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Political Landscape:

State creates tax credits for movies

February 21, 2009

Legislators passed an economic stimulus bill focused on the entertainment industry over the weekend, even as lawmakers continued tense negotiations over a budget plan that remained undecided until Thursday morning.

The state stimulus package passed with bipartisan support and was written by Democratic Assemblyman Paul Krekorian, whose district includes Burbank, home to several major motion-picture studios.

Krekorian’s plan would offer a 25% refundable tax credit for productions that are currently filming outside of the state but opt to move operations to California, according to the legislation.

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The package would also give a 20% refundable tax credit for new productions in the state.

The credits would apply to motion pictures with budgets between $1 million and $75 million, or to TV shows and commercials.

The bill, if it is signed by Gov. Arnold Schwarzenegger, would help reduce the amount of “runaway” film operations that studios decide to locate in other states or countries because of incentives, said Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corporation.

“They’re running away because it’s cheaper to film something somewhere else now,” Sidhu said.

California currently has no incentives for filmmaking in the state, whereas states like New Mexico and New York offer tax credits at or above 25% for movies, TV shows and commercials that are produced there. Canada has emerged as another major competitor for film production, with companies benefiting from up to 55% in credits to help cover labor costs, according to Krekorian.

“That could have really wonderful benefits for all of us here in Burbank because that could stem the tide, so to speak, of production going out of state,” said Gary Olson, president of the Burbank Chamber of Commerce.

The new incentives would help California stay competitive as a home for productions in the entertainment industry, which accounts for 266,000 jobs in Los Angeles County, Sidhu said.

“If California’s a high-cost place to make a movie, then what we end up with is just parts of movies, theoretically set in California, which require a beach scene or something,” Sidhu said. “They would like film a beach scene here and then go somewhere else, and that’s a real issue because the industry isn’t just the stars that we see on the screen?.?.?.?it’s the hundreds of people that we, here in Burbank and the Los Angeles area, see standing around when we see filming [taking place].”

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