California’s Movie Incentives Program Generated $21.9 Billion in Economic Output – Deadline

California’s Film and Television Tax Credit 2.0 program generated nearly $21.9 billion in economic output in the state over five years, at an expected cost to taxpayers of just over $1. .5 billion, according to a new study commissioned by the Motion Picture Association, using data from the California Film Commission.

The study (read it here), which convincingly demonstrates that tax incentives have helped save California’s flagship industry from rampant production, was conducted by the Los Angeles County Economic Development Corporation, an organization private non-profit organization established in 1981 by the Los Angeles County Board. Supervisors.

eBay

The $330 million per year 2.0 program began in July 2015 and ended for the 3.0 program in June 2020, which was enhanced with an additional $90 million per year for current and future fiscal years. According to the study, a total of 169 productions received tax credits under the program as of February 26, 2020, which “supported the equivalent of more than 110,000 jobs in the state by paying $7.7 billion. dollars in labor income, with California state and local governments. it is estimated to have earned $961.5 million in tax revenue from this activity.

“One way to interpret the value of the tax credit is to measure the economic impacts resulting from one dollar of allocated tax credit,” says the study’s cost-benefit analysis, “For every dollar of credit approved tax credit under the California Tax and Film Credit Program, at least $24.40 in production, $16.14 in gross domestic product, $8.60 in salaries, and $1.07 in receipts initial state and local taxes will result from production in the State of California.

In other words, the program pays for itself while creating thousands of jobs and billions in salaries.

The study, which recommends a major expansion of the incentives program, also looked at the economic impact of productions that left the state because they weren’t approved for tax breaks here and filmed elsewhere. More than 30 other states offer incentives, as do many foreign countries.

California Film Commission

“From 2015 to 2020, 157 of 312 projects (50%) who applied for but did not receive a California tax credit left California for another state,” the study said. “If these productions had remained in the state, California would have reaped the economic benefits. Instead, the loss of such spending in California cost the state $7.7 billion in generated economic activity; 28,000 jobs in total; labor income of about $2.6 billion and state and local tax revenues that would have totaled $354.4 million.

The study noted that these numbers represent projects that could be tracked by the California Film Commission, which administers the tax credit program, and that “it is possible, even likely, that more of these productions that did not receive the tax credit were filmed outside of California, or they were never made.

“Since 2000, incentives offered by other states have led to the development of film production industry clusters elsewhere, threatening the loss of jobs in California, which has traditionally been the nation’s unparalleled center for this activity” , notes the study.

“More than 30 states have production incentives in place to attract film, television and streaming productions. These incentives take the form of rebates, grants and tax credits. Incentives offered in the form of tax credits are usually either refundable tax credits, where the state refunds the tax credit at a reduced price, or transferable tax credits, which can be sold to a business subject to state tax.

“California is one of only two states whose tax credits are largely non-refundable and non-transferable. California’s program also differs from those of many other states and countries in that the salaries of senior employees above the line, such as directors, actors, composers, are not qualified wages for purposes of calculating the amount of earned tax credits, and the California economy derives significant benefits from these wages earned in the state.

“Currently, California is the only major production center without a stand-alone visual effects (VFX) tax credit. VFX companies use specialized software and live footage, edited video, and computer-generated imagery to augment productions in post-production, incorporating scenes and footage that would be too expensive, too difficult or dangerous, or downright impossible to film.

California Film Commission

The study makes many recommendations to make California more complete. “Based on the research conducted for this report and its key findings, a set of recommendations have been identified to continue to support California’s iconic film and television production industry, helping to prevent new productions spiraling downwards. other jurisdictions with more attractive credit programs and helping to ensure the continued growth of the industry, its workforce, its infrastructure and the industry cluster effect that helps generate business extra in the various support industries.

These recommendations include:

• Consider increasing the annual allocation of tax credits to avoid future revenue shortfalls.
• Consider extending the duration of the program, making it a longer tax credit incentive program to encourage additional infrastructure investment.
• Consider addressing the lack of a Visual Effects (VFX) tax credit in California to avoid the further loss of this growing part of the industry.
• Consider making California tax credit certificates refundable or transferable, like programs in other states, to attract productions with a greater number of jobs. Consider setting a cap on the amount of tax credits to be refunded or transferred in a year.
• Consider expanding the tax credits available in the new California Soundstage Filming Tax Credit program (SB144) to ensure that California continues to develop its much-needed sound stage production infrastructure. need.

Filming has always been an international activity, but tax incentives have greatly expanded the globalization of the industry. The 1994 North American Free Trade Agreement, which granted Canada a “cultural exemption” to subsidize its film and television industry, sparked a flood of American productions north of the border to take advantage of US tax credits. 35%. Other countries have followed suit, attracting productions from all corners of the globe with generous subsidies in the hope of bringing jobs and US dollars to their shores. In an attempt to stem the tide of runaway production or create film communities where none existed before, dozens of states then began offering their own grants.

California launched its grant program in 2009 with a relatively modest $100 million per year in tax credits. This amount was increased to $330 million per year in 2015. The study notes that in July 2020, the Credit 2.0 program allocated $1.55 billion, with tax credit certificates of $915 million dollars issued by the California Film Commission over five years “to ensure that California is and remains competitive nationally and internationally as other states, provinces and countries compete for preeminence in the international film industry. film and television production.