Los Angeles City Council Passes Production Tax Incentive

In an effort to curb runaway production, the Los Angeles City Council on Tuesday passed an initiative that will reduce taxes for production companies filming in the city. The change is expected to be a boon for smaller productions such as commercials and television shoots.

The initiative modifies the city's entertainment production tax, raising the minimum-tax threshold from $2.5 million to $5 million. That means productions costing less than $5 million will only be subject to a $145 flat fee.

"This is mostly going to be applying to commercials and smaller productions -- perhaps television and independent films," said Paul Audley, president of Film L.A., the film-permitting organization for the city and county of Los Angeles. "It's great they were able to get this through and have this additional incentive to have filming stay here in L.A."

In recent years, states including New Mexico and Georgia have poached business from Los Angeles by offering tax incentives to production companies.

The change to the tax structure would go into effect 30 days after Mayor Antonio Villaraigosa signs the measure. It could be in place as soon as next month, Audley said.

Under the changes, the entertainment production tax will assess a liability of $1.30 for each additional $1,000 in production costs over $5 million. The tax is capped at $12,495 annually.

Other cities in the area have explored changes to their entertainment tax structure in an effort to prevent runaway production. Culver City, for example, is considering the creation of a $12,000 annual cap on the business tax production companies filming there must pay. That city does not have a cap.