While prospects seem promising, there’s still no guarantee that a New York State tax credit designed to keep and attract more filming of commercials will gain passage. However, it is safe to say that momentum is building for the initiative as industry testimony in support of the measure was well received last month during a joint budget hearing on economic development before the state’s Assembly Ways And Means, and Senate Finance Committees.
Matt Miller, president/CEO of the Association of Independent Commercial Producers (AICP), testified at the session in Albany. The AICP hopes to gain inclusion of the spot lensing incentive in the Assembly’s proposed 2006-’07 state budget. Word is that the tax credit is currently a part of the Senate’s budget draft.
If both houses submit budgets containing the precedent-setting spot tax credit, it will go to Gov. George Pataki (R-N.Y.) for final approval. The budget process in the state legislature is slated to take place in April, likely with wrangling on both sides of the political aisle in store. Whether the tax credit will come out intact after this legislative jockeying remains to be seen. But the AICP has been successful in gaining bipartisan support for the measure. For example, as earlier reported in SHOOT, New York State tax credit bill sponsors include Assemblyman Joseph Morelle (D-Rochester) and Sen. Martin Golden (R-Brooklyn).
SPOT TERMS
Miller’s testimony documented not only the importance of commercialmaking to the economy but also New York’s declining share of spot filming. He also outlined provisions of the proposed incentive for commercials.
On the latter score, Miller said that the initiative–which mirrors the successful Empire State Film Production Credit for theatrical features and TV programs–consists of three prime components: growth credit, and downstate and upstate jobs credits. The estimated cost of the overall program is $7 million–a relatively small investment, contended Miller, in that the total economic impact generated by productions shot by AICP member companies annually amounts to some $5.5 billion.
The growth credit provision is designed to encourage companies to increase the amount of business they bring to the state by providing a refundable tax credit of 20 percent of qualifying production costs solely on newly generated business. The amount will be based on the difference between the total qualified production costs of the current year and the total amount of production costs of the preceding year. The growth credit would be funded by $3 million of the aforementioned $7 million total.
The downstate jobs credit addresses the misconception about the commercials industry that there is a fixed amount of work that will occur in a certain location regardless of economic circumstances. Miller testified that this is not the case in the spotmaking business where every job is considered “up for grabs prior to its being filmed…We feel it is important that the state make efforts to retain the existing share of work that is currently being produced in New York.” This provision would provide $3 million annually to eligible commercial production companies that conduct filming activities within the Metropolitan Commuter Transportation District. The jobs credit is five percent of the total production costs that exceed $500,000 and would be distributed on a first come, first served basis.
The upstate jobs credit recognizes that commercial production regularly occurs outside of major metropolitan areas that are considered traditional production centers. This component of the proposed incentives package provides $1 million annually to all eligible commercial production companies that participate in filming activity outside the Metropolitan Commuter Transportation District. The jobs credit would be five percent of the total production costs that exceed $200,000 and would be distributed on a first come, first served basis.
EROSION
Miller testified that New York State has seen its share of the commercialmaking pie steadily decline since its near dominance of the market in the late 1970s and early ’80s. The drop has accelerated in the last two decades. Miller cited a leading industry payroll company’s finding that New York’s share of overall nationwide payroll in the commercial industry has plummeted from nearly 45 percent in ’90 to around 18 percent in ’04. In today’s dollars, this equates to a decrease of $406 million in below-the-line payroll expenditures for the State of New York from its level in ’90. That translates into a loss of almost $1.4 billion in direct economic impact from spot production in the New York region. Direct economic impact includes hotel, equipment rental, stage rental and other non-payroll expenditures related to filming.
Miller added that competition for filming business has intensified, with other states enacting legislation designed to grow their share of production dollars. For example, Massachusetts, Georgia, Oregon and Arizona are among the states that have passed incentive programs in the last year to attract and keep productions within their jurisdictions. All of these programs include commercials.
Furthermore, a number of states and municipalities have initiated programs meant to specifically encourage commercial producers. Miller cited as examples South Carolina’s “commercial production tax incentive” and Los Angeles’ comprehensive business tax reform, which “virtually eliminates many commercial production companies from having to pay business tax in the city.”
All these programs provide more than just financial incentives. “They send a message to producers,” said Miller, “that these states want to attract filming and economic development, and will work to offset some of the incentives that our foreign competitors offer to filmmakers.”
