Posted 19 September, 2009 in FilmUSA
Citing irregularities in the film incentive program, Chester Culver, Governor of Iowa, temporarily suspended approval of new applications or issuance of tax credit certificates yesterday evening. Mike Tramontina, Director of the Iowa Department of Economic Development (DED), resigned. Tom Wheeler, Director of the Film Office, has been put on administrative leave.
Posted 13 September, 2009 in FilmUSA
The money shot
Aug 13th 2009
From The Economist print edition
WITH its deserts and its slight air of decay, New Mexico is a good place to shoot a post-apocalyptic action film. But the state’s natural charms alone would probably not have been enough to lure the makers of “The Book of Eli”. Broderick Johnson and Andrew Kosove, who are producing the Warner Bros film, say they were particularly enticed by New Mexico’s generous production subsidies and interest-free loans.
All but seven of America’s 50 states now offer incentives to lure filmmakers. Some states refund a portion of in-state production costs, which may include actors’ salaries. Others issue rebates against state taxes that can be sold to local residents. The club is growing quickly. California, which resisted subsidies for years, recently approved its first clutch of recipients. Kentucky is considering its first application. With banks and hedge funds virtually out of the game, state governments are now the most important external source of funding in the film business.
Public largesse has led to some odd artistic decisions. “Gran Torino”, a story that originally revolved around Minnesota’s distinctive community of Hmong immigrants, was transplanted to Michigan to take advantage of that state’s subsidies, which can amount to 42% of production costs. The forthcoming “Battle: Los Angeles” will be filmed mostly in Baton Rouge, Louisiana—a reversal of the tradition by which southern California stands in for everywhere else.
Studies commissioned by the states tend to show a healthy return on investment. Filmmakers have certainly learned to follow the money: California’s share of big-studio productions dropped from two-thirds in 2003 to less than one-third in 2008 as its politicians dithered over subsidies. It is also likely that subsidies have helped America compete with Europe and Canada, although the weak dollar has probably done more to restrain what is known as “flyaway production”.
The continuing bidding war is likely to result in diminished returns for the states. Michigan’s subsidies, once considered improbably lavish, may soon be matched by Washington, DC. Alaska has approved a 44% rebate, although production companies must film in rural areas during the state’s gruelling winter to qualify for the full sum. Whatever the benefit to the states, however, the subsidies are becoming ever more important to Hollywood.
But as state budgets tighten, a backlash is gathering. This summer Indiana and Wisconsin reduced their rebates. A bill to do the same is before the Michigan legislature. In the Midwest the surge in foreclosures and the collapse of traditional industries has hardened hearts. Jud Gilbert, a Michigan state senator who opposes film subsidies, points out that if he could offer a 42% rebate on car production, that industry would not be in crisis.
Yet a broad retreat from film subsidies is unlikely. Some of the first places to offer rebates, such as New Mexico and Louisiana, now have impressive sound stages and a deep pool of production workers. States that want to compete with them will have to be extremely generous. And big studios and independent outfits are sharply trimming their film output in response to the credit crunch and a faltering DVD market. As the supply of work shrinks, the squabbling will only intensify.
Posted 9 August, 2009 in FilmUSA
Variety recently conducted an online poll among several hundred prominent location managers, UPM’s, AD’s and cinematographers asking them to rate locations in North America and around the world. These professionals picked their favorites using the following criteria:
• Visual appeal (dramatic scenery, urban intensity, fresh look, etc.)
• Ability to substitute for another location (Toronto for New York, etc.)
• Incentives (including rebates, tax credits, co-production opportunities)
• Film office support (permitting, local cooperation, etc.)
• Production resources (crews, stages, equipment rental, etc.)
Here’s what they told us.
The 10 greatest locations in North America are:
1. California, including Los Angeles and its surrounding area, San Diego, San Francisco, and countless spots throughout the state.
2. New York, including Manhattan and the rest of New York City, as well as upstate locations.
3. New Mexico, including Albuquerque, other cities, and picturesque remote areas.
4. Chicago, a muscular urban center with many resources.
5. Louisiana, including New Orleans, other cities and parishes, and rural areas.
The 10 Greatest locations in the rest of the world are:
1. Morocco, including Marrakesh, Fez, Rabat and the country’s landscapes.
2. France, including Paris, Provence and the Dordogne region.
3. Prague, a beautiful, film-friendly city.
4. Spain, including Madrid, Barcelona and the Canary Islands.
5. The U.K., with London Edinburgh among its top spots.
They also cited the following locations for their particular strengths:
For visual appeal:
Croatia, Hawaii and Panama
For the ability to double for other locations:
Arizona, Buenos Aires and Iceland
For their incentive programs:
Georgia (U.S.), Jordan and Michigan
For their supportive film offices:
Connecticut, Utah and Vancouver
And for their production resources:
Sydney, Montreal and Toronto
Join Variety as we visit these top-rated production centers around the world. We’ll showcase their beauty, profile their resources, and explain to filmmakers how they can stretch their dollars in such diverse yet practical places.
