As a seasoned gamer who has spent countless hours immersed in the virtual worlds of Hollywood blockbusters and indie darlings alike, I can confidently say that this recent announcement by Gov. Newsom to revamp California’s film tax credit program is nothing short of a game-changer.
On October 27th, Governor Gavin Newsom announced plans to significantly expand a program that offers tax breaks to California’s entertainment industry. This move aims to stimulate production in the state, which has been severely impacted by strikes and has seen a long-term exodus of film and TV productions moving elsewhere.
Should the bill be approved, it would provide one of the most substantial subsidies offered by any state apart from Georgia, which doesn’t limit the annual amount given to productions. Members of the industry and their supporters have welcomed this long-awaited legislation as a response to an intensifying competition between states to attract Hollywood. “This industry is our cornerstone,” declares Los Angeles mayor Karen Bass, lamenting that we’ve been losing more and more of it to other states and foreign countries.
Colleen Bell, head of the state film commission, commented, “Everyone is trying to attract production away from California.
Whether these productions choose to film in California at previous rates depends largely on other modifications to the program aside from raising the annual cap from $330 million to $750 million. Bell indicates that everything is up for discussion, including broadening the eligible expenses and production categories for tax credits, as well as increasing the maximum subsidies a single title can receive.
Ellen Goldsmith-Vein, CEO of Gotham Group (known for movies like “Maze Runner” and “Juror #2”), who’s part of a Los Angeles taskforce organized by Bass to revitalize the film industry in its historic heart, considers the plan a significant stride towards countering the trend of production moving away from this location. However, she emphasizes that the plan’s success will hinge on the specifics still under discussion. “There’s a general interest in more incentives related to above-the-line positions and other areas,” she clarifies.
Impossible sequel in Los Angeles if he can receive a portion of his salary back by shooting it in the U.K. instead?
According to Joe Chianse, senior vice president at the Hollywood payroll service company Entertainment Partners, it’s essential and highly significant for California to remain competitive in the current landscape.
As a passionate film enthusiast, I’ve noticed that not only large-scale studio productions but also independent projects could potentially reap benefits from claiming incentives for star salaries, as suggested by industry experts. This additional tax relief could indeed tip the scales in securing financing for these smaller productions, as pointed out by Patrick Rizzotti, president of Blue Fox Financing. He further emphasizes that in some cases, producers are compelled to seek opportunities in certain states and countries just to close their financing deals. Interestingly, he’s observed a rise in production deals closing for titles shooting in New York since the state increased the cap on its program last year, which also incorporated changes allowing certain above-the-line costs to be eligible.
One suggested rephrasing:
“Reality shows employ a lot of our people, and I think they should be able to qualify,” he says.
Currently, certain genres such as multi-camera sitcoms with live audiences, animation projects, and visual effects (VFX) work are not eligible for California’s film program due to the lack of a separate tax credit for VFX work. The California Film Commission has communicated this issue to the governor’s office. Consequently, numerous productions are moving their postproduction overseas to countries that provide substantial subsidies, leading many VFX companies in California to establish foreign branches.
Canada and Australia provide some of the most financially beneficial tax incentives for this kind of work. Production companies can recover at least 30% of their post-production, digital, and visual effects expenses in these areas. Recently, in March, the U.K. increased its incentive by 5% and eliminated the 80% cap on VFX costs within the country to maintain competitiveness.
Furthermore, Lindsay Dougherty, principal officer of Teamsters Local 399, notes that “Los Angeles has a long-standing commercial industry which predates the film and television tax credit.
If changes to the program aren’t made, it won’t impact the situation if studios and streamers choose not to create their projects within California. According to Rebecca Rhine, national executive director and western executive director of the Directors Guild of America, we need to ask the studios and employers to promise that they will continue to work in California. She further suggests that this assurance should motivate them to do so.
For L.A., Newsom’s proposal would almost surely be a boon for industry workers and the ancillary businesses that at least in part rely on production. Amid the dramatic decline in local production, advocates for Los Angeles-area entertainment workers are preparing to lobby legislators to support the change. For the rest of the state, not so much. California lawmakers’ appetite to further subsidize Hollywood remains to be seen, especially when funds can be directed to other urgent needs, like housing and homelessness. Coupled with a looming budget deficit, it could be a tough sell.
Many economists and fiscal analysts question whether film tax credits genuinely boost job creation and stimulate economic growth as politicians suggest. A study on California’s film and television tax incentive program conducted by the state last year revealed that it’s not a consistent tool for expanding the economy. For every dollar invested in film tax breaks, the program yielded $1.07 in government income, but this number might be inflated because it presumed that productions wouldn’t have filmed there without receiving the credit. Other research suggests that each dollar returned between 20 cents and 50 cents in state revenue.
A study’s optimistic predictions indicate that every dollar invested in incentives could potentially boost worker earnings by between 2 to 4 dollars. Similarly, findings from research into areas such as K-12 education and workforce development suggest similar or even superior benefits when it comes to public spending.
Regarding modifications to the current scheme, Thom Davis, president of California IATSE Council, emphasizes the need for a careful approach. The goal is to generate employment opportunities without straining the state’s financial resources excessively. He explains, “Currently, the program works well in benefiting the state, so our aim is to preserve this positive impact.
This tale was initially published in the October 30th edition of The Hollywood Reporter’s magazine. To get the magazine delivered to you, [click here to subscribe](link-to-subscribe).
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2024-10-29 22:25