Filmmakers thrilled as Bush signs papers
After years of lobbying, independent filmmakers scored a major victory Friday when President Bush signed a bill that gives a sweeping tax break to movies made in the U.S. Producers believe the measure may draw substantial fresh funds into indie filmmaking.
Yet industry watchers said that while the legislation has the potential to boost the indie biz, Hollywood studios view the initiative as falling short and are not as enthusiastic about the tax bill as their specialty film counterparts.
“The net is that Hollywood has had some significant gains with this legislation,” said one industryite. “But it was not the grand slam that these three studios would like it to be. You rarely get everything you are shooting for.”
The source added the MPAA views the Republican blockage of the line-business tax break as signaling the GOP’s displeasure at the appointment of a Democrat to top the org.
Independent producers now may write off a movie in a single year if it has a budget of $1 million-$15 million and 75% of that budget is spent in the U.S. The expensing limit increases to $20 million if the movie is made in a low-income area of the U.S.
Actors, directors and producers have spent nearly a decade lobbying Congress to pass legislation aimed at curbing the flight of filmmaking overseas.
The showbiz tax break is a tiny piece of a massive $136 billion corporate tax bill intended to end a bitter trade war with Europe.
While indie producers applauded the development, they said they would need to begin powwowing with tax experts starting today to see if the new legislation could be leveraged to bring in new coin.
“Overall, it’s good, it’s fantastic,” said Tim Williams, production head at New York-based GreeneStreet Films, who co-produced Miramax’s 2001 breakout “In the Bedroom.” “It’s the same concept as the basis for the U.K. sale-and-leaseback (program). The trick now is for smaller companies to utilize it. Can this (bill) be used to leverage more funding on a state and local level?”
“It’s phenomenal,” said Schuyler Moore, an entertainment industry tax law expert. “Once this gets out, it’s going to jumpstart U.S. production in an enormous way. There’s nothing like it in the entire (U.S. tax) code. It’s just astounding.”
When Congress passed the corporate tax package more than a week ago, the windfall for indie filmmaking was overshadowed by a stinging studio defeat.
Disney, Time Warner and Viacom wanted a special tax break allowing studios to count each movie, DVD and videotape exported as a separate line-of-business. Tax analysts estimate such language would have saved the industry between $1 billion and $5 billion over a decade. In the end, House Republicans blocked the deal.
But the legislative defeat did nothing to dampen the spirits of those trying to stem the tide of film production overseas.
“A win!!! We won, won, won!!! At last — a United States federal tax break!” enthused actress Diane Ladd in a press release.
Indie producers applauded the fact that the bill seems more focused on their companies. “We feel like the New York state and city (legislative) benefits help the studios more than the indies,” said a prominent New York producer. “At first blush, this looks like it is the other way around.”
“Film and television productions, and the thousands of jobs and millions of dollars in revenue they provide, have today one more solid reason to stay in America,” said Directors Guild of America prexy Michael Apted. “With the new incentives provided in today’s legislation, uniquely American stories can now be more easily shot in the American towns, cities and rural areas where they are set — protecting one of our most valuable national resources: our creativity.”
Proponents pushed hard for the tax break, making the rounds on Capitol Hill many times over the last five years to speak to lawmakers about the thousands of lost jobs and billions in lost revenue that are the result of runaway production.
Ladd and the DGA found a receptive aud in Rep. Karen McCarthy (D-Mo.), who drafted the original language and continued to push the measure as the corporate tax bill made its way through Congress. The bill survived the contentious legislative process with the bipartisan help of Reps. Mark Foley (R-Fla.), Dan Burton (R-Ind.), Charlie Rangel (D-N.Y.), House Ways & Means Committee chairman Bill Thomas (R-Calif.) and Sens. Blanche Lincoln (D-La.), Max Baucus (D-Mont.) and Finance Committee chairman Chuck Grassley (R-Iowa).
In the last two years, several states, including Louisiana, New Mexico, Illinois and New York, have passed similar bills giving moviemakers tax incentives to film locally.
IFP/New York executive director Michelle Byrd said the org’s members seemed enthusiastic about the development overall, hoping it will generate further investment in smaller-budgeted films.
“In general terms, the producers I’ve talked to think it’s a really good thing,” she told Daily Variety Sunday. “This might interest people who have not invested in films to do so. Anything that provides a new opportunity for such people to invest is a plus. It will be interesting if this could potentially expand a niche for them.”
“This is a system that is analogous to a leaseback that will be able to contribute 10%-12%” of a film’s budget, said Antidote Films’ Jeffrey Levy Hinte (Fox Searchlight’s “Thirteen”). The producer added that the bill will have a “nominal advantage” on a film-by-film basis but that, on a larger level, the bill’s impact will grow as investment entities figure out how to use the legislation as a basis to create investment products.