate talent costs, then forget about studios, premium indies, and episodic television series (whose talent costs will rise if the series is successful, forcing the production to move to a more talent-friendly state).
I’d really like to see Chicago and Illinois succeed, but it’s going to take more than SB4 not passing.