Incentive system putting money in hands of indies
Empty"Originally, people thought this was only going to be for the major studios," says Katherine Oliver, commissioner of the Mayor's Office of Film, Theatre and Broadcasting for New York City, referring to New York state and New York City's refundable tax credit system.
And she's not wrong -- though it was mostly an open secret, independent producers and filmmakers in New York fretted early on that the newly established film tax "rebate" system was there to benefit two groups: the soundstages, who lobbied heavily for inclusion in the credit's requirements, and the major studios.
But in the three years since the state implemented a 10% rebate credit and the city piggybacked with a 5% credit for projects that meet certain requirements, the credit program has become far more egalitarian than anyone expected. "The interesting thing is," notes Oliver, "the majority of the applicants for the tax incentive program are independent companies, whether it's for television or for feature films."
Specific indie-to-major statistics are not available, but what is clear is that of the 198 projects that have thus far qualified for incentives, 129 were features (the others were pilots and TV series), according to the New York State Governor's Office for Motion Picture and Television Development.
From Fox Searchlight's upcoming "The Savages" to ThinkFilm's "The Ten" to 2006's "The Night Listener," any number of indie productions have found a safe haven in the tax credit system. And thanks to that system, their productions have stayed New York-based. Producer Jonathan Stern, who filmed his recent low-budget comedy "The Ten" in New York City, says he expects to get back $500,000 of his $4 million. An earlier movie he shot in New York, "Diggers" (2006), recouped $177,000 of its $1.6 million.
The government money has been helpful, but the private sector has also proved to be a friend to the indie community. In the case of the $5 million "The Night Listener," producer Jeffrey Sharp says they were able to shoot at Silvercup Studios because "Stuart Suna, who runs it, was a huge proponent of the tax breaks, and he not only made a stage available for us but gave us a home for our production offices -- which normally would have been way too cost-prohibitive. The private sector has really stepped up to make this happen."
Of course, the private sector has played an even bigger role when it comes to financing indie films. And it is here that the tax credits' impact may be greatest of all.
"They have had a very pronounced effect and led to a very significant increase in the number of independent productions that we are handling and the way that they are financed," says Steven Beer, an attorney at Greenberg Traurig who specializes in independent film finance. "Because of the tax incentive program, many more investors are interested in participating in independent film projects."
But New York could fall victim to its own success: Spurred by the popularity of the state and city rebate programs, neighboring states have been aggressively copying and expanding on the idea. Producer Ted Hope (who praises New York's tax credits) has already chosen to take his upcoming "Adventureland" to Pennsylvania because the state gave him a 25% rebate. That's 15% more than he would have had in New York state, given that his film would not have qualified for New York City's additional 5% credit.
This sort of hemorrhaging has insiders wondering if there isn't a way to boost the usefulness of the New York credits, which won't be up for renewal until 2011. Other states such as Louisiana allow producers to sell promised incentives and use the cash upfront to cover production costs, but New York does not -- investors might have to wait up to two years to see the tax break or cash refund.
"They cannot be traded on a secondary market," says Beer. "That makes flowing them to finance a film much more difficult. A bank isn't going to lend money against the credit because the tax payer/investor can't assign it to the bank."
Adds Stern: "That's the biggest negative. I know people that didn't have the options we had with 'Diggers' and 'The Ten' and who were not able to shoot in New York because of it."
At some point, he continues, "some enterprising financier will start banking against those credits. But it hasn't happened yet."
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