As reported last week on our front page, a proposal for business tax reform in the City of Los Angeles has received an endorsement from the Association of Independent Commercial Producers (AICP). If passed, the measure would provide relief to many small and medium-sized production houses that shoot in Los Angeles.
The city’s business tax code is currently tied to a yearly per company cap of $4.2 million on gross production costs incurred when filming in Los Angeles. A production house that meets that cap has to pay an annual business tax of $12,700. Thus, boutique houses often find themselves paying the same amount in business taxes as major motion picture and TV studios. The proposal by Los Angeles City Councilwoman Wendy Greuel would attach that maximum tax to a higher cap, meaning that many commercial production houses would end up paying a considerably lower amount in business tax.
Greuel’s measure would also raise the $50,000 gross production cost floor—under which production companies currently pay a flat minimum tax—to a higher level, again translating into savings for smaller shops, as well as companies that shoot a limited number of jobs in Los Angeles.
Cities generally impose business taxes on companies—local or from other towns and states—that conduct business within city limits. This applies to different business sectors, not just entertainment and media production. Production houses based in other cities and states are all subject to the business tax if they annually lens a certain minimum dollar amount of production in Los Angeles. Thus, if Greuel’s business tax reform passes, it could favorably impact most spot production companies that shoot in Los Angeles.
Steve Caplan, AICP’s senior VP/external affairs, stated, "We plan to lobby vigorously to ensure this motion’s passage."
The motion was made before the Los Angeles City Council the same day that Mayor James Hahn, Greuel and L.A. City Councilman Martin Ludlow led an entertainment industry summit that drew assorted film industry executives from both labor and management. Hahn characterized the meeting as the beginning of an ongoing dialogue.
While the session was closed to the press, several of those who participated came away with a favorable impression. "[The summit] represents a great start," said Frank Scherma, co-proprietor of bicoastal/international @radical.media. "The mayor and the councilmembers were very empathetic and sympathetic with the industry and seemed committed to helping us keep the filming business here. … But this needs to be taken to a state level and we need to see something tangible come out of all this."
During the session, there was talk of developing a campaign designed to make city neighborhoods more aware of how important filming is to their local economy. Indeed, a film-friendly attitude in neighborhoods was deemed a pivotal factor in an AICP-commissioned study independently conducted by Goodwin Simon Strategic Research, San Francisco and Los Angeles (SHOOT, 2/13, p. 1). Fifty percent of commercial production company executives surveyed said that community attitudes were "important" or "very important" in deciding whether to film projects in the U.S. or in foreign locations. Those production houses that made more commercials and reported higher levels of revenue (a company profile that’s typically active in foreign shoots) were far more likely than smaller shops to say that community attitudes significantly influenced their location decisions.
Scherma observed that if a campaign targeting local neighborhoods comes to pass, "it should show people what happened to property values and to the local economy when the aerospace industry went out—when good jobs were lost, triggering a negative ripple effect that many still haven’t recovered from."
