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Brian Dzyak

STATE FILM SUBSIDIES: NOT MUCH BANG FOR TOO MANY BUCKS

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Is it true that Dogfather led to other films being made there?

 

OMGosh, in a huge way! When I was shooting Against The Wild in the Parry Sound area last year there were TWO(2) other features shooting in Parry Sound at the exact same time! We were competing with each other for resources, and this in a town of 6, 000 people! Do you think a town of 6, 000 can sustain three film crews at the same time? It's tough for them to sustain one let alone three!

 

One of those movies starring Meat Loaf was using the house I shot The Dogfather in as their primary location.

 

R,

 

Oh sorry I already talked about the other shoots in the older post, but you get the idea.

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Since Brian loves to post all the studies that elevate his point of view that film tax credit programs do not benefit local economies. I guess it's time I start posting some of the many studies that show the opposite.

 

Ok let's start with Boston!

http://www.bostonmagazine.com/news/blog/2013/05/22/massachusetts-film-tax-credit-study/

 

 

 

Boston—and Massachusetts as a whole—have become a hotbed for making everything from blockbuster films to independent movies, and the Motion Picture Association of America is giving the Bay State a big incentive to keep the cameras rolling.

In findings from a report highlighting the beneficial economic impact of the Massachusetts Film Tax Program released by the association this week, officials said the state generated $375 million in total economic output through the $38 million in tax incentives awarded to the film industry in 2011, or around $10 in local spending for every $1 awarded to moviemakers through the program.

The study claimed that from all of the Jennifer Lawrence sightings, the Ben Affleck appearances, and the Bradley Cooper cameos, the tax breaks that brought the stars to the state led to the creation of 2,220 full-time equivalent jobs across all industries in Massachusetts in 2011.

“[The] study reconfirms that incentivizing productions creates jobs and generates enormous economic return for local and state economies,” said MPAA Chairman and CEO Senator Chris Dodd. “Massachusetts is the latest example of a state that is benefiting tremendously from a thriving local film industry. The steady stream of Massachusetts productions means more jobs for entertainment industry workers.”

The study, titled “Economic Impacts of the Massachusetts Film Tax Incentive Program,” found that since the tax breaks came to the state in 2006, total production employment has increased by 46-percent, from 1,630 jobs in 2006 to 2,380 jobs in five years later.

The study also noted that, “upon its completion, the construction of New England Studios will have supported 440 full-time equivalent jobs across all industries, generating $35.6 million in personal income and $62.3 in economic output for the Commonwealth.”

In a report released by the state’s Department of Revenue in March, which highlighted the tax incentive program, officials said “not all production spending benefits the Massachusetts economy” or its residents, however, and some spending “‘leaks’ out of the Commonwealth’s economy if spent on imports of goods or services, or employment of non-residents,” the report said.

Information in the DOR’s findings showed that less than 40 percent of the millions spent in the state actually went back to local filmmakers and businesses, and Hollywood honchos made the most gains. The findings came out two months after Governor Deval Patrick recommended a capped budget for the incentives, which he called “inflated bonuses” given to top brass actors.

One thing the report failed to recognize, however, was the “impact of potential increased economic activity” resulting from “greater exposure of the Commonwealth through films and other productions that are made in Massachusetts,” along with the fact that having a few famous faces floating around the city for a few months “might be tantamount to advertising.”

 

R,

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OMGosh, in a huge way! When I was shooting Against The Wild in the Parry Sound area last year there were TWO(2) other features shooting in Parry Sound at the exact same time! We were competing with each other for resources, and this in a town of 6, 000 people! Do you think a town of 6, 000 can sustain three film crews at the same time? It's tough for them to sustain one let alone three!

 

One of those movies starring Meat Loaf was using the house I shot The Dogfather in as their primary location.

 

R,

 

Oh sorry I already talked about the other shoots in the older post, but you get the idea.

Assuming you're not being satirical, congratulations, Richie. If you've influenced your entire nation towards film production in Ontario, that's HUGE. Very cool!!

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One of those movies starring Meat Loaf was using the house I shot The Dogfather in as their primary location.

 

 

Which would seem to indicate they had knowledge about the production. I'm still curious about how word got around. Did the meatloaf thing share any crew with your production (of the Dogfather)? How do you think they knew about Parry Sound, or even that house!?

 

Freya

Edited by Freya Black

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A film tax credit fiasco Tax incentives for movie and TV filming don't bring lasting benefits to the taxpayers who subsidize them. Worse, many such jobs get outsourced overseas.

 


By Michael Hiltzik

August 2, 2013, 6:24 p.m.

