The ever-increasing supply of tax credits for film and TV production has shaken up the geography of the entertainment business, luring shoots out of – and now back to – California.
But they’ve also rearranged the Hollywood power structure, taking clout out of the hands of directors and stars and instead giving it to accountants as credits and incentives increasingly dictate which projects get made and where they are shot.
With incentives available not just in various states but in countries from Iceland to South Korea, having an accounting expert who understands the latest global incentives available is key to any production shopping for the best bargains, said Joseph Chianese, executive vice president of Burbank film finance consultancy EP Financial Solutions, which tracks the international incentives market.
“The accountants are much more involved than ever before,” he said. “When incentives are being offered, each project is preparing four to six budgets, factoring in the savings and benefits of shooting in various places. Producers use this information to decide where they can go to get the most for their money.”
Those decisions have for years pushed film and TV production out of California and into other states such as Louisiana; North Carolina; and New Mexico, which lured hit Albuquerque-set series “Breaking Bad” with its tax incentives.
But now, a few productions are moving the other way, thanks to recently beefed-up tax incentives in the Golden State. Earlier this month, the California Film Commission announced a handful of series, including “American Horror Story,” “Secrets and Lies” and “Veep” had gone credit shopping and plan to relocate their productions to Los Angeles from Louisiana, North Carolina and Maryland, respectively.
Key factors
Film producer Jason Clark has made 35 films and is no stranger to weighing all the costs and benefits of shooting in various locations. His upcoming comedy “Ted 2” was largely shot in Boston and took advantage of Massachusetts tax credits. He said tax credits and other incentives are hugely important for producers trying to make a picture pencil out.
“The producer must maximize for every dollar used to produce the project and therefore tax credits and rebates are a fundamental part of determining the shooting locale of nearly every film and television show made today,” he said.
There are other factors, too, such as where a story is set, appropriate weather and the availability of cast, crew and equipment, but cost is always at or near the top of the priority list.
“Producers will sometimes rewrite the setting to maximize filming in a location with an advantageous tax incentive,” he said.
California is now a bigger player in this credits-shopping game, thanks to bipartisan legislation Gov. Jerry Brown signed in September to triple the size of the state’s annual film and television production incentive, from $100 million to $300 million, in a bid to retain and attract production jobs.
Amy Lemisch, executive director of the state’s Film Commission, admits credits here are still more modest than in other areas of the country and around the globe, but being at the center of the film business, California has other kinds of incentives.
“Producers have every piece of equipment at their fingertips here, there’s favorable weather for filming and really talented local crews who you are not having to fly and house,” said Lemisch, whose team made some of those arguments to appeal to producers of “Veep” and other shows relocating to Los Angeles.
In-state spending
The 11 TV shows picked to share in the $82.8 million in California credits allocated to new and relocating television projects will be spending a total of $544 million in direct in-state spending, including $216 million in wages, based on data provided with their tax credit applications. July 13 to 25 is the application period for movies to get a slice of the now-larger pie of California credits.
But as California seeks to bring productions back from other states and overseas, the competition remains fierce, said Steve Weizenecker, a partner in the Atlanta office of Indianapolis law firm Barnes & Thornburg.
“Various states are now looking at how to compete with California’s recent incentive increase, but the law is new so the competing states have not had time to evolve their programs – yet,” he said.
Those states still see plenty of opportunity to poach productions shopping for tax credits as California’s new incentive package, while much larger, is capped at $300 million.
“This will leave many productions without any incentive,” Weizenecker said. “As there is more production that still needs a home, we can expect that a number of states will now send representatives to California looking to get the productions that did not get awarded any funds.”
And now that California has upped the ante, other states are likely to amend their incentive packages as the film credit landscape continues to evolve.
Chianese of EP, a subsidiary of Burbank film payroll and production management firm Entertainment Partners, works closely with film commissions and legislators in various states to help form incentive programs.
He said while the offerings tend to be different, they all must have one thing in common: “They have to make sure what they are offering is attractive to the industry but also makes sense fiscally. For the states, the incentives are basically a jobs bill and for the producers they are a way to save costs.”