Posted 15 November, 2008 in FilmUSA
Hollywood Reporter 11-08
The credit crunch and the crumbling economy has put the nation’s many film tax incentives under the microscope as states debate their overall effectiveness.
At the locations panel Saturday at the American Film Market, the question of how long states can maintain the present course of tax rebates and credits in the face of mounting job losses and bleeding state budgets took center stage. (A refundable tax credit, instituted in such states as Michigan and New Mexico, acts more like a rebate and sees states issue a check to production companies. A transferable tax credit, like the ones in Louisiana and Rhode Island, sees states issue credits that the production then sells via brokers to those looking to offset tax liability.)
Some states are even questioning this “subsidization” of the film industry after reports like that one that claimed Louisiana gave more than $27 million in credits to “The Curious Case of Benjamin Button.”
The scrutiny has local film commissioners and those involved in local film production on the defensive.
“We’re not giving away money,” says Tony Wenson, COO of the Michigan Film Office. “We’re really incentivising new business growth and job creation in the state.”
Adds Jeff Spillman, who runs production-services firm S3EG: “They are not a subsidy for film, they are a subsidy for the development of the economy.”
Michigan instituted its program — which includes the possibility of an eye-catching 42% credit — in April. Since then, it has seen an explosion in production: A dozen movies have wrapped, and four are in production. That’s up from the previous year, when the state hosted one film.
The forecast is for about $100 million of direct spend in the state, a figure that does not include ancillary spending, like the money film crews spend after work.
According to insiders, Clint Eastwood’s upcoming “Gran Torino,” one of the high-profile movies shot entirely in Michigan, will receive about $5 million in credits once its audit is complete. “Youth in Revolt” received $4 million.
Wenson declined comment on the numbers but points out that when all is said and done, the final credit outlay will look more like 35%, not the much-ballyhooed 42%. A production receives 42% credit if it shoots in select cities; in the rest of the state, a production gets 40%, though that’s only if it uses a Michigan crew. Since almost all productions have been importing crews — Michigan is only beginning to create its infrastructure — the credit is only 30%.
“That number is not going to kill the budget,” Wenson says.
Some states are hearing a growing call to cap credits. That idea was brought up in Michigan but quickly quashed.
West Virginia, on the other hand, capped its incentives at $10 million a year. The limit was instituted to prevent the state from being overrun by productions as well as to maintain control over growth.
“Ten million dollars is a very manageable number for us,” Jamie Cope of the West Virginia Film Office says.
Louisiana, meanwhile, is standing by “Benjamin Button,” supporting the film after it pumped millions into the New Orleans economy, which is still recovering from Hurricane Katrina. Jennifer Day of the New Orleans Office of Film & Video said the production helped refurbish the city by sprucing up, restoring and fixing the locations it used.
“They were helping to rebuild this city by location by location,” she says.
As for its tax-credit scheme, which includes a 25% motion picture credit, film heads point out that if there are no buyers for the credits in these recessionary times, the state will buy them. The current price is 72 cents on the dollar, rising to 74 cents in 2009.
“It’s important to stress that the economy has its issues, but there is a fail-safe — and that fail-safe is the state of Louisiana,” says Bill Hess, from the city of Alexandria’s office of economic development
Posted 7 November, 2008 in FilmUSA
The Producers Guild of America’s FilmUSA Committee presents a seminar featuring the considerations & choices a Producer must face when making the fundamental decision of where to shoot their film. We will be utilizing an actual case study: an independently financed $2M feature film which has yet to commit to a location. This project is “The Farm”, Branded Pictures Entertainment’s (J. Todd Harris and Marc Marcum) next production. Using a panel of Producers, Production Managers and Film Commissioners, this study will give attendees a side-by-side comparison of the best creative & financial choices for this film.
DATE: SATURDAY, NOVEMBER 15, 2008
LOCATION: Technicolor Theater: 2345 North Ontario Street, Burbank, CA
(One block east of Hollywood Way).