The movie "42" arrived in theaters this spring swaddled snugly in the American flag.

Studio marketers declared the film to be "the true story of an American legend." With good reason: It's hard to find a more uplifting sports story than Jackie Robinson's battle against racism on his way to becoming one of the greatest ballplayers in history.

"42" evoked its bygone era by filming extensively in Georgia, Alabama and Tennessee. The filmmakers collected millions in subsidies from those states' taxpayers, who proudly followed the production via local newspaper stories detailing its step-by-step progress from location to location.

 

 

 

And then the producers of this all-American story co-financed by American taxpayers recorded its soundtrack in London.

"It's a classic story of corporate greed," says Paul Frank, a spokesman for the American Federation of Musicians, which represents unionized musicians in the film industry. "Taxpayers are subsidizing the outsourcing of jobs."

The problem of "runaway production" — California's loss of shooting days to other states, largely due to the generous tax credits and other incentives offered elsewhere — is a staple of industry panel discussions.

But there's much less discussion about the impact of filmmakers' incentive-hunting on the business of postproduction, including music recording and digital effects. Many of Hollywood's franchise pictures are scored abroad, including the "Hunger Games," "Iron Man" and "Avengers" features.

Although AFM's contracts with major studios such as Disney,Fox, Universal and Warner Bros. require that the scores of those studios' productions be recorded in the U.S. at union scale, the contracts generally don't apply to studio subsidiaries or specialty film units such as Fox Searchlight, Universal's Focus Features and Disney's Marvel Entertainment.

Lionsgate, which produces the "Hunger Games" and "Twilight" movies, isn't an AFM signatory, and union officials say their attempts to reach an agreement have been rebuffed. They got the same cold shoulder from Legendary Pictures, the Wall Street-backed studio that brought out "42," whenthey objected to its plans to record music overseas after pocketing millions in taxpayer handouts. Lionsgate, Marvel and Legendary Pictures all refused to comment.

Hollywood's fretting about runaway production prompted the state Legislature to create a $100-million annual program to pay tax credits of up to 25% of California spending for some smaller-scale feature films and certain TV movies and series; last year the program, which originated in 2009, was extended through 2015.

But the postproduction parts of the business don't get any special help from the state program. Although in-state spending on music and digital effects by eligible productions is subject to the tax incentives, nothing in the rule book requires that these crucial functions be performed in California, or at least in the U.S. That's a change that the American Federation of Musicians thinks should be on the table.

"We've had lots of conversations about how to make postproduction a part of the incentive," said John Acosta, vice president of AFM Local 47, which serves most of Southern California.

The fact that the conversation is still taking place shows how half-baked the California program has been. Producers applying for the credit don't have to show that they would film outside the state without it. Productions are accepted into the program by lottery — first come, first granted.

And obviously no effort has been made to figure out which segments of the film industry are most at risk, and aim the money in their direction.

But those are typical flaws in the deeply flawed concept of film incentives. These tax-financed handouts are a mug's game in which Hollywood has played state legislators nationwide for suckers. More than 30 states pony up more than $1 billion a year in subsidies to lure star-laden productions, based on the fantasy that they're creating permanent job growth.

They're wrong. An objective study of Louisiana's pioneering incentive program found that in 2010 the state paid out $7.29 in incentives for every dollar in revenue brought in. "People are getting rich on this deal, and it's not Louisiana taxpayers," concluded the study's sponsor, the Louisiana Budget Project.

California's program, which was enacted as a defensive bulwark against poaching by the other states, doesn't pay its own way either, according to the state Legislative Analyst's Office. That nonpartisan body concluded last year that state and local tax revenue almost certainly came to "well under $1 for every tax credit dollar in many years."

That said, there's no question that film musicians need help. About 2,000 California musicians rely on film score work as their main source of income, according to Marc Sazer, head of the recording musicians caucus of Local 47. For a feature film they'll earn roughly $550 to $640 for a typical recording day comprising two sessions of three hours each. Producers pay an additional 10.9% into the musicians' pension fund and $48.54 per day for health insurance.

Although Los Angeles is still the world center of recorded film scores, it's lost ground to European locations, especially London. From 2000 to 2010, the number of the 100 top-grossing features with L.A.-recorded scores each year fell from 68 to 55, while London's share rose from 19 to 27.

Big money is hidden within those statistics: The "Twilight," "Hunger Games" and "Avengers" franchises alone account for tens of millions of dollars in wages, Sazer estimates, as well as foregone contributions to retirement and health benefits.

The trend toward recording offshore may not be due strictly to wage scales, which the AFM says are roughly comparable in L.A. and London. One difference is in residual payments for such secondary markets as home video and broadcast and cable TV showings. Under the U.S. contract the musicians divvy up 1% of the producers' gross license fees; in London, their share is nothing.

