UCLA study gives qualified support to film tax credit program


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While California’s film tax credit is providing an economic benefit to the state, it may not be providing as much of a return to taxpayers as an earlier study claimed.

That’s one of the main conclusions from a new study conducted by UCLA’s Institute for Research on Labor and Employment about a program the state adopted in 2009 to help curb runaway production. The state sets aside $100 million annually for the program, under which filmmakers can receive a credit of 20% to 25% of qualified production expenses (salaries of actors are excluded). They can apply the credit to offset any sales or business tax liability they have with the state.


The UCLA study concludes that the California tax credit ‘is creating jobs and is likely providing an immediate economic benefit to the state,’ but finds that some claims about the program’s value have been exaggerated.

In particular, the study takes issue with some aspects of a report by the Los Angeles County Economic Development Corp. and financed by the Motion Picture Assn. of America that found that for every $1 the state allocated in a tax subsidy, the state recouped as much as $1.13 in spending.

That LAEDC estimate assumes that all productions applying for a subsidy will leave the state if they don’t receive one. However, the UCLA researchers found that some of the productions that didn’t get a credit, which is awarded on a lottery basis, still opted to shoot their films in California. Taking those projects out of the mix reduces the fiscal impact to as much as $1.04 per $1 of tax allocated, not $1.13, according to the UCLA report.

Nonetheless, the study, which included a survey of filmmakers, highlights the important role that state tax credits play in determining where they choose to shoot.

‘Even though there is likely a small benefit to the state, I think the California film and television tax credit is a worthy program because, without it, in the long run, California is likely to lose dominance in an industry that is very important to the state’s economy,’ said Lauren Appelbaum, research director for the Institute for Research on Labor and Employment.

The UCLA study was commissoned by Headway Project, a new think tank headed by former magazine publishing executive Michael Kong. In a separate report he authored, Kong makes several recommendations to improve the state tax credit program, including removing restrictions that forbid the sale or transfer of tax credits to third parties (except for low-budget independent movies) and doubling the funding of the current credit to $200 million a year.


[UPDATE: Christine Cooper, author of the LAEDC report, said she and her colleagues had made a “reasonable assumption” that the productions that received the tax credit wouldn’t have occurred without the incentive. “We are happy to see that the UCLA study confirms our finding of a net positive fiscal impact,’’ Cooper added. “While we can quibble over pennies -- $1.04 versus $1.13 in net positive fiscal impacts -- states like Louisiana are setting production records at our expense.”]


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-- Richard Verrier