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Hollywood gets a (tax) break

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Since everyone appears to be getting a hand from the government these days, why leave Hollywood out of the picture?

The proposed $700-billion bailout package includes some unexpected sweeteners for the movie and TV industry, which will get two tax breaks worth more than $450 million over the next decade for producers who shoot in the U.S. That’s not a lot of money given that the average studio movie costs $106.6 million to make and market, but it could keep some low-budget productions from going offshore.

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Hollywood union and industry groups have long pushed for measures to curb so-called runaway production, which has caused thousands of job losses in Southern California over the last decade as filmmakers have gone to Canada and other foreign countries that offer lucrative tax breaks.

One provision would allow film and TV producers to get the same tax deductions American manufacturers such as General Motors Corp., Boeing Co. and Xerox Corp. get for making their products in the U.S. The legislation would allow filmmakers to qualify for a 32% top tax rate, instead of 35%.

Additionally, the tax package lifts the budget cap on the existing tax deduction, which was limited to movies that cost less than $15 million to make -- in effect excluding most studio films, which cost a whole lot more. Now producers would be able to immediately deduct all production costs up to $15 million, regardless of the movie’s total budget. The change also extends the existing credit, which was due to expire this year, to December 2009.

The measures were part of a broad tax extension bill recently approved by the Senate that was folded into the bailout legislation.

-- Richard Verrier

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