It's been suggested that the AFM could bring more recording home by giving up its residuals. "L.A. has to become competitive or in 10 to 15 years there will be no industry here," argues Richard Kraft, an agent for film composers (who aren't covered by the union).

Responds Dennis Dreith, a composer who oversees the AFM fund that collects residuals for the musicians: "Giving that up would be devastating in many ways." Musicians on a successful picture could receive income into their retirement years; Dreith says some are still collecting for "E.T. the Extra-Terrestrial," which was released in 1982.

As long as states compete with one another to hand over millions to movie moguls while cutting essential services for their own citizens, film incentives will continue to foster a race to the bottom.

California could be different, if it only aimed its fire where it's needed. As Dreith told me, "We shouldn't be allowing people to use our tax incentives to employ foreign workers."

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.

 

 

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Since Brian loves to post all the studies that elevate his point of view that film tax credit programs do not benefit local economies. I guess it's time I start posting some of the many studies that show the opposite.

 

Ok let's start with Boston!

 

http://www.bostonmagazine.com/news/blog/2013/05/22/massachusetts-film-tax-credit-study/

 

 

R,

 

You're entitled to post all the propaganda you'd like, but real audits illustrate that claims of net gains are lies. Of course film commissions are going to claim benefits. It's their job to spew out whatever keeps them employed.

 

http://realfilmcareer.com/louisiana-lawmakers-stunned-about-cost-of-film-subsidy-program-and-industry-admits-loss/

 

 

 

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You're entitled to post all the propaganda you'd like, but real audits illustrate that claims of net gains are lies.

 

Oh look everyone....when Brian posts a link to one of his stories decrying tax credits we must all accept that as the gospel truth, because the great truth speaker hath spoken it.

 

When Richard posts a link outlining the benefits of tax credits it's "propaganda."

 

R,

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And for the record....I recorded the score for Against The Wild in Prague. Big deal. No one cares Brian.

 

Good luck finding a member of the public who will pick up a DVD at Walmart and say, "I'm not buying this because the producer didn't use union labour." Gimme a break.

 

R,

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I'd love to! :)

 

The avenue may be to attack the problem under extortion statutes. Production companies/studios are ostensibly using extortion techniques to pit governments against one another in order to extract the largest bribes from tax payers.

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Sorry but a production company saying to a government, "give us XYZ benefit or we'll move to another state" is not extortion by any definition. Extortion strongly implies illegal activities, and there is nothing illegal about companies pitting states against each other. It may not be what unionized workers in one state want to see happen, that may be true. But it certainly is not illegal.

 

Using your arguments all of the auto plants that have set up shop in Tennessee should be forced to relocate back to Detroit and sign contracts with the UAW.

 

No one could stop the auto industry from fleeing Detroit, and no one can stop the movie industry from fleeing LA either. Besides as I've said 10, 000 times before in this thread.....LA cannot offer the locations for every movie that is going to be made. It's a bit tough to shoot on the arctic tundra in Santa Monica is it not?

 

LA will always be the centre of the business end of the movie industry, that is for sure. But the production side for features is anyone's game now.

 

R,

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Louisiana movie tax credit reviewed by committee

http://www.nola.com/politics/index.ssf/2013/11/louisiana_movie_tax_credit_rev.html

By Julia O’Donoghue, NOLA.com | The Times-Picayune

A new state advisory committee will meet on Monday to discuss what, if anything, should be done to entertainment industry tax credits, including those given to the film industry, in Louisiana.

The state’s film production slowed for four to five months last year over concern that Gov.Bobby Jindal and the state legislature might cut or restructure the entertainment tax credits. That type of uncertainty isn’t good for Louisiana’s burgeoning movie and digital media industry, said state Sen. J.P. Morrell, D-New Orleans.

“The people who work in this industry need to have some security,” said Morrell, “We can’t have a situation where the industry is getting ready to do some movie projects and then they have to put everything on hold because they don’t know what is happening with the tax credits. That can’t happen year after year.”

Louisiana’s entertainment tax credit has been a sore point for several state budget experts, who say the tax breaks cost the state too much money. In 2010, the film tax credits cost the state nearly $170 million in revenue, according to a Legislative Fiscal Office report released last spring.

“We have to think about what it costs to have these programs,” said Greg Albrecht, chief economist for the Legislative Fiscal Office.

Morrell is supportive of the tax credit, but agrees that the costs of the tax program need to be controlled, especially as the credit becomes more popular.

“We have to stop it from ballooning with no end in sight,” he said.

