The New York legislature has passed a fiscal year 2006-’07 state budget that provides $7 million in funding for newly created tax credits specifically designed to help keep and attract more commercial production. At press time, Gov. George Pataki (R-N.Y.) was expected to sign the measure, formally establishing the financial incentives for spot filming in the Empire State.
If Pataki’s approval is indeed secured, still to be determined will be exactly when the tax credits will take effect. Currently there are three possibilities on the table: making the incentives retroactive to Jan. 1, ’06; enacting them on July 1, ’06, which is the beginning of the new fiscal year; or having them take hold on Jan. 1, ’07, the start of the next full calendar year.
Additionally, New York City is well on its way to setting up a companion program, putting 50 cents to the dollar on what the state has approved. This amounts to a $3.5 million fund for tax credits to encourage commercialmaking in Gotham.
The state initiative consists of three prime components:
- A growth credit provision 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 is funded by $3 million of the aforementioned $7 million total. The intricacies of the growth credit–such as coming up with the best way to verify total qualified production costs of the prior year as compared to the next–could require more time in the fine tuning of regulations, possibly resulting in the enactment date option furthest down the road: Jan. 1, ’07.
- A downstate jobs credit which 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. This is clearly not the case in that every spot lensing job is considered up for grabs prior to being filmed. The rationale for this downstate jobs credit is that it’s important not to take this business for granted and to make efforts to retain the existing share of work that is currently being produced in New York. For this provision, $3 million in annual funding is being apportioned for 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.
- And an upstate jobs credit which recognizes that spot production regularly occurs outside major metropolitan areas that are considered traditional production centers. This incentive component provides $1 million annually to all eligible commercial production houses that participate in filming activity outside the Metropolitan Commuter Transportation District. This 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.
CITY VIEW Meanwhile, the New York City tax credit incentives program will likely have its $3.5 million funding evenly divided between two components–counterparts to the state’s growth credit and downstate credit provisions.
The city tax credits are subject to New York City Council approval. There is precedent for this matching municipal initiative in that the state credits for theatrical features and TV programs–which were passed in 2004 under the Empire State Film Production Credit measure–also garnered a companion program funded by New York City
As earlier reported in SHOOT, Matt Miller, president/CEO of the Association of Independent Commercial Producers (AICP), articulated the industry’s case for an incentives program during his testimony in a joint budget hearing on economic development before the state’s Assembly Ways and Means, and Senate Finance Committees. He contended that the $7 million cost of the state tax credits represents a relatively small investment in that the economic impact generated by productions shot by AICP member companies amounts annually to some $5.5 billion.
In his testimony, Miller pointed out that New York State has experienced major erosion of its commercialmaking business. He cited a leading industry payroll company’s finding that New York’s share of overall nationwide payroll in commercials has plummeted from 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 nearly $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.)
INTEGRAL ROLE Miller’s testimony is just a small part of a concerted effort by the AICP to bring about the incentives package. The major push sprung out of what at the time seemed a major setback–namely when the earlier alluded to Empire State Film Production Credit measure passed in ’04, but excluded commercials.
Those incentives for theatrical films and TV programs came out of what Miller described as “a PAC [political action committee] of many people all jockeying for different things. At the end of the day, their [film and TV people’s] objectives were not in line with ours. The clear lesson we learned when we got cut out of the incentives was the only way to deal with it is to do it yourself–There are times when coalition building is important. But there are also times–in this case–where you need to go it alone and carry your own water.”
So the AICP did just that. At its December ’04 meeting, the AICP board approved the hiring of a major lobbying firm–Wilson, Elser, Moscowitz, Edleman & Dicker–which helped open some doors in Albany, enabling AICP officials such as Miller and executive VP Steve Caplan to present the industry’s case to legislators regarding the importance of commercialmaking to the New York economy.
Bipartisan support was drummed up in both the New York Assembly and Senate, to the point where there was a real chance to have a spots-only bill pushed through in ’05. While that didn’t come to pass, the foundation had been laid for another bid, which now appears to have been successful.
Miller pointed out that AICP actions predating the disappointment of the Empire State Film Production Credit helped to bring the spots-only incentives to the brink of fruition. He cited the AICP decision to form political action committees years ago as key. Other subsequent proactive measures included the AICP membership survey which documented the economic impact of commercialmaking–“without that, we couldn’t make a strong case to legislators,” said Miller–and the AICP’s role in contributing creative and professional services to the NYC2012 campaign, bolstering the bid for New York to be the host city of the ’12 Summer Olympics. (London ultimately garnered the Games.) The NYC2012 campaign, said Miller, showed public officials that the ad industry is indeed an asset to the community at large.
