28 Projects Make First Cut In State’s Production Tax Credit Lottery
UPDATED 7PM: The California Film Commission completed its production tax credits lottery this afternoon and of 322 projects submitted today, 28 were selected to receive credits before this year’s $100 million total allocation runs out. Other qualified applicants go on a waiting list. The number of projects submitted this year approached double last year’s number. On the first day of last year’s application period, 177 projects were submitted and 27 were selected to receive the credits. Ultimately 74 projects received tax credits from last year’s $100 million allocation. The increase came from the large number of smaller independent projects that moved from the waiting list to be awarded credits as larger projects withdrew.
Today’s figures are subject to change as the commission reviews the applications. More information will become available Monday afternoon about the estimated total spend by approved projects, estimated wages, the number of cast and crew members employed and breakdown by production type — feature vs. TV, studio vs. independent.
PREVIOUSLY 3:16PM Now they wait. The California Film Commission’s 3 PM deadline today for applications to receive a portion of the state’s $100 million film and TV tax credits has come and gone. Now it’s all about waiting for the commission to randomly pick the winners in a lottery. That is expected to happen sometime around 3:30 PM today. The Film Commission expects to have information on how many projects were submitted sometime later this evening. Deadline will update with that info. The commission is expected to release detailed information Monday of the breakdown of the winners in terms of studio vs. independent, film vs. television and other.
Producers and filmmakers had between 9 AM-3 PM to drop off applications packets at the commission’s Hollywood Blvd office. Each packet was given a lotto number. Those numbers will be put in a bowl, according to Film Commission executive director Amy Lemisch, and picked out by an on-hand CHP officer. Once the $100 million is used up, remaining projects that didn’t get funding will be put on a waiting list. If already approved projects drop off the winners’ list due to scheduling or production delays, those on the waiting list will take their place and credits.
The low-tech lotto method has been used by the Film Commission annually to allocate the credits since 2009. The idea is that a random process removes any advantage for any one company. The majority of the applications today were dropped off in the morning with a few trickling in this afternoon, Lemisch told Deadline. As of 2:35 PM, Lemisch didn’t know how many projects the Commission had received today but she did say it was busy like last year. In 2011, the Film Commission received 170 applications for the $100 million fund.
Of this year’s allocation, $10 million is reserved for indie films with minimum budgets of $1 million and maximum qualified expenditure budgets of $10 million. Feature films with budgets up to $75 million are eligible for a 20% credit. TV movies and miniseries with a minimum budget of $500,000 are eligible for the 20% credit also. New TV series licensed for cable TV are eligible if they meet minimum budget and other requirements. Existing TV series that formerly filmed all previous episodes outside California, as well as indie films, are eligible for a 25% credit, subject to budget and other restrictions.
Don’t let David Stern near those ping pong balls
The film incentive is a ridiculously successful program. The UCLA study showed a ridiculous return in jobs and revenue: http://filmworks.filmla.com/2012/02/02/independent-report-confirms-success-of-california-film-incentive/
Indeed the study did show a ridiculous return: $1.04 for every $1.00 spent. Bearing in mind CA borrowed that $1 for a cost of about $0.04, the ridiculous return is zero.
DH,
The $1 California “borrowed” to pay for $1 in film credit issued to a studio belonged to the studio in the first place. Rather than owe it as a tax, the state lets them keep that $1, but ONLY IF the make spend it making a project in California, hire state residents and spend it locally. It is, very simply, a tax break that can only be used if they spend money in this state rather than another.
Moreover, the UCLA study showed each $1 spent returned $1.04 in new state and local taxes. Translation, the entire dollar spent is recouped and, on top of that, there is a 4% return. Hell, even if it was only breaking even or, for that matter, taking a slight loss, the number of jobs it sustains each year is well worth the cost. Unemployment is 11%. People care about jobs. This program is ridiculously cost-effective at creating lots of them. Finally, lest we forget, the purpose of the credit is a defense against the stupidity of other states and nations where film incentives literally represent cash financing for each projects budget. California is getting killed this. Until their foolishness ends, we need to protect what we have left.
Dear Amy -
We filed our application for the movie 6M independent film LUCKY STIFF on Friday, per regulations.
Our start date is June 13. After filing we were informed that our application had been rejected out of hand because you have to file 30 days before your production start but not more than 180 days before you production start. And the ONLY day to file is June 1. Can this really mean that if your movie starts in the SEVEN MONTHS outside of the July-November window, you have no chance at participating in the CA lottery? We stayed in Los Angeles to make this movie at great expense. When we called the office for an explanation, we were told “it’s not a perfect system.” Ya think? Christ almighty, no wonder production flees CA at every opportunity. Come on, Amy, you can do better.
J. Todd Harris
Producer of 40 movies (with fewer and fewer in California)
First, thank you for choosing to shoot in California with or without an incentive (in this case, without). There are a number of local vendors who are willing to reward filmmakers like you who decide to stay in California with discounts that often match the rebates offered in other states. T-stop camera rentals, for example, offers a 30-40% discount to projects that stay.
Second, of course the program is not perfect. But it’s important to remember the original intent and purpose of this program: to prevent runaway production. Since California is one of the few places (perhaps the ONLY) in North America where most of the production happens without getting a film incentive, a program that is meant to prevent runaway production will fail if credits are given to a project that would have shot in California anyways. Since you are going to stay (again, thank you), it would have been a waste (no offense) to give credits to you when they could (and should) go to a project that would leave but for getting credits.