 

 

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"The state’s film production slowed for four to five months last year over concern that Gov.Bobby Jindal and the state legislature might cut or restructure the entertainment tax credits. That type of uncertainty isn’t good for Louisiana’s burgeoning movie and digital media industry, said state Sen. J.P. Morrell, D-New Orleans."

 

More good news for Ontario! Uncertainty in the US states just drives more US production into Ontario which offers a bankable rock solid tax credit where there is zero talk of ending the program, and there has been no history of stopping and re-starting the program.

 

When Michigan's tax credit collapsed it drove a ton of work over the border and into Ontario.

 

R,

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Interesting pair of articles about Mauritius. Article one highlighting the tax breaks offered to attract Hindi film. Article two discussing how Mauritius is used as a tax haven for Corporations to escape taxation at the expense of everyone else.

Big shock. <rolleyes> Just need to replace the word "Scheme" with "SCAM."

http://www.thehindubusinessline.com/industry-and-economy/mauritius-offers-30-rebate-to-attract-bollywood/article5300723.ece

 

MAURITIUS, OCT 31:

Mauritius, known for its scenic beauty and exotic locales, has launched a rebate scheme to attract film makers, especially from Bollywood, to shoot in the picturesque island nation.

The Film Rebate Scheme allows for a 30 per cent refund on all the Qualifying Production Expenditures (QPPE) incurred by all film producers in respect of their projects in Mauritius.

This scheme puts Mauritius at par with other destinations like Malaysia and Abu Dhabi which offer a 30 per cent rebate.

The scheme was launched earlier this week by the country’s Vice Prime Minister and Minister of Finance & Economic Development Xavier—Luc Duval and Minister of Arts and Culture Mookhesswur Choonee, in the presence of Bollywood Actor Jackie Shroff.

“The (film) industry is estimated to bring MUR 1 billion annually in foreign exchange to Mauritius,” Duval said at the launch here.

It is also expected to generate employment for SMEs, designers, artists, hoteliers, with significant beneficial spill over effects on other sectors like tourism, trade, travel, transport and retail, he added.

The Board of Investment in Mauritius has recorded an increasing number of potential interests from local producers as well as production houses from China, South Africa and India. So far, expressions of interest have been received mostly by Indian producers.

Jackie Shroff said: “Mauritius should start producing movies. It should have a specialised school offering courses on script-writing and editing as well as crash courses on film making”.

As many as 198 films, commercials and serials from India have been shot in Mauritius since 1977.

MUR: Mauritius rupee

 



http://www.rawstory.com/rs/2013/11/02/deloitte-promotes-mauritius-as-tax-haven-to-avoid-big-payouts-to-poor-african-nations/

Deloitte promotes Mauritius as tax haven to avoid big payouts to poor African nations

A global consultancy giant has been accused of advising big business, including UK firms, on how to avoid paying tax in some of Africa’s poorest countries.

ActionAid has obtained documentation showing that Deloitte, which employs more than 200,000 people in over 150 countries, has been advising foreign companies on how, by structuring their investments through the tropical island of Mauritius, they can enjoy significant tax advantages.

The charity claims that the strategy could help companies to avoid paying hundreds of millions of dollars in tax. Deloitte insists the strategy is not about tax avoidance and attracts much-needed investment to the countries involved.

A Deloitte document, “Investing in Africa through Mauritius”, passed on to the Observer, advises on investing in African companies via the island nation, which has a population of 1.3 million. The document provides the example of a foreign company investing in Mozambique, where more than 50% of the population live below the poverty line and average life expectancy is 49 years. Normally, the foreign company could expect to pay a withholding tax on the dividends flowing back to it from Mozambique of 20%. A sale of its Mozambique investment would see the company liable for a capital gains tax bill of up to 32%.

However, the Deloitte document explains that, if the foreign company made its investment through a holding company in Mauritius, it could limit the withholding tax it would have to pay to just 8%, while capital gains tax would be reduced to zero. The potential value of capital gains tax to developing economies is considerable. An Italian oil company was recently required by the Mozambique government to pay $400m (£250m) in capital gains tax.

The document explains that Mauritius could tax the holding company’s profits at 15%, but that this does not happen in practice. The firm explains that any tax liability in the island is wiped out by a foreign tax credit, issued because the company has been taxed in Mozambique.

Deloitte presented the document at a conference for international businesses two weeks before this year’s G8 conference in Loch Erne, Northern Ireland, when world leaders promised action to help impoverished nations improve their tax regimes. It followed claims by David Cameron that aggressive tax avoidance was “morally wrong”.

