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'Runaway' Aid Could Keep Producers Home

Washington— When a giant sinkhole threatened to swallow New Orleans in last summer's TBS Superstation original movie On Hostile Ground, few viewers likely realized the phony disaster was staged in Toronto, which had lured the film's production crew with tax credits and the cheap Canadian dollar.

Such "runaway film production"— in which U.S. film and TV show producers, attracted by lower costs, pack up and move their sets to foreign countries — is an increasing phenomenon.

But the cable and broadcast-network TV producers who are most likely to take their projects elsewhere, according to the U.S. Commerce Department, might soon have similar incentive to remain stateside — if certain federal lawmakers get their way.

A bill introduced July 31 (S-1278) by Sens. Blanche Lincoln (D-Ark.) and John Breaux (D-La.), among others, seeks to level the playing the field by offering wage-tax credits to producers who film inside the U.S.

"This is a problem not just for the movie industry, but also for the small businesses across the country that provide services to the film industry," said Breaux, who noted that Canadian cities were substituted for New Orleans in four different productions just last year.

He said the runaway projects translate into lost opportunities for construction crews, caterers and other local businesses that could have supported the productions.

"Our economy is being threatened by other countries luring our production crews overseas with the promise of a cheap imitation," Breaux said.

A Commerce Department report released in January estimates that runaway productions cost the U.S. economy $10.3 billion in 1998. That's a fivefold increase from $2 billion in 1990.

The report noted that TV series, pilots and films are more likely to be filmed in foreign countries than full-length, big-budget theatricals because they're more sensitive to cost.

Although several countries already offer tax incentives to producers — including the United Kingdom, Ireland and Australia — Canada takes the most business from the U.S. film industry, the report said.

The Canadian federal government offers an 11 percent refund on wages paid to local laborers, along with various financing packages for film production. Individual Canadian provinces also offer their own tax credits.

Film production by foreign outfits grew by 65 percent in Ontario following the introduction of an 11 percent wage tax credit in 1998. The province also provides a 3 percent bonus credit for shoots that last a minimum of five days.

Although the Commerce Department report doesn't specifically pinpoint these tax incentives as the primary factor in movie-making migration, it shows that credits are clearly an important production consideration.

Breaux said passage of the Senate bill would provide "an important incentive for the movie industry to go back to making American movies in America."

The proposed tax credit would apply to 25 percent of the first $25,000 in qualified wages per employee for productions with payrolls in the range of $200,000 to $10 million.

The credit would apply to production of any motion picture (whether released theatrically or direct-to-video), broadcast network or cable TV original movies, series, miniseries, or pilot.

The average cost for made-for-TV movies is around $3 million, according to the Commerce Department.

The bill would grant productions made in economically depressed areas a larger 35 percent credit, which also prohibits the granting of wage credits for pornographic films.

But it could be some time before the bill reaches the Senate floor. Congress is currently in recess, and Senate Finance Committee Chairman Sen. Max Baucus (D-Mont.) has yet to schedule a committee hearing on the matter.

States News Service