Tax Reforms Focus On Entertainment By SLAV KANDYBA Staff Reporter Brad Smaulson has leased equipment to producers of television commercials for more than 20 years, but these days, he is afraid he may share the fate of his friends in the business and he is blaming the city’s tax system. After a Spanish-language commercials producer told the sole proprietor of Granada Hills-based L.A. Video Assist, which provides monitors and other equipment for playback, that he was considering taking production out of the Valley and the city, Smaulson started doing some research and began writing people. One person he reached via e-mail was Steve Caplan, the external affairs manager for the Association of Independent Commercial Producers. Interestingly enough, Caplan has been heavily involved with tax reform, having appeared in several trade publications to voice his support for it. While Smaulson and Caplan don’t directly work with each other, they share in the desire to see the system changed. With several proposals for tax reform being finalized by the Business Tax Advisory Committee (BTAC) and scheduled to be presented to the City Council as early as April 12, Smaulson and Caplan stand together. They have a stake in seeing a change in city taxation on the entertainment business done in the Valley and other parts of L.A. The BTAC proposals include several elements that would directly affect the Valley’s numerous production houses and businesses that serve them, as well as individuals such as screenwriters and musicians. One variant of the proposal calls for the elimination of all taxes on “creative talent,” the name applied to people who work in the entertainment business out of their homes, such as screenwriters or songwriters. Under the current tax system, screenwriters and others are taxed as businesses, under a city tax code that has not seen reform for about 40 years, said Norman Huberman, a BTAC member and part-time teacher who joined Councilmember Tom LaBonge and others as they walked along a Toluca Lake street on April 8 to demonstrate how laptop computers can be used to verify if businesses have paid their taxes. Another Valley councilmember, Wendy Greuel, has an interest in tax reform as it applies to the entertainment industry. She was a Dreamworks SKG executive before being elected into public office. “Right now, if you’re a writer and write scripts at home, you don’t have any deductions,” Greuel said. “We’ve created an atmosphere of fear for those people.” Tax cap When BTAC meets April 12 to vote on its final recommendations to the Council, it will also finalize its recommendations to move up the dollar amount for how much production companies spend on a production before they are charged taxes. Under the current cap, productions that are $4.5 million pay the maximum tax, which is $12,700, according to the BTAC entertainment subcommittee report. Although there are no specific numbers, BTAC will likely recommend the cap be raised to approximately the $20 million range, Greuel said. That figure will better suit the production companies which quickly run up taxes because they are involved in multiple projects, and combined with a simplified tax structure which is in a larger tax reform scheme will help stem runaway production and actually draw business back to the Los Angeles and the Valley. “People have allowed it to be trashed,” Huberman, a BTAC member who also sits on the entertainment subcommittee, said of the city’s economic environment for entertainment business. He pointed out tax breaks overseas and said it is important for the city to do the same in order to compete. While runaway production is well documented to have drawn business away from the Valley and the city, some businesses are staying put because their employees like southern California and may have personal ties. Thus, many of them are looking at the “bottom line” before opting to pack their bags and leave for places like New Zealand or Australia to film. Tax reform fund If the elimination of the tax on creative talent is approved, the City Council will be asked to release $2 million to help implement the process in fiscal year 2006. Another $2 million will be asked of the governing body to change the production cap scale in the municipal code. If the spending is approved by the council, it would be taken from a $6 million trust fund set up specifically to implement tax reform, not the city’s general fund. While Smaulson’s L.A. Video Assist has an indirect stake in seeing that the tax reform is passed, it is a stake nevertheless. He explained there is a close camaraderie between him and other business owners who work his end of the entertainment industry. Thus, if he gets more work than he can handle, he makes sure to pass it on to his friends really, competitors with no reservations. In fact, he thinks the passing of work is a good indication that things are going well and he hopes it continues. “I don’t want to be a statistic,” he said. “I don’t want to be out of business.”
