On Location: California sees record level of film tax credit applications

Even as it struggles to keep crews from leaving the state, California has received a record number of applicants for its film and TV tax credits.

The California Film Commission said Tuesday that it received 497 applications on Monday for the state’s film and TV tax credit program, 117 more than last year.

However, due to limited funds, only 23 projects were initially selected for a tax credit, the commission said in a statement.

The surge in applicants underscores the importance that tax breaks and rebates play in helping to finance movies and TV shows, and a growing dilemma for California: the widening gap between demand for tax credits and the supply of available funds.

“This year’s dramatic growth in the number of applications reaffirms that California is the preferred choice for projects of all types and sizes,” said California Film Commission Executive Director Amy Lemisch. “The industry wants to base productions in California, but incentives now drive those decisions.”

California launched its film program in 2009 to better compete with states such as Louisiana, Georgia and New York, as well as Canada and Britain. The program allows production companies to receive a state tax credit worth as much as 25% of specific production costs, such as expenses related to building sets and hiring crew members. The credit can be used to offset any sales or business use tax the company has with the state.

The state sets aside $100 million annually for the program and relies on a lottery system to decide who qualifies for the subsidies.

Typically, only about 20% of the applicants “win the lottery.” Those who don’t draw a lucky number are put on a waiting list, hoping others may drop out, or simply take their business to elsewhere.

The California Film Commission, which administers the program, began accepting applications on Monday between 9 a.m. and 3 p.m. Even before the office opened, a line of 30 production assistants, messengers and producers waited outside the commission’s headquarters on the ninth floor of an office building on Hollywood Boulevard.

They hand-delivered brown envelopes containing a five-page application describing their projects, including the script, cast and financing sources.

On Monday afternoon, film commission staff members, with help from a state fire marshal, conducted a lottery to select projects at random. Each application was given a number between 1 and 497, and the credits were then reserved in that order until all $100 million was assigned.

The lottery was briefly delayed when the building was forced to evacuate Monday afternoon due to a bomb scare that briefly closed a stretch of Hollywood Boulevard.

On Tuesday, the commission said it selected 23 applicants from the lottery, who will be notified later this week that their applications are being reviewed to determine eligibility.

The remaining 474 projects submitted on the first day of the application period will be placed on a waiting list. As in prior years, it is expected that a significant number of wait list projects may be allocated tax credits as approved projects withdraw due to scheduling delays or other production-related factors.

Former Marvel Studios executive and independent producer Michael Helfant showed up Monday morning to submit applications for two movies, including a sequel to “The Call,” the 2013 Halle Berry movie which was set to shoot in Canada until it received a California film credit. The second project, “Mister Right,” is a romantic comedy starring Sam Rockwell and Anna Kendrick.

Helfant said California was hist first choice because of the quality of crews and proximity to talent in the state. But he said he was drawing up contingency plans to shoot the movies in Vancouver and Puerto Rico or Colombia should neither movie qualify for tax credits.

“If I don’t get the tax credits for these two films then I’m basically going to spend $25 million outside of the state of California instead of spending it California hiring people for goods and services,” Helfant said. “I’m just one independent producer. Think about how many other productions are similarly situated.”

Proponents say the tax credit program has kept several high-profile productions in California, including such movies as Disney’s “Saving Mr. Banks,” as well as the TV shows “Justified” and “Rizzoli & Isles.”

A coalition of entertainment unions and studios is backing legislation that would improve California’s program to make it more competitive with those of New York, Georgia, Louisiana and other states and countries that are gaining a large share of Hollywood business.

The Assembly recently unanimously approved a bill, AB 1839, to significantly expand funding for California’s program. The bill would extend funding for the program through 2012 and allow more projects to qualify, including large-budget features and new network dramas.

The measure, however, is likely to face tougher opposition in the Senate.