California’s incentive does a pretty good job targeting likely runaways. In New York, where the incentive is also meant to be a defense, they waste it by giving credits to Saturday Night Live and 30 Rock, etc, i.e. projects that were not going to leave.
Sorry you did not get the credit. Thank you for shooting in the state. And, hopefully, you can appreciate the intent of the program and appreciate that credits you may not get will go to someone who would have shot in Louisiana otherwise.
A big part of the posting that you seem to be missing, Film Guy, is that a producer with a steady track record who works on smaller budgeted films (respectively re: Large studio financing) is questioning the qualifying rules.
If the window of opportunity is that small and a producer/financier wants to keep work local, shouldn’t the window be expanded and the rules more encompassing?
If one has a worthy project that will keep work local and bring money to the local system/local economy/local workers/state shouldn’t they all be treated equally?
It’s true, new systems and programs will always have wrinkles to iron out, but it feels (from an outsider’s perspective after reading the post) that maybe some of the “Rules” need to be re-thought. No?
Not everyone will be lucky enough to receive the credits. And more will be unhappy with the final decision if they’re told, “Sorry.” But denying an app outright for not filing 30 days before production start feels a little heavy handed.
Once work leaves, it leaves.
Once another state offers vastly cheaper options it seems people would return to those options again and again. (Much like finding a store that offers the same products for less.)
Why would you return to Z Store if you know you can get the same thing someplace else at a drastically reduced rate?
Major studios have a lot of money to spend and even they (from a smart business stand point) go elsewhere when credits make it a sound choice.
Shouldn’t we strive to make “smaller” films local so we don’t lose a piece of the pie that affects everyone?
(By having steady “qualifying” rules, I mean.)
Do the rule need to be ironed out? Yes. I am not arguing the current system is ideal. I was merely trying to point out that this particular film should not get the credit in any event, given that the point of program is to retain productions that would not stay but for getting credits.
The big problem, as I understand it, is that the CFC is bound by the enabling law. Even if they (the CFC) wanted to make changes, they can’t. Lawmakers in Sacramento have to tweak the law. Given that the extension bill has only a slim chance of passing as it is, the focus needs to be on getting it passed for 5-years first and then tweaking it when its safely in place.
Perhaps having two lotteries each year would fix many of the issues. Due $50 million in June and $50 million 6 months later. Ideally, they could bump the program up to $200 million annually. To me, the biggest change they should make is to lift the cap on budgets over $75 million but only let the bigger projects get the the credit on their first $75 million of spending. This is what the LAEDC proposed in their report. If they made that change, it would make the return higher because the effective rate of the incentive would be smaller when applied to a $100 million film. And, let’s face it, the big-budget films are the ones that almost 100% leaving. Sure, Spiderman, Batman and Star Trek (2?) shot/are shooting here, but they are the rare exceptions.
Finally, the ULCA report found that the smaller indy films that did not get the incentive ended up shooting in the state anyways. In short, they are not a runaway flight risk. Thus, perhaps they should not be allowed to apply at all unless their budget is $15 million or more?
Film Guy,
Thanks for your thoughtful (“non-flaming”) reply.
I hear what you’re saying.
I realize when money is tight perhaps more indie film makers stay local thinking travel costs and per diems and other expenses might get them into trouble because they have so little money to deal with anyway. But those would seem (to me) to be the REALLY low budgeted projects.
If producers like the poster above who play the game professionally and have merited movies made decide to start looking to subsidized states instead of staying local because the lottery process is so restrictive, it might not take long for that opinion to start spreading.
And THAT’S a dangerous road to go down.
As noted, it’s a program that needs to have kinks worked out. Most notably, as you’ve mentioned, in Sacramento.
Hopefully something’s done before too long.
Thanks again for your reply.
We tried to shoot in LA. Keep work local. We needed a strong knowing crew and the story takes place here. The “lottery’ system would’ve put us on the waiting list before we applied. As it doesn’t balance out for Indies. Like many, we had to go to the South. And found out, an outrageous number of LA crew-families have permanently relocated; New Orleans, Baton Rouge, Carolina(s) &Georgia. Heartbreaking LA is impossible for certain budgets. 370 applied/so far 24 were selected. What a joke!
I am a manufacturer and I want to build a factory in the US and employ a hundreds of people permanently. I get grief from the city county and state over zoning, environmental, contract and local ordinance regs, I have to deal with unions, delays, threats of litigation over noise, the environment, whatever. Finally, I decide, its cheaper, easier and less aggravation to go overseas and build my factory there. What do people say? That I am a turncoat, I am cheating Americans out of jobs, that I am exploiting another country’s work force.
I don’t get a lottery to help me stay in the US and I sure don’t get any breaks or praise for doing it. Why is Hollywood always criticizing ‘corporate welfare’ and then demanding it ‘or else’.
I would not call you a turncoat. I would say there are specific rules and regulations that we need to fix to allow people like you to stay. Specific problems demand specific solutions. For example, runaway production (right now) is being caused by essentially one thing: state subsidies. Films are not going to Louisiana because they offer lower taxes, they go because the tax credits can be sold for cash and used to offset 30% of the budget. In states like New Mexico, producers don’t even need to sell the credits, as they are refunded for cash directly from the state.
So, the problem of runaway production is being caused by a specific factor (film subsidies) and the only effective solution, for the time being, is to fight fire with fire. And it’s working. The film incentive prevented the worst year for feature filming and has meant the first years of increase after almost 15 years of non-stop declines.