More than 80 major international organisations attended the conference addressed by Deloitte. Representatives from major banks and legal firms, including Clifford Chance, Citibank, JP Morgan, the World Bank, Standard Bank and several Chinese firms, were present.

Tax campaigners are increasingly concerned about how Mauritius is used by big business with interests in Africa. The island has taken steps to aggressively position itself as the “gateway to Africa” for companies looking to invest in the continent. It currently has 14 double taxation treaties in place with African countries and a further 10 under negotiation. But ActionAid said the terms of the treaties could easily be abused by companies seeking to minimize their tax bills.

The charity wants a global clampdown on tax avoidance, which it says costs developing countries hundreds of billions of pounds a year in lost revenue. It said that, if companies paid their fair share of tax, the money could be used to fund food, health and education programs. It cited the example of a British sugar company operating in Zambia. The money saved by the company through the legitimate use of tax avoidance schemes was enough to put 48,000 of the country’s children through primary school every year.

“The tax strategy advised by Deloitte could potentially be used to deprive some of the poorest countries in the world of desperately needed tax revenues,” said Toby Quantrill, ActionAid Tax Justice Policy Adviser. “In using the example of Mozambique to illustrate their strategy Deloitte chose a country where the average income is less than two dollars per day and one third of the population is chronically food insecure. Developing countries need to grow their tax revenues, which are vital to help lift people out of poverty. But that can only properly happen if large companies stop avoiding their taxes.”

A Deloitte spokeswoman said it was wrong to describe applying double tax treaties, such as that between Mauritius and Mozambique, as tax avoidance: “The absence of such treaties could result in a reduction of investment, and less profit subject to normal business taxes in the countries concerned.”

 

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Wow New Zealand picks up three more huge blockbusters. That's going to employ a lot of people there. It really is amazing, there was zero film industry in NZ when I lived there from 87-89.

 

So Canada and the USA are shut out of jobs, again. Good job NZ, you know how to bring in film work!!

 

http://www.cbc.ca/news/arts/james-cameron-3-avatar-sequels-will-be-shot-in-new-zealand-1.2465494

 

R,

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Basically what's going on here is that taxpayers are footing upwards of 1/3 of a film's budget. So why aren't those taxpayers being treated like co-financiers/producers and receiving points upfront and points on the backend grosses? Because all that's really going on right now with this tax "incentive" scam is that Corporations (in and out of the industry) are getting away with paying little to no taxes which leaves workers in all sectors to foot the bills to pay for schools, roads, and other public expenses while those at the top get to hoard more wealth that they don't really need.

 

If the general public (particularly in Georgia and Louisiana) had any idea just how badly they were being fleeced by Corporate extortion that plays States (or nations) against others in search of the largest bribes disguised as "tax incentives," there would likely be a revolt. Unless the lure of "bright shiny objects" in the form of movie starts blinds out reality, that is.

Hollywood's new financiers make deals with state tax credits

Brokers take the credits given to studios for location filming and sell them to wealthy people and companies looking to shave their state tax bills.

 

http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-hollywood-financiers-20131226,0,5151886.story#ixzz2ob5fkGKz

 

 

By Richard Verrier

December 26, 2013, 5:30 a.m.

ATLANTA — Ric Reitz makes movies. He helped bankroll the Matt Damon thriller "Contagion," Clint Eastwood's "Trouble With the Curve" and the Robert Downey comedy "Due Date."

 

Reitz, an energetic 58-year-old, doesn't hang out at the Polo Lounge, red-carpet premieres or swank offices in Century City. Instead, he works out of a former cotton mill near Martin Luther King Jr.'s boyhood home, hustling for business at Chamber of Commerce dinners and Rotary Club lunches. Recently, he was looking forward to attending a meeting of prosperous chicken farmers.

 

Reitz is one of Hollywood's new financiers. Just about every major movie filmed on location gets a tax incentive, and Reitz is part of an expanding web of brokers, tax attorneys, financial planners and consultants who help filmmakers exploit the patchwork of state programs to attract film and TV production.

 

In his case, he takes the tax credits given to Hollywood studios for location filming and sells them to wealthy Georgians looking to shave their tax bills — doctors, pro athletes, seafood suppliers, beer distributors and the like.

 

"I've got a giant state of people who are potential buyers," he said. "It's the funniest people who are hiding under stones."

 

The trade benefits both sides. The studios get their money more quickly than if they had to wait for a tax refund from the state, and the buyers get a certificate that enables them to cut their state tax bills as much 15%.

 

About $1.5 billion in film-related tax breaks, rebates and grants were paid out or approved by nearly 40 states last year, according to Times research. That's up from $2 million a decade ago, when just five states offered incentives, according to the nonprofit Tax Foundation.

