Hollywood lobbies to extend state film tax credit through 2018

By Richard Verrier

May 15, 2012 12 AM PT

Amid mounting evidence that rival states are chipping away at California’s movie and TV production business, a coalition of entertainment unions and film industry officials is renewing a push to provide long-term funding for California’s popular film tax credit program.

But the effort faces an uphill challenge in Sacramento, where lawmakers and Gov. Jerry Brown are wrestling with a wider-than expected $16-billion budget deficit.

California currently sets aside $100 million annually for dozens of projects applying for credits that cover 20% to 25% of qualified production expenses. The program is limited compared to what many other states offer in that it excludes movies with budgets of more than $75 million.

Still, supporters say since its debut in 2009, the tax credit has kept productions in California that would have filmed elsewhere and is vital to keep the state competitive at a time when nearly 40 states offer film tax credits and rebates to filmmakers.

On Monday, the Assembly Revenue and Taxation Committee unanimously voted to support a bill that would extend funding to California’s film tax credit -- which expires next year -- through July 1, 2018.

“With our state facing a 12% unemployment rate, it’s critical to extend this program, which is a demonstrated job and revenue generator,” said Assemblyman Felipe Fuentes (D-Sylmar), author of the bill.

That message was reinforced by a group of film industry and union officials, including representatives from the Directors Guild of America, SAG-AFTRA and the International Alliance of Theatrical Stage Employees, who spoke on behalf of the bill at a hearing in Sacramento. They argue that an extension is necessary to show California is committed to long-term funding of its program.

“We would like to get the five-year extension because productions need certainty and one year doesn’t give certainty, especially for television,” said Kathy Garmezy, associate executive director of government and international affairs for the Directors Guild of America. The program “is seen as incredibly effective even though we all recognize its limitations and wish they could be eased.”

Paul Audley, president of FilmL.A. Inc., the nonprofit group that handles film permits, outlined at the hearing the economic effect of the industry, noting that there are more than 6,600 businesses in the state that service films, TVs and commercials -- at least three times the number of Starbucks locations in California.

He noted the rising competition, especially from New York, which allocates $420 million annually in film tax credits and recently touted the addition of five new soundstages at the Brooklyn Naval Yard.

“They (lawmakers) need to understand that they are in a battle to keep employment here in California and to stop the poaching of jobs,’’ Audley said in an interview. “We need to start fighting back.”

New York had a record year for TV production, drawing 23 prime-time dramas in 2011, contributing to a nearly 20% fall in location shoots in Los Angeles for TV dramas in the first quarter of this year from a year earlier, according to FilmL.A. And feature film production in L.A. remains a fraction of what it was during its peak in 1996.

The Assembly could vote on the bill this month, but opposition is expected to be stiffer in the Senate, where lawmakers will take up a similar bill by August. An previous effort to provide a five-year extension failed in September when the Legislature approved only a one-year extension.

Some lawmakers balked at setting aside $500 million at a time when the state is confronted with having to cut social services and lay off teachers in the face of a massive budget shortfall.

Those concerns have resurfaced. The California Teachers Assn. has already expressed its opposition to the film credit bill, arguing that it would put a further strain on the general fund.

“Over the last several years, schools have taken $20 billion in cuts so we oppose anything that is going to reduce revenue to the general fund,” said Frank Wells, spokesman for the CTA.

Film industry supporters, however, argue that film tax credits benefit the California economy as a whole by generating jobs. They cite a study by the Los Angeles County Economic Development Corp. that found the program pumped $3.8 billion into the state’s economy and created more than 20,000 jobs in its first two years.

“We recognize that it’s a challenging year for the budget, but we feel this is a tax credit that actually does what tax credits are supposed to do, which is generate more revenue than it costs,’’ said Barry Broad, lobbyist for the California Teamsters Public Affairs Council.

UCLA study gives qualified support to state film tax credits

Study shows state film tax credit program pumped $3.8 billion into the economy