On Location: Report shows state film tax credits pumped $3.8 billion into California’s economy
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
California’s film tax credit program is giving taxpayers a bang for their buck. So says a newly released study from the Los Angeles County Economic Development Corp., showing the state’s tax credit program pumped $3.8 billion into the California economy and created more than 20,000 jobs in the last two years.
Based on an analysis of expenditures from nine projects that received tax credits from the state in the first two years of the program , the LAEDC found that for each tax dollar allocated the local and state governments get back at least $1.13 in tax revenue, while the total GDP in the state will increase by $8.48.
‘The first two years of the program have been net positive to the state as far as the fiscal impact,’’ said LAEDC economist Christine Cooper, who authored the report. ‘The state is getting more in return than it has paid out.’
The report marks the most comprehensive review to date of the state film tax incentive program, which took effect in 2009. A total of about 110 projects have been approved under the program, which offers a 20% to 25% credit on qualified production expenses. Companies can apply the credit to offset any sales or business use tax they have with the state.
Commissioned by the Motion Picture Assn. of America, the report’s findings were seized on by supporters of the program to build support for a bill recently approved by the state Assembly that would extend funding another five years for the film tax credits, which expires in 2014.
“The tax credit program has provided a tremendous economic stimulus for California,’’ said Assemblyman Felipe Fuentes, who authored the bill to extend the tax credit program. ‘It is a job creator and a job saver at a time when too many Californians are struggling to find work.”
The LAEDC based its findings on a detailed examination of budgets from nine projects that were allocated $41.4 million in tax credits and included a new TV series, a movie of the week and small and medium-sized budgeted feature films.
Those films produced $847 million in overall spending. That included not only direct production expenses, such as wages for crew members, but also secondary expenditures on restaurants, hotels and construction supplies. The projects generated 4,440 jobs and $312 million in wages, contributing $44.6 million in total state and local taxes, according to the report.
California’s tax credit program is not as competitive as other states’ incentives, allocating only $100 million annually, a quarter of what New York state offers. But advocates say it has kept the state in the game and slowed the pace of runaway production, fueling a 15% increase in overall location shoots in the L.A. area last year with such films the independent feature ‘Rampart’ and Sony Pictures’ ‘Friends with Benefits.’
Still, the LAEDC recommended some changes to make California’s incentives more competitive, including lifting the restriction on films that can qualify for the credit. Currently, only movies with budgets of less than $75 million are eligible, effectively excluding many major studio features.
-- Richard Verrier