The Madeleine Brand Show for August 17, 2011

Calif. film, TV tax breaks appear to work, but is it worth the cost?

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Lucy Nicholson/AFP/Getty Images

Director Patrick Norris (C) prepares to film a scene as Assistant Director Brad Gross (L), actors and crew look on, on the set of Paramount Pictures' television series 'The Division' in downtown Los Angeles, CA.

Three years ago the California State legislature created the Film and TV Tax Credit Program, which allows TV and movie producers to write off up to 25 percent of their taxes if they film in state. The aim was to keep crews from moving production to states already offering generous incentives, and it's up for renewal this month.

Hollywood has long been synonymous with cinema, but thanks to generous tax breaks from states looking to attract the large productions and the money they bring, movies are now just as likely to be made in Atlanta, Detroit or Shreveport, Louisiana.

And it's the increased competition that's motivated Assemblyman Felipe Fuentes. The San Fernando Valley Democrat is behind the bill to renew California’s film and TV tax breaks until 2019.

“Knowing that 40 other states in the country are after this industry, I think it’s absolutely important for California to figure out how to keep it in California."

The incentive works like this: Each year, the state sets aside $100 million in tax breaks. Movie and TV productions enter a lottery. The ones that get picked can write off 20% to 25% of their taxes.

It’s not the sweetest deal out there. Louisiana’s tax write off is 30%. New York sets aside more than $400 million for its program, but Assemblyman Fuentes says California has built-in advantages.

“People’s families in the industry, a large part of the infrastructure that is available to the industry is already in California," he explains. "And if we can just stay competitive, that will make California the choice for the industry.”

The program is targeted to productions most likely to leave the state, so only smaller feature films, TV movies and basic cable shows can apply. Plenty of recent productions have snatched up the credits, including recent cinematic releases "Horrible Bosses," "Friends with Benefits" and "Winnie the Pooh."

One of the bigger success stories Assemblyman Fuentes points to is ABC TV's "Body of Proof." That series filmed its first season in Rhode Island, but thanks to California's tax breaks, season two is shooting in Burbank.

“They would not have been able to move the TV series here if they had not received the tax credit,” says Amy Lemisch, executive director of the California Film Commission, the organization that administers the tax breaks.

Lemisch says the program has had an economic impact on the state, citing a study commissioned by the Motion Picture Association of America and carried out by the L.A. County Economic Development Corporation. It says the film and TV incentives created 20,000 jobs and kicked in more than $200 million in state tax revenue.

And she says demand for the credits keeps growing.

“We get calls all the time: Do we have any credits left? We really want to make this movie in California but we are going to go to Georgia if we don’t get the tax credit. Or we are going to go New Mexico or Vancouver or Toronto. Every day we get calls like that.”

To Orange County republican Chris Norby, those calls amount to what he says is business blackmail.

“Businesses play this game throughout the country – threatening to move unless they get more money,” he says.

In May, when the film and TV tax breaks passed the Assembly 77 to 1, Norby was the 1. He says the incentive isn’t fiscally sustainable and that the economic gains aren’t worth the $100 million-a-year cost to the state.

“Rather than try to out-subsidize competing states for their irresponsibility – like South Carolina, New Mexico, Louisiana and New York – we should simply allow those programs to implode and rely on the natural advantages of climate and talent and infrastructure that California already has.”

Sure enough, some states - like Michigan - have scaled back their large incentives. But other eager states have stepped in. Sony Pictures producer Glenn Gainor says the incentives are hard to ignore.

“There’s no question that when somebody gives you free money they are going to pique your curiosity.”

Gainor is working on a movie called “Think Like A Man.” It was set in Los Angeles after they secured California tax breaks. Gainor likes to shoot in California; it’s his home. But he says producers, directors and even writers will work out-of-state if it’s cheap.

“Most scripts can be adapted to any location," Gainor explains. "And if you have to hit a number, which these days you have to more and more, then you have to look at these incentives to see how you can best make your film at the price that you have to make it.”

The bill to renew the California incentives is expected to pass the Senate. If it does and the Governor signs the bill, it’ll be lights, cameras and tax breaks in Hollywood for another eight years.


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