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Advocates of Tax Credits Talk of Hurdles to Expanding California’s Incentive Program

Supporters of boosting California’s film and TV production tax credit are grappling with how to convince lawmakers in Sacramento to expand the program.

Los Angeles Councilman Felipe Fuentes, a key champion of the tax incentives when he was an assemblyman in Sacramento, said at a Beverly Hills Bar Assn. event  on Wednesday that in Sacramento “there is a real dislike among Democrats for tax credits, except this one.”

But he expressed concern over the recent report by Al Jazeera America that the FBI staged a sting on state Sen. Ron Calderon, in which undercover agents posed as film producers pushing Calderon to expand the tax credit program in exchange for gifts for his family members. Calderon has been stripped of his committee assignments, as well as his spot on the California Film Commission.

Supporters of tax credits note that the investigation did not question the integrity of the program itself. But Fuentes said that it nevertheless will be a “hurdle we are going to have to deal with. I’m not sure how we do that.”

An entertainment industry coalition is organizing to make a legislative push in Sacramento, with the goal of renewing and expanding the program next year. With overwhelming support, lawmakers have twice renewed the program since it was establishing in 2009, but “it is not as much the individual leaders as it is the policy staff” that is skeptical of the tax credits, Fuentes said. The worry is that those staffers are pointing to the Calderon investigation and connecting it to the incentive program, even if advocates point out that the two are unrelated, he said.

He added that the challenge is to convey the message that the incentives have returned money to the state — between 3% and 8% — and that it has been “a tremendous asset in terms of stabilizing the economy.”

Another problem is that in the tax incentive is seen in Sacramento as “L.A.-centric.” “We really have to convey a story here that is one of statewide significance,” he said.

Also on the panel was Amy Lemisch, executive director of the California Film Commission, who noted that areas in the state outside of the L.A. region have seen a particular drop in production over the past decade, with other states offering more generous incentives for producers to trek to their borders.

Asked about the outlook for expanding the program, Lemisch said, “I’m not sure. I’m really not. It’s a tough road ahead in terms of 2014 legislation and I’d rather not speculate.”

Also on the panel was Marco Cordova, vice president of EP Financial Solutions at payroll firm Entertainment Partners, and it was moderated by Dama Claire, production executive at Incentives Office at Ease.

Cordova noted states that have recently upped the ante include New Mexico, which boosted credits for certain TV series after the success of “Breaking Bad,” which shot in Albuquerque; and an incentive being offered in Alaska. He also noted that Nevada is preparing to offer a 19% incentive starting next year, a potential challenge for California next door.

But Cordova also noted that other states also grapple with the uncertainty that can come with tax credit programs, subject to the whims of lawmakers. North Carolina, which has established a production base, has a program that expires at the end of next year. New Jersey’s program suffered when Gov. Chris Christie pulled an incentive going to MTV’s “Jersey Shore,” and Texas Gov. Rick Perry exercised a clause allowing removal of the incentive for negative depictions of the Lone Star state when he pulled an incentive given to “Machete.”

Although the push will be to expand incentives in California to better compete with other states,

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