Study shows film tax credit pumped $3.8 billion into California economy
California’s film tax credit program is giving taxpayers a bang for their buck. So says a newly released study by the Los Angeles County Economic Development Corp., which shows 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 film 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 and the total gross domestic product in the state increases $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 wrote 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. About 110 projects have been approved under the program, which offers a tax credit equivalent to 20% to 25% of qualified production expenses. Companies can use the credit to offset any sales, income or business use tax liabilities they have with the state.
The Motion Picture Assn. of America commissioned the report. Its findings were seized on by proponents of the program to build support for a bill recently approved by the Assembly that would extend funding for the film tax credits, which expire in 2014, for five years. The Senate is expected to take up the bill in the next two weeks.
“The tax credit program has provided a tremendous economic stimulus for California,” said Assemblyman Felipe Fuentes (D-Sylmar), who wrote 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.”
At a press conference Tuesday at Walt Disney Studios in Burbank touting the report, “Body of Proof” executive producer Matthew Gross cited California’s tax credit as the main reason ABC recently moved the TV drama to Los Angeles from its previous base in Providence, R.I. The show received approval for a $7-million tax credit in March.
LAEDC based its findings on a detailed examination of budgets from nine projects that were allocated $41.4 million in tax credits. These included a new TV series, a movie of the week and feature films with small and medium-size budgets.
Those films produced $847 million in overall spending. That included not only direct production expenses, such as wages for crew members, but also 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 fraction of what New York offers. But advocates say it has slowed runaway production, fueling a 15% increase in overall location shoots in the L.A. area last year with such films as the independent feature “Rampart” and Sony Pictures’ “Friends With Benefits.”
Still, the LAEDC recommended some improvements, including lifting the restriction on films that can qualify for the credit. Currently only movies with budgets of less than $75 million are eligible, excluding most large studio features.
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