California Legislator Studying New Tax Incentives to Lure the 'Late Show'

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Mike Gatto

An author of a bill to expand a program to stem runaway production says he is consulting with his colleagues and L.A. Mayor Eric Garcetti on amending a pending law.

Before The Tonight Show relocated from Burbank to New York City, the state of New York's legislature passed an amendment to the movie/TV tax incentive law that very specifically provided a significant tax break to the show.

Now a California legislator who has taken the lead in expanding existing movie/TV tax incentives is actively studying ways to reword a proposed law (AB 1839) to make possible tax incentives for a program like the Late Show after David Letterman retires sometime in 2015.

"I am discussing this precise issue and I will discuss the inclusion of productions like the Late Show with my joint author and with the Mayor," says California Assembly Member Mike Gatto (D-Silver Lake).

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His co-author is Assembly Member Raul Bocanegra (D-Pacoima) and the mayor he is referencing is Eric Garcetti, who has made attracting and keeping entertainment industry work and jobs a key part of his mandate since he took office in June 2013. The proposed bill also has more than 60 co-authors in the Assembly and Senate. 

On Thursday, Mayor Garcetti sent a letter to CBS president/CEO Les Moonves encouraging him to move the Late Show from the Ed Sullivan Theater in Manhattan to Los Angeles. And on Friday, the speaker of the New York City Council sent Moonves a letter encouraging him to keep the Late Show in the Big Apple.

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At present the Late Show does not get any financial or tax incentives from New York State or New York City, spokesmen for the city and state have confirmed.

So if California could step up with incentives that would cover the Late Show, that could help turn the tide and result in a move west.

However, as Gatto points out, there are a number of issues. First is how to script a clause that would for the first time include a program like the Late Show.

"The state of New York came under a little bit of fire when they drafted their language to lure The Tonight Show," says Gatto, "and the reason why is because you can legislatively define a category in such a way that it is a defacto earmark (a tax break for one person or company)."

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"We have to be a little careful not to do this type of thing that is narrowly defined legislatively," adds Gatto, "because it opens up a Pandora's Box. There are constitutional issues with favoring one production over another."

A little over a year ago California added a clause to the incentives law first passed in 2009 that provides a tax incentive of about 25 percent to TV series that relocate to California after having filmed at least six episodes during a prior season outside the state. Currently that only covers scripted productions.

What Gatto is considering is amending that clause to include unscripted productions such as the Late Show which relocate to California.

"The current legislation could be amended to lure productions beyond just scripted ones but we have to be very careful," says Gatto. "We're looking for the most job bang for the buck and the most economic bang for the buck. These productions are very high profile but getting ten or twenty mid-sized movies or TV shows is probably  just as good. I'm open to it but I want to be very careful in the drafting."

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Attracting the Late Show would likely require the state to ante up more money (than the current $100 million per year), the legislation would have to pass the Assembly and Senate and Gov. Jerry Brown would have to sign it into law, probably sometime late this year.

Even then the Late Show would face the fact California is a lottery state. That means many applicants apply and then a few are chosen at random (usually the first week of June) until available funds are used up.

If The Late Show wasn’t chosen, it could apply again the following year and if it won the lottery then, it would continue to receive incentives of 20 or 25 percent of what it spends each year until production ceased or it moved away again.

When The Tonight Show left Burbank, it was estimated about 150 high paying year round jobs were lost, millions spent in the area evaporated and hundreds of other businesses from carpenters to tailors lost revenue. It also had an impact on lucrative tourism tied to the show.

So the stakes are high for both states and pressure will build as the decision by CBS – which likely would be impacted by the choice of a new host – draws closer.