California film tax credit lottery draws only a few lucky winners

By Richard Verrier

June 5, 2012 12 AM PT

Producer Andrew Lazar was all set to shoot an adult romantic comedy in Hermosa Beach, where the story is set.

But now, he’s forced to have the $10-million movie rewritten with Miami Beach as the backdrop so he can take advantage of Florida’s film tax credit.

The reason: His film didn’t make the cut of 28 projects approved last week for California’s state film tax credits.

“I’ll just have to change the location and the script because these tax credits are so important for making movies,’’ said Lazar. “It’s a heartbreak because the story would have been perfect for California,” added the producer, whose screen credits include “Jonah Hex” and “Get Smart.”

Lazar’s experience was widely shared among filmmakers who came away disappointed Friday when their projects didn’t win the “lottery” -- the annual selection of films and TV shows eligible to receive a piece of the $100 million allotted for state film tax credits.

Competing with about 40 states that provide incentives to producers, California offers tax credits of 20% to 25% toward qualified production expenses, such as the salaries paid to crew members and the costs of building sets. Companies can use the credits to offset any state tax liability they may have.

Because funds are so limited and the demand so high, California is one of the only states in the country that uses a lottery to decide who gets the credits, which are allocated every June 1.

This year competition for the subsidies was stiffer than ever as filmmakers become increasingly dependent on credits to help finance their movies amid Hollywood’s tough economic climate. The California Film Commission, which administers the program, received a record 322 applications by the 3 p.m. deadline Friday, 83% more than last year.

“Once again, the number of applications we received far exceeded our expectations,’’ said California Film Commission Executive Director Amy Lemisch. “It’s clear that despite fierce competition from other states and nations, the industry is eager to remain at home in California.”

TV series accounted for a dozen of the 28 projects. Nine others were independent feature films and five were TV movies-of-the-week. The remaining two consisted of one studio feature film from Paramount Pictures called “OT Beach” and one TV mini-series. Approved credits ranged from $66,760 for a movie-of-the-week called “Doll & Em” to $12 million for ABC’s drama “Body of Proof.”

“Body of Proof” relocated from Rhode Island to Los Angeles last year, among a handful of shows that have moved to California from other states since the state tax credit took effect in 2009. The popular MTV show “Teen Wolf,” which received a $10.4-million credit Friday, will move here from Georgia.

Tax credits are awarded on a conditional basis based on a film’s budget. Certificates are handed out only after production has been completed and expenses have been audited by a certified public accountant.

Each application was given a number between one and 322 and the credits were doled out in order until all $100 million was assigned. The numbers not drawn were placed on a waiting list to fill slots that typically open up when others drop out because of scheduling delays or financing issues.

To improve their odds, filmmakers often submit applications for more than one project at a time. Lazar’s company, Los Angeles-based Mad Chance Productions, was awarded a $1.76-million credit for another project he proposed, a romantic comedy called “10 Things I Hate About Life,” starring Hayley Atwell (“Captain America: The First Avenger”). Filming will begin in Los Angeles in October.

Without the credit, Lazar said, the movie would have shot in Boston or Louisiana. Four other movies he submitted for the lottery, including the untitled project he planned to shoot in Hermosa Beach, didn’t get credits and consequently will all film out of state. “I’m happy I got the one,’’ he said. “I wish California would give more credits.”

Michael Kolko, principal of Eastman Kennedy Production Services, was disappointed when he learned Friday that both of his projects didn’t qualify and are now on a waiting list. On Saturday, when the California Film Commission notified him, Kolko booked a flight to New York to begin scouting locations for one of the two projects, “Meal Fit for a King,” a $10-million comedy that will employ about 400 cast and crew members, he said.

“I just knew that once we were on the waiting list,” he said, “I had to make backup plans.’’

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