Hollywood seeks to bolster California film and TV tax credit

Hollywood stakeholders are calling on California to bolster its film and TV tax credit to keep its homegrown industry from permanently leaving the state.

Film industry and union officials are mobilizing to back legislation this year that would substantially increase funding for the state’s film incentive program and lift some restrictions to make the program more competitive with those offered by New York, Georgia and other states and countries.

“The bottom line is, these countries and these states realize what production means to them, and we have to show them [lawmakers] why we’re missing the boat here,” said Tom Sherak, Los Angeles’ newly appointed film czar. “It’s unbelievable they are doing this right under our noses.”

Paul Audley, president of FilmL.A. Inc., which handles film permits for the city and county, said the state must move quickly to strengthen its incentives.

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“California is simply not working to keep its signature industry in the state,” Audley said. “This is the year. If California doesn’t get it, then it’s going to have to accept the fact that it’s going to be second tier in the international marketplace for making films and TV shows.”

The comments follow a report in the Los Angeles Times last week that highlighted the proliferation of film incentives and the growing trade in film tax credits in Georgia and other states.

The Times’ analysis revealed that states paid out or approved $1.5 billion in tax breaks, rebates and other grants in 2012, up from only $2 million in 2002, leading to a sharp drop in production in California. The number of top-grossing films shot in California has plummeted 60% in the last 15 years.

During the same period, Louisiana quadrupled its share of top-grossing movies while Georgia’s output increased more than 300%, according to Times research.

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“When you see some of the numbers — we need to do something,” said Raul Bocanegra (D-Pacoima), who chairs the Assembly Committee on Revenue & Taxation. “Right now we’re getting our lunch handed to us by these other states.”

Sherak said he would soon submit a plan of action to L.A. Mayor Eric Garcetti outlining ways the city can be more film friendly, and would meet with state legislators this month to make the case for bolstering California’s film incentive.

Garcetti has made fighting so-called runaway production one of his top priorities. In September he tapped Sherak, a veteran Hollywood executive and former president of the Academy of Motion Picture Arts and Sciences, to spearhead the effort.

“Our goal is to go up there [to Sacramento] and make the case based on statistics,” said Sherak, a former senior film executive at 20th Century Fox. “We can’t lose this industry.”

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Under a program enacted in 2009, California allocates $100 million annually to film and TV productions, which are eligible for up to a 25% tax credit toward qualified production expenses. Although the incentive has slowed the outflow of production and boosted local activity, most of it has been for smaller and lower-budget projects.

Consequently, industry officials are pressing to substantially increase annual funding, closer to the $420 million a year that rival New York provides.

Other favored revisions include allowing large-budget films to qualify, as well as TV pilots and network dramas. Currently, only movies with budgets less than $75 million are eligible, as are basic cable programs and network shows returning from out of state. The exclusions have contributed to a historic falloff in the production of one-hour dramas as well as big-budget studio movies in L.A.

Entertainment industry executives and union officials recommended several of the proposed changes at a state committee hearing held at SAG-AFTRA’s Los Angeles headquarters in October attended by Bocanegra and other lawmakers.

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This month, Bocanegra said, he and his colleagues plan to reintroduce a bill that would extend and expand the program. The bill needs to make it through various committees before it comes up for a vote in the Assembly, probably sometime in late May.

“We can’t just watch this multibillion-dollar industry that’s so important to our economy leave,” Bocanegra said. “We need to do everything we can to make California more competitive.”

Assemblyman Mike Gatto (D-Los Angeles) and state Sen. Kevin de León (D-Los Angeles) also have announced plans to introduce legislation to improve the program.

Efforts to expand tax breaks for the industry, however, have traditionally faced opposition from lawmakers in Northern California and such unions as the California Teachers Assn.

Some lawmakers also have questioned the costs of the credit, citing a study by the state’s Legislative Analyst’s Office that said the program caused a net loss in state revenue. Studies by UCLA and the Los Angeles County Economic Development Corp., however, said the incentives have provided an economic boost.

It’s also not clear how Gov. Jerry Brown, who granted a two-year extension of the program in October 2012, feels about giving Hollywood more tax help.

But Sherak can count on the support of some powerful allies in Hollywood’s labor community.

“If we need to protest and do a rally and let our legislators know how much this is impacting our industry, we will,” said Steve Dayan, secretary treasurer for Teamsters Local 399, which represents casting directors, location managers and drivers.

He said the 4,000-member union has seen at least a 20% decline in membership in the last five years as more work has left the state.

“Many of our members have left to go to places like Georgia and Louisiana where there is work, and they are no longer contributing to the state,” he said.

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