Members of Chicago’s film community are seeking economic relief that would make the city more competitive in its bid to retain and attract additional production business. The initiative centers around the effort to get an exemption for the film and production industry from Chicago’s six percent transaction tax, which is a rental tax levied by the city exclusively (in contrast, sales tax is levied by the state, county and municipality). Chicago is one of the only major cities that has not exempted or rescinded the rental tax for the entertainment industry, according to Wayne Kubacki, VP of Chicago-based Essanay Studios, and a member of the Chicago Film and Video Development coalition formed to address the issue.
"The tax has a psychological impact greater than its financial impact," said Kubacki, "because Chicago is the only place that still has it." A number of states have already alleviated similar taxes on film production, including California, New York, Florida and Texas. Last year, Minnesota passed a bill into law that rescinded a 6.5 percent sales tax for creative services that go into commercialmaking (SHOOT, 5/28/99, p.1).
Alan Sadler, president of the Chicago chapter of the Association of Independent Commercial Producers (AICP) added, "In Chicago, all of us in the film business have felt unsupported by city and state government. In terms of the rental tax, we believe it is just a penalty on doing business here—considering most other cities in the country don’t have anything like that."
To help persuade Chicago lawmakers that an exemption would be beneficial, the Illinois Film Office (IFO) and the AICP Chicago chapter are now in the process of commissioning a study that would quantify the amount of local commercial production, and the money it generates. "The survey, we hope, would help our case as to how substantial our involvement and investment in the city is," said Sadler.
IFO director Ron Ver Kuilen noted, "I constantly remind people that the commercial industry—in terms of actual monies brought into the country—is probably four to five times bigger than feature films and television. Frankly, that’s a guess; it could be ten or twenty times as big. A lot of people don’t perceive the commercial industry as a business … they don’t realize how big it is."
Kubacki said that the Chicago Chamber of Commerce has actively—and to date, unsuccessfully—petitioned lawmakers to abolish the transaction tax altogether, arguing that it would stimulate business that would more than make up for any funds lost from the tax.
The issue was first raised in early ’97, spearheaded by Eileen Willenborg, executive director of the local chapters of the Screen Actors Guild and the American Federation of Television & Radio Artists. The film community has voiced its concerns to city government officials but, according to Kubacki, they have been reluctant to exempt the tax, fearing a negative reaction from other industries.
"It was a fairly predictable response," said Kubacki. "Even if they were amenable to exempting our industry from the tax, their main concern was that it would open them up to litigation from businesses in other industries who are still subject to the tax, accusing the city of an un-uniform enforcement of the tax code."
In addition, supporters of the exemption may have less leverage now than when the tax relief was first proposed a few years ago, said Kubacki, because the city had its best year for film production in ’99—garnering a record $124 million in revenue from local film production. In the eyes of lawmakers, he said, the film industry neither needs nor deserves an exemption.
Ver Kuilen said that while not discounting the benefit of exempting the rental tax, he has a practical outlook on the overall big picture. "The tax issue doesn’t necessarily make or break a decision about where a film, TV project or commercial is made. It’s such a small part of the budget." But he added that having such a tax in place during a time of heightened runaway production hurts from a perceptual standpoint.
While it is building its case for the exemption, the film community is not currently engaged in any discussions with lawmakers about the rental tax, according to Kubacki. However, prospects for the exemption have been the topic of recent discourse due to a press conference held by Mayor Richard M. Daley (D-Chi.), during which he announced the aforementioned record-breaking film production revenues. During a Q&A session, a reporter questioned Daley about the transaction tax issue. "Daley’s comment was, ‘We’ll keep an open mind about it,’ and that got garbled," Kubacki said. "Within twenty-four hours, people in the business were saying, ‘I hear the city’s going to exempt us from the tax.’ The mayor’s comments were blown out of proportion."
