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California Film Office Updates Incentive Regs

The California Film Commission has unveiled the full set of newly approved regulations for its expanded Film and TV Tax Credit Program. New procedures for applications, eligibility and audits are now detailed on the agency’s website, along with the CFC’s new project selection and “jobs ratio” ranking. The latter-most piece is perhaps the most sweeping change to the “old” credit program: instead of the lottery system, the 2.0 version of the selection process will include a formula that rewards projects that create more jobs.

The regulations were created by the CFC with input from the industry, then reviewed and approved by the Office of Administrative Law, which vets all agency regulations for the state. In addition to raising the annual credit cap from $100 million to $330 million, the overhauled program was expanded to include TV pilots, one-hour series for any distribution outlet, and high-budget studio features.

The entire set of guidelines can be downloaded here. The complete regulations can be found here.

The agency has also posted qualified expenditure charts and a handy jobs ratio calculator on its main site.

Other key features highlighted by the CFC in their announcement of the new regs:

  • 5% “uplift” for non-independent productions with qualified production expenditures for visual effects, music scoring/track recording or filming outside the Los Angeles 30-mile zone.
  • Category-specific competition – under the new program, different types of productions (e.g., TV, indie films, studio films, etc.) each have a dedicated fund of tax credits, so each project competes directly against comparable (or “like”) projects.
  • An all-new, all-online application process

The agency also gave more detail on summer application dates below. A winter application period for all project types has yet to be announced.

May 11-17, 2015 – Non-independent TV projects only:
  • $55.2 million in tax credits available for New TV series, TV pilots, MOWs, and Mini-series for any distribution transmission
  • $27.6 million in credits available for Relocating TV Series

July 13-25, 2015: Independent Projects and all Feature Films:

  • $40.25 million in tax credits available for feature films
  • $5.75 million available for independent projects
(Source: California Film Commission)

Have incentives questions for California or any other state? Please contact Media Services incentives specialist Ryan Broussard or check out our interactive map here. You can also do a side-by-side comparison of up to four states or regions.

CA Rolls Out First “New Program” Tax Credit Lottery in May

On April 1, the California Film Commission will accept applications for its last-ever tax credit lottery under what is now being referred to the “old program.” The office made an announcement today that a large number of television series productions currently receiving credits will return for an additional season and remain in the program for its final year – leaving only a handful of credits available to new productions and eliminating studio projects from eligibility for the final lottery.

Ten million dollars will still be available for independent productions via the lottery, with old program rules still in effect.

First Application Period for New Lottery May 11-17

The new program will have two application periods for fiscal year 2015-16 (July 1, 2015 – June 30, 2016). The first will be May 11-17, for non-independent television projects only. Credit allocations will be available July 1 at the earliest. Other details from the film commission:

  • $55.2 million in tax credits available for New TV series, TV pilots, MOWs, Mini-series for any distribution transmission
  • $27.6 million in credits available for Relocating TV Series (defined as a series with $1 M minimum production budget, previous season shot outside CA, and must attest that the tax credit is the primary reason for move to the state)
  • Projects will be selected via a new competitive ranking system based on jobs and other criteria

A second application period, to be announced this summer, will cover other types of production. Read more about the old and new programs at the California Film Commission website here. Learn about production incentives nationwide here.

CA State Assembly Unanimously Votes to Supersize Production Incentives

The California State Assembly has unanimously passed a bill that would greatly expand production incentives in the state, extending tax credits for the first time to big-budget studio films and one-hour shows made for network, premium cable and the web. While production budgets for eligible movies are currently capped at $75 million, features of any size would be able to qualify under the bill, with the tax credit applicable to the first $100 million of the budget.

The legislation does not address the current $100 million annual cap on incentive spending by the state, though that issue is expected to be revisited next month, prior to a vote on the state budget. The bill now goes on to the State Senate for consideration in August.

Meanwhile, this year’s lottery for distributing credits to production companies under the current program will be held on Monday.

The California Film & Television Production Alliance said in a statement: “The strength of the unanimous vote demonstrates the Assembly Members’ clear understanding of the vital economic importance of the motion picture industry to California and their determination to return this state to a competitive position.”

To learn more about production incentives in California and other states, contact our incentives expert Ryan Broussard at 504 296 2502 or email ryanb@mediaservices.com.

Read more at Variety.com

Garcetti Appoints New L.A. Film Czar, Requests Tax Credit Extension

Los Angeles Mayor Eric Garcetti has requested an expansion of entertainment tax credits from the state and appointed a new chief advisor on film and TV production. Entertainment lawyer Ken Ziffren, who takes up the advisor position following the death of Tom Sherak, will seek to increase local production through expanded state incentives.

