compiled by Jeff Burman

Cartoon by Mike Lane, Cagle Cartoons Inc.

Last October President Bush showered $136 billion in new tax breaks on businesses, including the film business, quietly signing the most sweeping rewrite of corporate tax law in nearly two decades. The American Jobs Creation Act of 2004 (HR4520), among countless other provisions, allows independent producers to write off qualified costs of a motion picture in a single year if it has a budget of $1 million to $15 million and 75 percent of that budget is spent in the United States. Back-end participation and residuals are not included. The law’s new provisions sunset for productions that commence after December 31, 2008.

“ This is a system that is analogous to a leaseback that will be able to contribute 10 percent to 12 percent of a film’s budget,” said Antidote Films’ Jeffrey Levy Hinte, in an article by Susan Crabtree and Ian Mohr in Variety on October 24.

“ It’s phenomenal,” said Schuyler Moore, an entertainment industry tax law expert, who also was quoted by Variety in the same article. “Once this gets out, it’s going to jumpstart US production in an enormous way. There’s nothing like it in the entire [US tax] code. It’s just astounding.”

“ 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 President Michael Apted in a DGA press release. “With the new incentives provided in [this] 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.”

While many believe Bush’s recent tax benefits will solve Hollywood’s runaway production problems, others have no illusions about the fact that many films budgeted over $15 million will continue to shoot overseas, still seeking greener pastures.

HR4520 text | Variety 10/24 | DGA Press Release | Variety 11/8

Film Business Applauds LA City Tax Cuts
Meanwhile, hoping to keep film companies and other businesses from leaving Los Angeles, the City Council adopted a landmark package of tax reforms in mid-November that would exempt 61 percent of firms from city business taxes and eventually slash levies by $92 million annually, writes Patrick McGreevy in The Los Angeles Times on November 18. The tax package was passed unanimously by the City Council and sent to Mayor James Hahn, who has pledged to sign the seven measures into law.

The changes, backed by council members Wendy Greuel and Eric Garcetti, also exempt creative workers in the entertainment industry who earn less than $300,000 a year from paying the city business tax, write Gabriel Snyder and Dave McNary in Variety on November 17.

The reforms are designed to make Hollywood more hospitable to small production companies and independent films. The minimum threshold for the city business tax would rise from the current $50,000 to $2.5 million, with productions under that threshold paying a flat rate of $147. The floor for the maximum business tax rate would move up from $4.2 million to $12 million. The cuts could be in effect as early as July of 2005. This is according to two articles by Dave McNary in Variety on October 25 and 31.

LA Times 11/18 | Variety 11/17 | Variety 10/25 | Mayor Hahn’s Press Release 10/25 |
Variety 10/31

AFTRA, Networks Reach Tentative Agreement
The American Federation of Television and Radio Artists (AFTRA) has reached a tentative three-year deal with the networks on a new contract to cover its broadcast members with increases in health care and retirement contributions, writes Dave McNary in Variety on October 31.

The agreement was reached in late October in New York after three weeks of negotiations. The deal came with two weeks left in the current three-year contract, which expired November 15 and covers about $400 million worth of work annually.

Neither side gave any details of the new pact beyond AFTRA’s assertion that it had achieved gains in health and retirement in line with recent improvements in other Hollywood union deals.

The contract covers performers on daytime serials, sports, game and talk shows, syndicated programs and other AFTRA TV shows, with the exception of primetime dramatic programs, for which the terms will be negotiated jointly with the Screen Actors Guild this winter. AFTRA represents nearly 80,000 professional broadcasters and performers nationwide working in news and entertainment programming on television and radio, as well as in the sound recording industry, commercials and industrial work, and newer technologies such as interactive games, Internet production and CD-ROMs.

