Runaway Production Condundrum Only Gets Worse Guest Column by Gregory N. Lippe About a year ago, the Valley Industry and Commerce Association joined a nationwide effort to stop the increasing migration of U.S. film and television production, known as runaway production, to other countries. In May 2001, a VICA delegation of eight traveled to Washington, D.C. to lobby for legislation that would provide wage-based tax credits for productions substantially filmed in the U.S. A bill had been drafted by several congressmen, but had not yet been introduced into the House. In July 2001, U.S. Sen. Blanche Lincoln, D-Ark., introduced S. 1278 into the Senate. In October, U.S. Reps. Howard Berman, D-Calif.; David Dreier, R-Calif.; and Charles B. Rangel, D-N.Y., introduced a similar bill, H.R. 3131, into the House. Since the introduction of the bills, there have been tremendous efforts to inform the public of the critical situation. There have been articles in the trade papers and local newspapers about runaway production. The lobbying efforts have significantly increased with the formation and continuation of coalitions of industry groups, film commissions, chambers of commerce and small businesses. Representatives of studios, networks and unions are working on possible contract concessions to reduce the cost of filming in the U.S. A wage-based tax credit bill has been introduced in the California Assembly, the “Film California First” program has been enhanced and the STAR partnership, which makes surplus state (California) property available to filmmakers for free or nominal cost, has been implemented. Despite all this, conditions have worsened considerably. Australia has introduced very attractive tax subsidies similar to those offered by Canada. There has been dramatic growth in the building of infrastructure to support filming in Canada as well as increased availability of quality crews. A UCLA industry forecast stated that Los Angeles County lost 17,000 motion picture jobs in 2001, and ancillary service companies are losing substantial revenue, forcing many out of business. Although the UCLA report didn’t specifically address the number of jobs lost in the San Fernando Valley, because of the substantial film workforce in the Valley, I believe it is fair to assume that many of the lost jobs were here. On April 7 of this year, a VICA delegation again traveled to Washington D.C. This time 15 members were armed with a powerful video, ” Runaway Films: Keep Them in America.” The film adds a human touch to the problem by providing personal interviews of those hardest hit, the below- the-line workers (art, construction, costumes, props, camera, sound, special effects, etc.) and the ancillary service businesses (caterers, dry cleaners, transportation companies, janitorial services, security services, restaurants, communications companies, etc.). Once again we were welcomed by our legislators and had many face-to-face meetings with them and their staffs. Our video was distributed throughout Capitol Hill and to the White House. It was well received. The information we obtained from our meetings was quite enlightening. The key committee for S. 1278 is the Senate Finance Committee. Currently there are 24 co-sponsors of the bill, including six of the 24-member Finance Committee. The bill’s primary sponsor is Blanche Lincoln, D-Ark., a member of the committee and very committed to this bill. She is young, delightful and highly energized. Her enthusiasm gave us all a tremendous boost. The key committee for H.R. 3131 is the House Ways and Means Committee. Currently there are 55 co-sponsors of H.R. 3131, including nine members of the 41-member House Ways and Means Committee. At first, we were very encouraged because the committee’s chairman is our own U.S. Rep. Bill Thomas, a Republican from Bakersfield. Since more than 80 percent of U.S. filming is done in California, our and his home state, we believed his support would be unquestionable. Unfortunately, although we did not meet with Mr. Thomas, credible sources outside Congress believe that he will not lend his support to the bill. This is difficult for us at VICA to understand. I hope our sources are incorrect. Other issues related to the success of the bills are the estimated cost (currently being determined by a process called scoring) and the vehicle that will be used to carry the bills through Congress. The consensus of the legislators we spoke with was that they will not succeed as stand-alone bills, but will need to be attached to a more comprehensive bill (the vehicle). Possible vehicles include a bill (currently in the Ways and Means Committee) that will add permanence to otherwise expiring provisions of the massive Economic Growth and Tax Relief Reconciliation Act of 2001, a minimum wage increase billl. Although we are encouraged, we harbor no illusions that getting these very important tax incentive bills passed through both houses of Congress will be easy. Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based firm of Lever, Lippe, Hellie & Russell LLP and chairman of the VICA Subcommittee on Runaway Film Production.