In many ways, the battle of the best location- or at least, the best tax credits to entice people to shoot in the area- was the unsung entertainment battleground in 2022. We’ve seen more and more states, and even foreign destinations, offer compelling tax incentives to productions who choose to shoot there. With these newcomers offering compelling reasons not to choose ‘traditional’ shoot locations, it could be time for better known locations to step up to the podium and reclaim their business. Blake & Wang P.A entertainment lawyer, Brandon Blake crunches the latest numbers for us.
Indies Strike Lucky
In California, the latest victory definitely went to independent projects. Of the 24 films selected to participate in the tax credit program, only 3 belonged to big-name studios- Lionsgate, Disney, and MGM. The year before, it was 11. Warner Bros Discovery and Netflix, who were leaders in the last two years, were nowhere to be seen. Interestingly, in return for its $21.1M in tax credits, Michael, the Michael Jackson biopic, is anticipated to pump $120.1M in qualified spending into the state.
Despite their shrunken number, these 3 studio titles are still expected to account for over half ($46.2M of the $81.7M total) of the allocated tax credits. Six of the qualifying indies have a budget over $10M. Compare this with last year, where 11 studio films and 19 indies took home their share of tax credits, with around $120M of the $149.2M reserved going to the studio films.
No Longer the De Facto Home of Entertainment
California Film Commission Executive Director Colleen Bell was quick to talk about competitiveness and an urge to reduce ‘runaway productions’ and keep California a production hub. A title it will retain, of course, with Hollywood right at hand. Despite California’s earmarked $330M annually in tax credits, however, the reality is that more lucrative tax incentives in other states have lured a lot of productions elsewhere. Georgia, for example, with its uncapped tax credit program, has benefited significantly from the California withdrawal. We’ve also recently seen New York push up its tax incentive program to stay competitive. In California specifically, unlike many high-production states, only the qualified spending on a production (not talent compensation) can be claimed. There is, however, a proposal on the table to allow above-the-line wage costs to become eligible for the first time in this tax year. Gov. Gavin Newsom is also trying to make the tax credit refundable, too, in order to make the program more competitive. Whether these will be enacted officially before the next application period (July 24-31 for feature films and March 6-20 for TV) is a key question.
As the production boom, driven partly by the need for constant content on streaming platforms, continues, we can expect to see a lot of older tax incentive programs overhauled. For similar reasons to the proposed California changes- to re-intice films away from ‘upstart’ new locations offering bigger and better incentives to shoot there. Having a robust tax economy for films and TV production benefits the industry as a whole, of course, so at this point, the more opportunities on offer the better for everyone.
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