“Stopping runaway production is about protecting our middle class,” said Garcetti. “Ken will be a powerful leader in our fight against other states that are taking our jobs, and he will be aggressive about streamlining government so red tape doesn’t contribute to driving production away.”

According to the Mayor’s Office of Motion Picture and Television Production, which Garcetti established last year following his election, only one out of 45 “big budget” feature films was shot exclusively in California over 2012-2013, representing a loss of thousands of jobs to other states. From 2005 to 2013, California’s share of the 1-hour TV series market declined from 64% to 28%.

“This is a critical moment for our industry and our economy,” Ziffren said. “If we don’t fight back now, these jobs are going to be lost for good, and that would be a devastating blow to our middle class. This is about jobs for carpenters, electricians, makeup artists — good jobs that leave enough over at the end of the month to save for retirement, save for the kids’ college, and to spend in our neighborhoods.” Ziffren brings extensive entertainment industry experience to the new position, having played a key role in resolving a Writer’s Guild strike and represented the NFL in negotiating network TV contracts.

Bloomberg Businessweek also reports that Garcetti has lobbied Governor Jerry Brown and state legislators to double the current tax credit’s $100 million cap and expand it to include commercials, pay-TV programs and movies with budgets over $75 million.

Producers Take Advantage of IRS Forgiveness Program

Good news for production companies concerned about prior misclassification of workers as independent contractors: the Internal Revenue Service has beefed up its Voluntary Classification Settlement Program to be even more beneficial to employers. The program was launched in 2011 to encourage employers to start properly classifying employees who had previously been claimed as independent contractors (paid with 1099’s). The settlement program allows taxpayers who were treating workers as independent contractors to now treat them as employees, without incurring stiff penalties and fines for past infractions.

The IRS has now relaxed some eligibility requirements and extended the program until June 30, 2013. An example of increased eligibility is that the program can now be used by employers who are currently under IRS audit, unless it is specifically an employment tax audit. The IRS has also eliminated the previous stipulation that required users of the program to extend the period of limitations on assessment of employment taxes.

To take advantage of the program, the settlement requires employers to pay just 10% of the employment tax liability from the most recent tax year for the reclassified workers, with no interest or penalties. In exchange for the advantageous terms, the employer agrees to treat that class of workers as employees for all future tax years going forward.

“This is an incredible break for the entertainment industry,” says veteran film and TV payroll consultant Shelley Wolfe. “In the eyes of the government, there are almost no independent contractors in our industry. Studios and production companies have been hit with massive audits and paid millions to the IRS in back penalties for misclassifying crew members. This program gives employers a once-in-a-lifetime ‘get out of jail free’ card. If you have ever paid a crew member as an independent contractor, do yourself a huge favor and look into this program.”

Over 1,000 employers have taken advantage of this program and switched their workers from independent contractors to employees. Learn more about the process here. To speak to a payroll consultant about converting your independent contractors to employees, call (866) 429-9316.

Consortium Pushes for Easing of L.A. Film Permitting Rules

Los Angeles NightA consortium of pro-entertainment business groups in Los Angeles have banded together to offer recommendations to cities across Southern California, which would make it easier to film location days in the area. A revised Model Film Ordinance and Best Practices (MFO/BP) was adopted by the California Film Commission in May, laying out a standardized set of policies for filming in the state. Now the consortium – which includes the state film commission along with the Los Angeles County Economic Development Corporation (LAEDC), FilmL.A. and the Southern California Association of Governments (SCAG) hope to have the policies adopted by local cities as well.

The MFO/BP policies call for relaxing several key permitting rules, some of which have been championed vigorously by local residents in response to filming issues in their neighborhoods. The recommended provisions from the MFO/BP include:

  • Eliminating the city’s business license requirement for film productions.
  • Adjusting the film permit structure to a weekly rate of $650 for the first week and $500 thereafter.
  • Reducing the advanced notice requirements from two weeks to five days.
  • Requiring law enforcement on an as-needed basis only.
  • Reducing the radius required to notify businesses and residents of filming from 500’ to 300’.
  • Reducing the radius required to survey businesses and residents of filming for extended hours from 500’ to 300’.

SCAG’s regional council voted unanimously earlier this month to encourage its 191 member cities and six counties to adopt some version of the MFO/BPs.

“Southern California is home to ‘Hollywood’ – it is our heritage, but cannot be taken for granted,” said Glen Becerra, SCAG President and City of Simi Valley Council Member. “By including the MFO/BP in Phase II of our Economic Recovery & Job Creation Strategy, we are clearly stating that supporting the entertainment industry is critical to our region’s economy and future. In addition, this is only the beginning of government, business and an industry specialist working together to adopt business-friendly principles that secure a prosperous California.”