TIME: 10 am – 12:30 pm
MODERATOR: TBD
PANELISTS:
Amy Lemisch, Film Commissioner, CALIFORNIA
Robert Scott Fort, Line Producer [PGA], CALIFORNIA
Dawn Keezer, Film Commissioner, PITTSBURGH, PA
Laura Greenlee, Line Producer [PGA], PITTSBURGH, PA
Scott Robbe, Film Commissioner, WISCONSIN
Nick Langholff, Line Producer, WISCONSIN
Jerry Jones, Film Commissioner, MISSOURI
Jeanine Rohn, Line Producer [PGA], MISSOURI
Jill Simpson, Film Commissioner, OKLAHOMA
Chad Burris, Line Producer, OKLAHOMA
Peter Jasso, Film Commissioner, KANSAS, participating, but not attending
Joel Feigenbaum, Line Producer, KANSAS, participating, but not attending
COST: Free to Members of the PGA, $50 for non-members, payable by check or cash at the door
PARKING: Free parking – entrance off Ontario Street
RSVP: kyle@producersguild.org
PRODUCED BY: The FilmUSA Committee – Eric Klein, Diane Ward, Wayne Hackett
Posted 2 November, 2008 in FilmUSA
FORWARDED: Congress Extends Federal Tax Incentive
The Section 181 tax incentive has been extended through December 2009. This program which was first enacted in 2004 was extended and enhanced by being attached to the $700 billion financial markets rescue plan passed by Congress.Â
The new legislation improves upon the prior law by applying the tax incentive to the first $15 million of all motion picture productions in the USA. The prior legislation was flawed because this threshold amount included all costs, including difficult to predict residuals and participations. This quirk in the law made it risky to accept the incentive if your budget plus these extras might exceed $15 million.Â
The new provisions are retroactive to January 2008. Â
Posted 26 October, 2008 in FilmUSA
Posted 12 October, 2008 in FilmUSA
U.S. SECTION 181 The Federal Bail-out Plan has extended the sunset of this program for another year, until December 31,2009.
The extenders bill that passed Congress and signed on October 3rd by the President includes the following modifications to the film production incentives under section 181 and section 199.
Modifications to Section 181
1) Section 181, which was scheduled to expire with respect to films commencing after 2008, was extended for an additional year. Thus, the benefits of section 181 apply to the cost of any qualifying film and television production commencing before 2010.
2) Under prior law, the expensing benefits under section 181 generally only applied to films that cost $15 million or less to produce. Thus, because the cost of most films exceeds $15 million, the benefits of section 199 were generally limited to television production. The bill eliminates the eligibility cap on the amount of production costs. Rather, under the bill, up to $15 million of production costs may be immediately expensed under section 181($20 million in the case of production in certain low-income communities or distressed areas), regardless of the aggregate cost of the film. The remaining cost of the film would be recovered under the taxpayer’s normal amortization method (e.g., income forecast).
Modifications to Section 199
1) For purposes of section 199, a “qualified film” would include the copyrights, trademarks and other intangibles with respect to the film. Thus, income from the license of copyrights and trademarks relating to a qualified film would be eligible for the section 199 production benefits.
2) The bill favorably modifies the treatment of certain film production partnerships and film distribution partnerships. First, if a partnership produces a film, the bill would treat any partner that has at least a 20 percent ownership interest in the partnership as a “producer” of the film for purposes of section 199. Thus, the income earned by such a partner from its distribution of a qualified film produced by the partnership generally would be eligible for benefits (as DPGR) under section 199. Similarly, the bill would allow income earned by a partnership from distributing a qualified film to be eligible for section 199 benefits, if a partner having at least a 20 percent interest in the partnership produced the film. Thus, the bill generally overturns Treasury regulations holding that production activities of a partnership could not be attributed to a partner, or vice versa.
3) For purposes of the TIPRA wage limit to section 199, the definition of W-2 wages was changed to include any compensation for services paid to “actors, production personnel, directors and producers.” This change was made to reflect the fact that workers in the film industry may provide services in a capacity other than as employees (e.g., as independent contractors or thru loan-out companies, payroll companies or other arrangements) and thus are not paid “W-2 wages” for such services.
4) The bill specifies that the methods and means of distributing an otherwise qualified film do not impact its eligibility under section 199. Thus, according to a technical explanation of the provision (previously released by Joint Tax), the distribution of a film or programming over the internet (i.e., digital programming) or on broadcast television would be treated as a disposition for purposes of section 199. Thus, the advertising and other income attributable to any such distribution of a qualified film should be eligible for section 199 benefits.
Section 502c)(2) amends IRC section 199(c)(6), which defines the term “qualified film.� The additional language broadens the definition of a “qualified film� to include “copyrights, trademarks and other intangibles.� This in turn broadens the scope of “domestic production gross receipts,� in section 199(c)(4((A)(i)(II), increasing the amount of “qualified production activities income� (section 199(c)(1) against which the 9% (phased in) deduction is allowed under section 199(a).
South Carolina is considering legislation that would reinstate the 20% feature film incentive for out-of-state crew; currently out-of-state crew are capped at 10% of the first $35,000 in wages. Qualified television projects earn 20% for out-of-state crew up to $1M. Both qualified film and tv projects can earn 20% for all cast and local hires up to $1M, and 30% for SC goods and services
Attempts are now underway in the Michigan legislature to limit the amount available per year for production rebates. Currently there is no limit or cap, but last week an amendment bill which would put a $50 million per year cap on the rebate was passed by a Senate committee. The House is now out of session until after the election; legislation not approved by both the Senate and House by December 31 may not be carried over to 2009, so passage is unlikely this year. But it is probable that an amendment will be introduced again next year.
Meanwhile, the Michigan Treasury Department has ruled that mileage reimbursements, meal allowances and per diems will not qualify for the rebate unless they are subject to Michigan taxes.
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