 

Film tax credits have become so integral to the filmmaking process that they often determine not only where but if a movie gets made. Studios factor them into film budgets, and producers use the promise of credits to secure bank loans or private investment capital to hire crews and build sets.

 

"You just follow the money," said Ben Affleck, the actor-director who said he would shoot part of his upcoming film "Live by Night" in Georgia. "What happens is that you're faced with a situation of shooting somewhere you want to shoot, versus shooting somewhere you'd less rather shoot — and you get an extra three weeks of filming. It comes down to the fact that you have X amount of money to make your movie in a business where the margins are really thin."

 

Box office top 10 of 2013

 

The credits and incentives can cover nearly one-third of production costs. In 14 states, there is an added benefit: They can be sold, typically enabling the filmmakers to get their money months sooner than if they had to wait for refunds. States that permit the sale of tax credits, including Georgia and Louisiana, are now among the most popular for location shooting.

 

Tax credit brokers like Reitz, although little-known outside the industry, play a key role in greasing the skids of location shooting. Reitz and his partner sold $1 million in credits in 2009, their first year in business. Their company, Georgia Entertainment Credits, did $15 million last year, and they expect to hit $30 million in 2014.

 

Most referrals come from entertainment industry attorney Stephen Weizenecker, whose clients include Viacom Inc. and Comcast Corp.

"He has been a great advocate for the industry," Weizenecker said of Reitz. "He gets buyers in the door."

 

Not everyone is such a fan. Hollywood's trade workers — the electricians, carpenters, caterers and others who work behind the scenes — have long complained that they've lost their livelihood as states vie for film business with ever-richer incentives. The number of top-grossing films shot in California has plummeted 60% in the last 15 years, according to a Times review of public records, industry reports and box-office tracking data.

 

Some economists question whether these programs create long-term benefits to the local communities they are supposed to help. The sale of tax credits, meanwhile, has triggered criticism that companies and people with no connection to the film industry are benefiting from film credits.

 

Selling tax credits is "a particularly bad public policy because they allow purchasing corporations to shelter income from something unrelated to their activities," said Lenny Goldberg, executive director of the California Tax Reform Assn.

 

Most states won't say who is buying and selling tax credits, considering it to be confidential.

 

Illinois and Pennsylvania are exceptions, and disclosed complete lists of buyers and sellers in response to public records requests from The Times.

In Illinois, location tax credit buyers included retailers Kohl's and Macy's, ketchup maker H.J. Heinz and Bank of America. About $40 million in credits were sold last year from producers and studios including Fox and NBCUniversal.

 

"There's value in these programs in that some film companies, particularly smaller ones, may qualify for a tax credit but may not be able to use it," said Nicole Garrison-Sprenger of U.S. Bank, U.S. Bank, which last year bought more than $11 million in Illinois state tax credits. "Rather than let those dollars go to waste, they sell the tax credit to a third-party purchaser such as U.S. Bank. As a result, the film company has the financing that they might not otherwise have for their production."

 

In Pennsylvania, energy company Exelon Corp. helped underwrite the Jason Statham thriller "Safe" by buying a $4.3-million tax credit (for the discounted price of $3.7 million). Other recent buyers in Pennsylvania included Apple Inc. and Richard Mellon Scaife, heir to the vast Mellon banking fortune. Scaife bought a $1-million tax credit for the Denzel Washington film "Unstoppable" for $900,000, cutting his taxes by $100,000, records show.

 

Pennsylvania's maximum 30% tax credit was a chief draw for producers of the 2012 drama "Promised Land." The film's creative team — producer Chris Moore, director Gus Van Sant and actor-producer Matt Damon — chose the state in part because it allowed them to sell a 30% tax credit.

 

Moore said he spent six weeks in meetings at his Los Angeles office and Universal Studios' Focus Features unit, where accountants laid out competing offers from New York, Massachusetts, Georgia, Oregon and Pennsylvania.

 

"It's like the wild, wild West with so many people promising you money," said Moore, who also produced "Good Will Hunting" and "The Adjustment Bureau." "If you have a $100-million Brad Pitt movie, you just call 15 different film offices, and you're going to have the governor calling you at home saying, 'Hey, man, here's why you should do it in Iowa.'"

 

Georgia was appealing because its credit covered actors' salaries, but the "look" wasn't right for the story. The filmmakers considered Oregon, but the state's 20% cash rebate wasn't competitive.

 

New York had a stronger credit, but skilled workers were not available upstate, where the producers wanted to film. That would mean importing a crew and paying their housing and transportation costs.

