San Fernando Valley Business Journal

Report: Film Tax Credits Working

By Staff Report Friday, March 21, 2014

The state’s $100 million film and television tax credit program generated an 11 percent return on investment in its first three years, according to an economic analysis by the Southern California Association of Governments.

The report, issued this week as debate heats up in Sacramento about possibly extending and expanding the program, found that for every dollar of tax credits issued, state and local governments received $1.11 in new tax revenues from assisted productions.

Tax credits were issued to 109 film projects, which generated $248 million in state and local tax revenues, $4.3 billion in economic activity and $1.6 billion in labor income, supporting 22,300 jobs, according to the report.

“You cannot look at this program and not see it as a formidable economic and fiscal benefit,” said Hasan Ikhrata, the association’s executive director, in a statement. “California is very much at risk of losing its film industry, and with this program the past five years, the losses would have even been more painful.”

The report, which studied the program from its start in 2009, found a higher rate of return than a 2012 UCLA study of the program, while a report that year by the nonpartisan Legislative Analyst's Office concluded the program was losing local and state government’s tax revenue.

The program offers tax credits of up to 25 percent to film and television productions, on a lottery basis, with the credits capped at $100 million annually. It was established to slow the loss of productions to other states offering their own financing incentives.

Still, the latest report found that California continues to lose market share, with 75 percent of 41 live-action features with budgets in excess of $75 million filmed outside the state in the 2013 fiscal year. Authored by association economist Christine Cooper, the report recommends lifting the $75 million budget cap on films eligible for the tax credits.

A proposal by Assemblymen Raul Bocanegra, D-Pacoima, and Mike Gatto, D-Burbank, is scheduled to be heard in committee on Monday.

The bill would extend the program for five years and allow films of any size to apply but only allow the credit for the first $100 million in expenditures. The legislation also would allow television pilots to seek credits.