Sunday, October 19, 2014

Tax Incentives For VFX

The Wall Street Journal weighs in on California's recently-enactive AB 1839:

... The state recently expanded its tax-incentive program for film and TV productions, offering a larger credit for visual-effects work done in the state and scrapping restrictions that had excluded big-budget movies, which often feature the highest number of whiz-bang effects. Visual-effects artists create special effects and animation and do visual cleanup in “postproduction” work, which can include everything from brightening the lighting of a scene to building whole virtual worlds.

The expanded incentives are a little-noticed part of a larger package designed to lure back productions that have fled California for generous tax programs in other states and countries, which can cover 30% or more of a project’s total cost.

State officials say the visual-effects credit gives an incentive to an industry that can rebuild a highly paid, stable workforce once centered in California but now scattered. Even more ambitiously, they are hoping the subsidy could bring back big-budget, effects-laden feature films that create thousands of jobs not just for camera operators and lighting technicians, but for hairdressers, electricians and others.

The new legislation, which more than triples the state’s current program to an annual $330 million in incentives over five years, was signed by Democratic Gov. Jerry Brown last month and goes into effect in 2015. Part of that annual allotment will go toward tax credits for visual-effects work, now covering 25% of eligible expenditures in the field, up from 20% under the old program. ...

The bill's tax breaks kick in the middle of 2015, and as one International rep said to me recently:

Companies will be ramping up production, hiring people, by April to take advantage of the new money next summer. Right now we've got sitcoms and reality shows in L.A., but not many dramas or big-budget features. The bill will bring back more of the higher end work, and California will have a rainbow of both high and low budget productions." ...

What's being talked about here is principal photography -- people on sets, actors in front of cameras. The Journal takes a jaundiced view of visual effects work returning because the work will have to get done somewhere and because even a small incentive program will move the needle. VFX redevelopment will happen for the same reasons that animation employment has ratcheted up steadily over the past several years:

1) There's a skilled pool of VFX talent that's itching to work.

2) There are colleges, universities and art institutes in and around Los Angeles adding to the pool all the time.

3) California won't match Canadian and British subsidies, won't compete with the wage levels of India and China, but a 25% tax subsidy will be enough. Even now there are boutique studios in the east San Fernando Valley making visual effects for various TV shows; once the incentives kick in, viz effx for larger budget movies will happen.

The state doesn't have to match London or Montreal dollar for dollar. It only has to be in the game.


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