 

Ultimately, Moore and his partners chose a town near Pittsburgh. They could hire local crews and get $3.3 million in state tax credits. The credits were transferred in May to Comcast, owner of Focus Features.

 

Companies and wealthy individuals typically learn about the credits from their tax attorneys, accountants or financial advisors.

Along with cutting taxes, buyers say it's also a chance to promote economic growth in their own states.

 

Bryan Marshall, who owns an industrial equipment distribution company in Lawrenceville, Ga., said he saved $18,000 in taxes by buying a $150,000 Georgia film tax credit.

 

"It was a no-brainer in my situation," Marshall said, adding: "It's been great for Georgia to get some of that California money."

 

Reitz and partner Wilbur Fitzgerald began selling tax credits shortly after Georgia sweetened its tax incentives in 2008.

 

The men got to know each other working as character actors on TV shows filmed in Georgia, including "In the Heat of the Night." They saw their livelihood threatened by other states offering richer deals to Hollywood and joined a coalition of state film industry advocates campaigning for more attractive incentives.

 

The expertise they gained researching incentive programs turned into a business.

 

"We'd get phone calls from practically every studio in America asking us about the tax plan and how it would work," Reitz recalled. "We said: 'Maybe we should become consultants and get paid for this.'"

 

State tax incentive programs vary, but most are structured knowing that film and TV companies based in California or New York don't have significant tax liabilities in other states. So they either pay a rebate after production is wrapped or allow the credits to be sold.

 

In Georgia, the tax credit is up to 30% of the money spent on production in the state (20% plus a 10% bonus for promoting the state). That includes not just location filming costs, but money spent on salaries for actors and crews and any costs for building sets. On a movie with a $100-million production budget, the state tax credit could be up to $30 million.

 

Georgia doesn't pay a rebate, so if studios don't have a tax liability there they must sell the state tax credit to gets its benefit. That reduces the value of the credit to the studio, because it must give a slice of the credit to the buyer and pay a commission to brokers like Reitz. So in the case of a $30-million credit, a studio that decides to sell it would net about $26 million, after broker fees and other costs.

 

Spending an afternoon with Reitz in his Atlanta office gives an insight into how the process works.

 

On this day, Reitz was working to sell off a $147,000 chunk of a multimillion-dollar tax credit Viacom was getting for filming a variety of movies and TV shows in Georgia. Viacom owns the BET, MTV and Nickelodeon cable channels as well as Paramount Pictures, which shot the movies "Footloose" and "Flight" in Georgia.

 

He had jotted down a list of half a dozen potential buyers on a yellow notepad, including an NFL player, a Middle Eastern investor, a Florida-based retailer and an oncologist, who had been referred to him by an accountant friend.

 

Reitz, wearing bluejeans and resting on a leather sofa next to an antique movie light, called the doctor first.

 

"Let me tell you what you're going to save," Reitz said, pausing to punch some numbers into his laptop. "I can get you 88 cents on the dollar," he said moments later. "We can knock this down by $11,000."

 

The oncologist didn't take long to give his answer. He agreed to wire Reitz $81,699. In return, the doctor will get a tax credit voucher with a face value of $92,840, which he can apply toward his 2013 Georgia state income tax bill.

 

Reitz, meanwhile, will earn a commission of 2%, or $1,857, for his short phone call with the oncologist. As is often the case, he'll split the commission with another broker who worked on the deal. After the commission and other fees, Viacom will end up with $79,842 from the transaction.

 

"In the early days, people were very skeptical," said Fitzgerald, Reitz's partner. "Now it's an easy sell."

 

Big deals can be lucrative. The going rate for, say, a $20-million credit would be $17.6 million before fees. Reitz and Fitzgerald would pocket a $200,000 commission, or 1% of the credit amount, and probably share some of that with others who worked on the deal.

 

Such large paydays are rare, however. A few minutes after his call with the doctor, Reitz got an urgent email from Weizenecker, the entertainment industry attorney. Viacom and TV One, a cable network co-owned by Comcast, had sold off more than $6 million in film tax credits to various investors but had $325,000 remaining. Did he have any buyers?

 

Reitz scanned his list of buyers and quickly called Weizenecker.

 

"I can commit them to a contract by tomorrow," said Reitz, whose authoritative voice has led to his being cast as TV judges, policemen and lawyers. "If you can scare up another $400,000 to $500,000 from Viacom, I can sell that just as quickly."

 

Although tax credits have been blamed for loss of production in California, they have been a boon for Hollywood's financial consultants.

Burbank-based Entertainment Partners, a big payroll-services provider, says it has handled the transfer of more than $200 million in tax credits for 100-plus projects since 2011. Most of the buyers are Fortune 100 companies.