Variety 10/31 | AFTRA Press Release 10/30

SF Mayor Joins Hotel Union’s Picket Line
Thirty-eight raucous days of picket lines, tough talk and the angst of 4,300 San Francisco hotel workers locked out of their jobs with the holidays nigh were put aside in late November when negotiators for the hotels and the workers’ union agreed to a 60-day cooling-off period, ending the lockout for the time being, writes George Raine in The San Francisco Chronicle on November 21.

A few weeks earlier, San Francisco Mayor Gavin Newsom made good on a promise to join locked-out union members on the picket line after a group of San Francisco hotels rejected his proposed cooling-off period, extending a bitter labor dispute that has left 4,000 workers locked out of their jobs, writes Raine in The Chronicle on October 27.

The dispute, caused by an impasse in the negotiation of a new contract, began September 29 with a two-week strike at four hotels and grew to become a lockout by employers at 14 of the city’s largest hotels on October 13.

The union accepted Newsom’s proposal for a three-month cooling-off period, but the hotels rejected it and Newsom hit the picket line.

“ This lockout is going to hurt the city [and] feed the perception that San Francisco is not open for business,’’ said Newsom. “The business owners are making a bad business decision, not only for themselves but for the entire city. They are hurting San Francisco, and they are hurting their ability to succeed.’’

The hotels primarily oppose a bid by the workers’ union, Unite Here, to negotiate a contract that expires in 2006. That year hotel workers’ contracts in six other major cities and Hawaii will expire. Locals in San Francisco, Los Angeles and Washington, DC are trying to synchronize with them to enhance their bargaining strength nationally, adds Raine.

SF Chronicle 10/27 | UNITE HERE site

British Columbia’s Film Production in ‘Freefall’
Blame the rising Canadian dollar, now at a 10-year high against the US greenback; blame rival Canadian provinces or global competition. Whatever the culprit, British Columbia’s once high-flying film and TV production industry is in a freefall, writes Don Townson in a Variety piece dated October 21.

Fred Rosenthal (center) welcomes Los Angeles’ new business tax cuts. Rosenthal is the owner of Ametron, a Hollywood film equipment rental business, and is flanked, from left, by Pam Fair (Screen Actors Guild), Steve Kaplan (Association of Independent Commercial Producers), Tom LaBonge (LA City Council), Mayor James Hahn, Wendy Greuel (LA City Council) and Eric Garcetti (LA City Council). Photo by Josh Kanemsky.

After a record-breaking year in 2003 with production revenues valued at US $1.12 billion, BC’s industry is suffering a 25 percent drop in shooting days and a similar rise in unemployment numbers, says Susan Croome, the province’s film commissioner.

Meanwhile, adds Townson, the Canadian federal government bumped up the Canadian Film or Video Production Services Tax Credit, which is mainly for the benefit of U.S. producers, to 16 percent of Canadian labor costs from the previous 11 percent.

Variety 10/21

‘Screener Debate Re-Opened
The screener debate, about whether or how studios should send Academy Award voters videos of nominated films, has re-opened in time for this year’s Oscar season, says an unsigned article in The Guardian Unlimited on October 18.

The plan was for a company called Cinea to send a free DVD player, each carrying a unique code, to every Academy of Motion Picture Arts and Sciences (AMPAS) and British Academy of Film and Television Arts (BAFTA) voter. The studios would then send out DVD copies of their nominated films, marked with the same code, thereby ensuring the discs would not work in any other player.

The aim of the scheme was to prevent a repetition of what happened last year, where an Academy member gave away unwanted DVDs and, as a result, pirate copies were made.
Variety says the DVD players have not arrived soon enough for the studios to be comfortable with the technology in time for this awards season. Cinea is sending the players out anyway so that they will be fully prepared for next year.

With the deadline for studios to pick a format for awards screeners having already arrived, no studio has yet signed on for the secure-DVD system proposed by Cinea, write Timothy Gray and Ben Fritz in Variety on October 17. The bottom line: Things will be just as confusing this season as they were last year.

Guardian UK 10/18 | Variety 10/27