Tax credit shortfall costs California TV, movie production revenues

SAN FRANCISCO Thu Jul 24, 2014 8:32pm EDT

SAN FRANCISCO (Reuters) - A growing number of TV series and film crews have left California in search of tax credits elsewhere, causing $2 billion in revenue losses over the past four years to a state that is home to Hollywood and the U.S. production industry, a report said on Thursday.   

California has been battling for years to keep its storied film industry - a source of thousands of jobs and millions in tax revenues - at home, even as other states and foreign countries offer financial incentives to producers.

“We would really like to return California to its heyday in terms of being the number one place for entertainment production,” said Amy Lemisch, executive director of the California Film Commission, which released the report.

Producers have long sought cheaper places to film than heavily unionized Los Angeles, but the number fleeing has increased in recent years despite a state program meant to offer tax incentives to keep them in the most populous U.S. state.

From 2010 to 2014, the state lost about $2 billion in production-related spending, according to the report.

Since 2009, large-budget filmmakers and TV producers in California have been able to apply for tax credits of 20 percent through a lottery system. But state funding for the credits - about $582 million so far with a further $110 million allocated through June 2015 - left some applicants without access to the funds, prompting them to seek financial incentives in other states.

Of 1,570 applicants for tax credits since the program began in 2009, the commission has had funds to award to just 309 projects.

A bill to extend the program another five years, and add a 5 percent tax incentive for producers who move to California from other states, passed the state Assembly in May and is pending in the state Senate.

While overall production of one-hour TV shows has increased 73 percent worldwide over the past eight years, the report found the percentage of series produced in California decreased nearly 60 percent over the same period, to 28 percent in 2013 from 65 percent in 2005.

In 2013, the loss of production crews because there was not enough funding to offer them a tax credit cost the state an estimated $1 billion in revenues. The crews spend an average of $770 million in the state for every $100 million they receive in tax credits, the report said.

(Editing by Cynthia Johnston, Sharon Bernstein and Peter Cooney)