States of Aggression: Producers Play Off the Competition for Best Deals
That eliminates middleman fees and can remove an extra step in the financing process. “We look for simplicity in a deal,” says Michael Roban, exec VP of motion picture finance and operations at IM Global. “We're going to look for more efficient models
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States of Aggression: Producers Play Off the Competition for Best Deals - VarietyCannes Film Festival
Companies that buy tax credits from producers are increasingly working with those producers directly, rather than going through a broker. That eliminates middleman fees and can remove an extra step in the financing process.
“We look for simplicity in a deal,” says Michael Roban, exec VP of motion picture finance and operations at IM Global. “We’re going to look for more efficient models, and the market has created more efficient models for us.”
Tax incentives are among the sub-issues on the table at the Intl. Film Finance Forum presented by Winston Baker in association with Variety on May 17 at the Carlton Hotel in Cannes.
Roban points to companies like Entertainment Partners, one of the largest buyers of tax incentives, which typically finances between 80% and 90% of an incentive upfront. And without a middleman fee, that’s a little more money that producers can use as collateral for a bank loan.
A different type of competition exists in the tax rebate states. More banks have entered the single-picture financing space in the past two years, meaning more competition among lenders. That’s led some businesses, like Entertainment Partners and film finance company 120dB Films, to lend more actively against incentives.
“Some tax credit financiers are doing more than just tax credits,” says Christopher Woodrow, chairman and CEO at Worldview Entertainment. “Money is cheaper than it was a few years ago … tax credit lenders (have) to be more aggressive to secure deals.”
Worldview shot two films this past year in Georgia: “Devil’s Knot” and “The Sacrament,” both of which used third parties to cash flow the state’s tax credit.
Georgia is one of the more aggressive tax credit states, offering 20% incentive plus 10% for qualifying productions. New Mexico, too, is attracting attention for its program, a 30% tax credit for qualifying productions. The amount increased this year through the so-called “Breaking Bad” bill after facing some opposition last year from Gov. Susana Martinez. (The AMC hit show shoots in the state.)
“New Mexico’s rebounding,” says Joe Chianese, executive VP of Entertainment Partners. “Producers go to a location whether it’s a country or a state where there’s certainty … When there’s even a hint of uncertainty, you’re going to see a ripple effect.”
New Mexico benefited from uncertainty in Michigan two years ago, when Marvel’s “The Avengers” pulled out of the state after proposed budget cuts threatened the then-generous program.
Some in Hollywood are paying close attention to Louisiana, which has attracted many productions with its partially refundable and fully transferable film tax credit of 30% for qualifying productions, plus 5% of resident payroll under $1 million.
But Louisiana’s Gov. Bobby Jindal announced plans to cut some of its tax breaks at the beginning of the year and that could affect the state’s successful film incentive program.
“We’re all watching what’s going on in Louisiana (and) we’re hoping that nothing changes materially there,” Roban says.
- 25% refundable tax credit on direct and post-production expenditures subject to state taxation.
- No minimum budget or spend requirement.
- An additional 5% applies to all direct production expenditures made by a TV series with an order of six episodes and that has a budget of $50,000 per episode.
- For other types of productions, an additional 5% applies to payments for resident crew wages and fringes when a qualifying production facility is used for a minimum number of principal photography days: 10 days when the total budget is less than $30 million or 15 days when the total budget is $30 million or more.
- 20% across the board, transferable flat tax credit with a minimum of $500,000 spent on qualified production and post production expenditures within the state.
- Additional 10% tax credit if a production company includes an imbedded Georgia promotional logo in the qualified feature film, TV series, musicvideo or videogame project.
- Provides same tax credits to all instate and out-of-state labor working in Georgia, plus standard fringes qualify.
- No limits or caps on Georgia spend.