 

Entertainment Partners has doubled to more than 800 employees in the last eight years, opening offices in Georgia, Louisiana, North Carolina, Utah and Alabama. Most of the employees work in Burbank, where a team of 18 workers advises companies on how to apply for, sell or monetize their credits. The company employed just one person to do that in 2006.

 

"We get 2,000 to 3,000 phone calls a year from clients," said Senior Vice President Joe Chianese, who launched the tax credit department.

The team draws up budgets and summaries of each state's incentives — eight budgets for a single film is not uncommon — while keeping tabs on any legislative changes that could affect film funding.

 

Entertainment Partners keeps a list of 25 companies that regularly purchase credits and has three full-time brokers who handle the sales.

"It's not just a phone call and handshake. There's a lot of work and discussion involved," Chianese said. "It can take weeks, it can take days."

Chianese also makes cold calls to prospective buyers and relies on leads from his staff, many of whom worked for major accounting firms with clients searching for tax breaks.

 

"Eight or 10 years ago it was, 'I want a beautiful mountain, should I go to Montana or Colorado?'" said Mark Goldstein, chief executive of Entertainment Partners. "Now it's, 'I can re-create anything. Just tell me where the money is.'"

 

richard.verrier@latimes.com

Times researcher Scott Wilson contributed to this report.

 

 

 

http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-hollywood-financiers-20131226,0,5151886.story#ixzz2ob5n1rNL

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Basically what's going on here is that taxpayers are footing upwards of 1/3 of a film's budget. So why aren't those taxpayers being treated like co-financiers/producers and receiving points upfront and points on the backend grosses?

 

Yes and US tax payers are handing over billions in subsidies to farmers all across America. So each American should be a stake holder in every family farm in America, receiving a share of the profits produced by each farm.

 

R,

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Finally someone else is waking up. A story primarily about BOEING, but recognition that Corporate Extortion crosses industries:

 

http://www.latimes.com/business/la-fi-hiltzik-20140105,0,1097806.column#axzz2pcytc7aN

Here's a business practice likely to keep booming in 2014: corporate extortion.

We don't mean extortion of corporations, as is practiced by Somali pirates or entrepreneurial Russians. We mean extortion by corporations.

In this field the victims are taxpayers, and what makes it a beautiful business is that the taxpayers think they're getting a great deal, even as they're led to the shearing. And a lucrative shearing it is, for business: By the estimate of the Washington-based Institute on Taxation and Economic Policy, state and local tax incentives funnel $50 billion in tax revenue into corporate coffers every year. On a national basis, ITEP says, this is worse than a zero-sum game: The incentives are "much more likely to reshuffle investment between geographic areas than … to spur genuinely new economic activity."

…..

Still, politicians' faith in the magic of industrial incentives is hard to shake. A perfect example is the film incentive, which has gotten etched into the tax code of dozens of states despite consistent evidence that the giveaways to movie and television producers cost more than they deliver in terms of economic development.

In California, where the Legislature is under pressure to expand the state's film incentive program as much as fourfold from its current budget of $100 million a year, no objective study has shown that the program produces more revenue than it spends. The only study to make that claim, by the Los Angeles County Economic Development Corp., was financed by the incentive-hungry Motion Picture Assn. of America. (Cannily, the LAEDC's study didn't disclose the MPAA's role.)

Even worse, as my colleague Richard Verrier recently reported, the film incentives have become the grist of a nationwide trade in tax breaks worth as much as $1.5 billion a year.

A Hollywood producer snags a few million in credits to shoot a picture in Georgia, Pennsylvania or Illinois, say, then sells them to a middleman who hawks them in turn to Kohl's, or Macy's, or Bank of America, or the power plant company Exelon.

The studio gets its money more quickly than if it had to wait for a tax refund. The buyers cut their state tax bills as much as 15%. The middleman makes a profit.

Everybody wins, its seems — except for taxpayers, who get hosed.

Such is the natural harvest of a system that hands out tax breaks, regulatory exemptions and other benefits to business just for the asking. You get to the point where no smart businessman will make a move without expecting a payoff. As long as politicians aren't smart enough to turn them away, why should they expect anything different?

 

 

 

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Oh well at least now you see it's not just the movie industry, we are making progress. :D

 

R,

Um, yeah, when did I ever claim that it wasn't? What are you feeling so smug about? You're the one defending worldwide extortion rackets and legalized bribery.

 

But at least you seem to finally be admitting that tax "incentives" are just extortion and bribery. So yeah, we are making progress. :D

Edited by Brian Dzyak

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