Tax Incentives for Film Industry Should Be Approached with Caution, Report States

Article excerpt

Tax breaks offered by competing states and countries appear to have lured away California's once-booming film and television industry, but responding with more subsidies won't necessarily boost production in the Golden State, a new state report concludes.

Released Wednesday by the California Legislative Analyst's Office, an independent office that advises the state Legislature, the report warns California is in danger of losing more production because of competing subsidies, but it also questions the economic benefit of such incentives.

The analysis comes as some Sacramento lawmakers and Los Angeles Mayor Eric Garcetti make an aggressive push to pass a bill this year to expand California's $100 million annual tax credit for the entertainment industry.

Nearly half of all the U.S. film and television industry's jobs are located in Los Angeles County, the report found.

While offering no formal recommendations, the LAO report concedes "California could lose a significant share of this flagship industry" because of other states' subsidies. New York, for instance, offers $420 million for film and TV shoots, which backers say has boosted TV production in that state.

Stating it is "reasonable" to expand the program, the LAO report also suggests legislators not approach economic policy on an industry-by-industry basis. Instead, lawmakers could explore "actions that encourage all businesses to stay or relocate in California, such as broad-based tax reductions or regulatory changes," the report states.

State legislators passed the five-year credit in 2009 to stop a steady flow of film and TV production to states like Louisiana, North Carolina, as well as other countries, which created their own tax incentives. California's program, after receiving numerous extensions, sunsets in 2017.

With lawmakers weighing AB 1839, runaway production and the state's program are under scrutiny.

In the last few years, studies provide conflicting views of the state's $100 million annual program. The LAO report concedes it's very difficult to evaluate the effectiveness of film tax credit, and that offering more subsidies won't necessarily result in an increase in production. …