Posted date: 2/08/2007

Byline: LISA FRIEDMAN Washington Bureau

WASHINGTON -- More than two years after being signed into law, special tax breaks designed as incentives to keep movie-making in the United States have not kicked in.

Southland lawmakers and industry analysts blame the delay on a mix of slow-moving Treasury Department bureaucracy and an indifference among administration officials toward the $60 billion entertainment industry.

But Hollywood leaders said the holdup might have cost the country millions of dollars in film production lost to countries such as Canada that are eagerly offering generous incentive packages.

"Treasury has dragged its feet for two years,'' said Taylor Hackford, director of "Ray'' and vice president of the Directors Guild of America.

And many producers also have a lingering sense of uncertainty about whether their projects will qualify for the tax breaks.

Rep. Howard Berman, D-Van Nuys, who helped spearhead the incentives, called the delay ridiculous and charged that the United States has lost films because of it.

"Apparently the administration doesn't think that protecting the jobs associated with one of the strongest export industries in the country should be rushed through,'' Berman said.

The Internal Revenue Service is expected as early as today to issue rules allowing the incentives to move forward.

Still, Berman and others said, it could be months before any decisions are finalized. And by that time, the law could expire. It is set to sunset in 2008.

"Half the time of this provision's life we've lost already,'' Berman said.

U.S. Treasury Department officials did not return calls for comment Wednesday.

The Hollywood provisions are part of the American Jobs Creation Act, a sweeping piece of corporate tax legislation that President George W. Bush signed into law in October 2004.

The bill allows film and television producers with budgets of less than $15 million to immediately write off costs in a single year.

A higher production-cap limit of $20 million applies to films shot in specific lower-income areas such as the Mississippi Delta region.

Losing $23 million

Industry leaders said the measure could save producers 7 percent to 10 percent of a project's costs -- a significant enticement for keeping a film in the country at a time when runaway production is estimated to drain about $23 million from the U.S. economy each year.

At issue, however, is whether residual payments to actors, directors, writers and others are considered within that $15 million cap. Also unclear is just what percentage of a film must be shot in a low-income region to qualify for that bracket.

Canada is cheaper

Amy Lemisch, director of the California Film Commission, said the uncertainty has caused producers close to the $15 million margin to avoid thinking about the tax break altogether.W

"It's not as effective an incentive as going to Canada and knowing with certainty that you're going to get a 16 percent federal labor credit and between 18 (percent) and 40 percent provincial labor credits,'' she said.

Berman added, "If someone is deciding whether to film in Los Angeles or somewhere else, if they can't tell whether they qualify, they'll go abroad.''

Hammering out the terms, Lemisch said, is critical to California in particular.

"We don't have a state incentive, so a federal incentive is going to benefit California,'' she said.

While it is impossible to know how many producers might have been dissuaded from filming in the United States because of the Treasury Department delay, Los Angeles Economic Development Corp. Chief Economist Jack Kyser noted there are currently 11 movies being filmed outside the United States.

That, he said, translates into an at-the-moment loss of more than 3,300 jobs and about $18 million.

lisa.friedman(at)langnews.com - (202) 662-8731