State to lose $2 mil in revenue if bill is signed into law
Recognizing the rapidly evolving nature of post-production and special effects, California legislators on Tuesday unanimously approved a bill that would grant tax breaks for purchases of post-production equipment.
The 75-0 vote in the Assembly enables post houses to take a 5% exemption — the portion of sales tax that accrues to the state, as opposed to local levies — on purchases of equipment, computers, software and other materials essential to completing the look of a movie or TV show. The loss in revenues to the state would be in the $2 million-a-year range.
The bill includes a number of other tax breaks and is headed to Gov. Pete Wilson for signature. Once signed, it becomes effective Jan. 1. However, legislators attached a “poison pill” to the bill that would rescind the tax breaks in the event that an environmental initiative on the November ballot passes; the premise is that the state cannot afford to pay for both.
The industry tax breaks were proposed by Assembly members Wally Knox — who represents mid-Wilshire, Beverly Hills, West Los Angeles and part of Hollywood — and Scott Wildman, whose district covers Burbank and Glendale.
“The progress has been so tremendous in cutting-edge equipment that it’s becoming almost impossible to keep up,” Knox told Daily Variety from Sacramento. “You can’t compete in the market unless you have the finest equipment available. In some cases, it becomes obsolete in 18 to 36 months. The fact that TV and film production is flourishing is all well and good, but we need to plan for the future.”
The bill covers companies engaged in film and video post-production activities such as editing, film/video transfers, transcoding, dubbing, subtitling, credits, close-captioning, audio, special effects, graphics and animation.
As chairman of the Assembly’s committee on revenue and taxation, Knox wrote a summary of the bill saying the credits were “intended to ensure that the entertainment industry continues to thrive in California.”