Senate OKs biz benefits

Bill provisions include tax incentives to film in U.S.

WASHINGTON — After nearly a year of behind-the-scenes lobbying, the Senate greenlit a bill late Tuesday containing a raft of tax benefits for Hollywood.

The showbiz benefits were quietly buried in the Senate version of the Jumpstart Our Business Strength bill, a corporate tax bill that has been stalled for months, as Democrats tried to add several labor-related amendments that GOP leaders opposed.

The overall bill overwhelmingly passed the Senate 92-5 after Republicans allowed a vote on one of the Democrats’ pet amendments.

Among the several provisions benefiting Hollywood is a tax incentive for studios to film in the U.S. instead of going overseas — an effort at curbing runaway production. The Directors Guild of America and other showbiz orgs that have been trying for years to secure an incentive for studios to shoot in the U.S. celebrated the long-sought victory.

“Film and television production is a homegrown American industry, and both state and federal tax incentive efforts are crucial in leveling the playing field and keeping these jobs in the U.S. where they belong,” a DGA spokesman said in a statement.

Guild also applauded the efforts of Sen. Blanche Lincoln (D-Ark.), who pushed the measure, as well as senators on both sides of the aisle who made it happen.

The Motion Picture Assn. of America also convinced the Senate to include language fixing a long-running dispute with the Internal Revenue Service over how Hollywood studios write off the depreciation of films and TV shows.

At the last-minute, senators also tacked on a 50% tax credit to offset the cost of creating closed captioning for movies.

Overall, however, the movie biz may wind up taking a hit of nearly $1 billion over 10 years, according to several tax analysts.

The overarching legislation would give U.S. manufacturers tax breaks on their income tax in exchange for giving up an export subsidy that the World Trade Organization has deemed illegal. Because of that ruling, the European Union has already imposed tariffs on most U.S. exports starting March 1. Those tariffs are set to increase 1% per month until 2005.

Studio lobbyists worked overtime to ease the new financial burden Hollywood faces on exports. The broadest would count studios as manufacturers to reduce the top corporate tax rate from 35% to 32% for them along with other U.S. businesses that build and produce products.

According to several congressional sources, the new tariffs will impose a $3 billion burden over 10 years on Hollywood, and the manufacturing tax break, runaway production incentives and income depreciation measures won’t make up the difference. Congressional aides and tax analysts estimate that Hollywood will still be in the hole at least $1 billion over the next 10 years.

California’s Democratic Sens. Barbara Boxer and Dianne Feinstein failed to win support for an amendment that would exempt Hollywood from the new financial burden entirely by arguing that the WTO ruling does not apply to its products.

Still, showbiz lobbyists were jubilant about the provisions they were able to insert in the Senate version of the bill. The House Ways and Means Committee jettisoned benefits for Hollywood in its version after Rep. Donald Manzullo (R-Ill.) complained that film producers were getting a better deal than other U.S. manufacturers.

Washington entertainment industry reps believe the showbiz provisions in the Senate bill will prevail when the House and Senate hash out their differences.

Minority Leader Tom Daschle (D-S.D.) urged the House to take quick action now that the Senate had thrown their support behind the bill.

“It is imperative that the House of Representatives act quickly,” he said. “The American people can’t wait any longer for legislation that encourages companies to keep their jobs in the U.S.”