In making their case for change, the consortium points to some 176,700 jobs and $30 billion in spending the entertainment industry is estimated to bring to the region. A 2005 report commissioned by the CFC reported that 10 “feature films” (budgets greater than $70 million) that leave the state means a loss of $106 million in state revenues… in addition to high value jobs and less quantifiable losses to ancillary small businesses such as hotels, restaurants and dry cleaners. The group is concerned that if it is easier to film in other, tax-incentive-rich states, it will give filmmakers that much more reason to go.

“One of the constant refrains I hear from filmmakers is the need for predictability and uniformity in the film permit process,” FilmL.A. President Paul Audley said. “SCAG’s adoption of the Model Film Ordinance will help urge local communities and county governments to work within a framework of policies that can create a region that is attractive to the Industry.”

Record 322 Applicants for CA Tax Credit; Nearly Doubles Last Year’s Number

California state map cartoonA record 322 applicants submitted projects for the California Film & Television Tax Credit Program last Friday, hoping to be chosen at random for the 20-25% nonrefundable credit for qualifying features and TV series. Because the $100 million annual allotment to the credit is typically not enough to cover all the productions that apply, a lottery is used to select the applicants that actually receive the credit. This year the lottery process, which is completed in one day, drew nearly twice as many submissions as 2011.

Once an application is submitted and vetted by the California Film Commission, it is placed in a queue. During the lottery, queue numbers are chosen at random, and those projects are given the opportunity for a tax credit allocation. Projects that do not get selected in the lottery are placed on a waiting list and offered allocations as they become available due to withdrawals, disqualifications, cancellations of projects, etc. This year, 28 projects were selected out of the 322, though many more from the waiting list could end up receiving credits – for example, last year there were 27 projects selected, but 74 ended up benefiting in the end.

While the film & TV tax credit program is set to expire in a year, a bill has been proposed in the California Assembly to extend the program in the state through 2018. The original tax credit was created in 2009. While the $100 million annual budget and 20-25% credit are considered modest in film incentive terms – consider New York’s 30% state film tax credit, funded by over $400 million per year – the California credit is viewed in some studies as a pivotal factor in a windfall in film production and thousands of production jobs created in the state since the program was initiated.

NY Commercial Tax Credit Extended Through 2015

Statue of LibertyThe AICP has announced New York Governor Andrew Cuomo’s approval of a three-year extension to the Empire State Commercial Production Tax Credit. The extended credit, which appears to have been made retroactive to January 1 of this year, will run through 2015. Launched in 2007, the program as led to a net 3% increase in commercial production activity in the state, according to the AICP. The extension was included in Cuomo’s state budget bill, agreement on which was reached Tuesday.

“It’s an honest, straightforward document that exhibits the fiscal discipline and fiscal integrity that we’ve been talking about,” said Cuomo of the agreed-upon budget. “It also evidences the priorities we’ve been talking about. It’s all about jobs, jobs, jobs; it’s all about economic development.”

The program’s renewal maintains the full $7 million a year funding that producers have come to depend on. The legislature made some minor modifications to this year’s bill, including increasing the amount eligible to companies with productions in upstate New York. Additionally, flexibility has been established between the upstate credit and growth credit in years when the growth pool has a higher demand, and the upstate credit is undersubscribed; providing interchangeability of the pools so unused funds are no longer lost.

According to the AICP, the program is divided into three available pools:

• Downstate jobs credit: Provides $3 million annually to eligible commercial production companies whose principal place of business is within the metropolitan commuter transportation district. The credit is 5% of the total production costs exceeding $500,000 and is distributed on a first come, first serve basis.

Upstate jobs credit: Provides $3 million annually to eligible commercial production companies whose principal place of business is outside the metropolitan commuter transportation district. The credit is 5% of the total production costs that exceed $200,000 and is distributed on a first come, first serve basis. This pool had a previous annual allocation of $1 million.

Growth credit: Provides $1 million annually to all eligible commercial production companies and allows eligible companies to receive a 20% credit on the difference between the total qualified production costs of the current calendar year that are greater than the total amount of production costs of the preceding calendar year. This pool had a previous annual allocation of $3 million.

“I applaud the ongoing support of the commercials business in the State of New York,” said AICP President and CEO Matt Miller. “The unwavering support of the legislature and the Governor for our business – and to the employment of New Yorkers – illustrates their appreciation of the economic impact that our sector has on the state’s economy.”

He went on to acknowledge State Senator Marty Golden of Brooklyn, and Assemblyman Joe Morelle of Rochester, who both introduced legislation in their respective legislative branches, in case the extension was not worked out in the state budget.

The AICP presented 2009 as a sample year, showcasing the dollars and jobs that participating production companies brought to the state via the tax credit:

• 458 projects filmed in New York
• Over $101 million spent in-state by participating companies
• Average total in-state spend per company was $3.4 million
• Over 15,000 jobs generated
• Over 45,000 employment days (1,690 per company) and over 548,000 hours of work

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