Lights, Camera, Action

Allan Rolnick, CPA

Last weekend‭, ‬Hollywood’s elite gathered to do what they do best‭: ‬celebrate themselves at the Oscars‭. ‬And while Will Smith smacking Chris Rock sucked most of the oxygen out of the room‭, ‬Sunday night’s‭ ‬“main event”‭ ‬still managed to honor the big-name nominees for awards like Best Picture‭, ‬Best Director‭, ‬and Best Actor and Actress‭. ‬Smaller satellite ceremonies recognized everyone else‭, ‬down to the gaffers‭, ‬best boy grips‭, ‬and bullwhip coordinators‭. (‬“Rolly Guacamole”‭ ‬beat out the‭ ‬“Macho Taco”‭ ‬in a hotly-contested race for‭ ‬“Best Performance by a Burrito Truck‭.‬”‭) ‬

There’s one unsung group‭, ‬though‭, ‬that still isn’t getting the red carpet they deserve‭, ‬and that’s the tax professionals who make the movie money machine go‭ ‬‘round‭.‬

Filmmakers have always been willing to leave Hollywood for the right location at the right price‭. ‬Just ask Clint Eastwood‭, ‬who made his bones shooting cheap spaghetti westerns in Italy and Spain‭. ‬But now‭, ‬states looking to capture a slice of Hollywood’s Action‭! ‬aren’t sitting around waiting for producers to find them‭. ‬They’re bidding on shoots with a whole slate of tax breaks‭, ‬loading up Super Soakers full of cash to spray down producers‭. ‬That’s where the tax pros come in‭. ‬

Have you ever wondered why Marvel Studios chose Georgia to film their Black Panther sequel‭? ‬It’s not because of the Peach State’s rich vibranium deposits‭. ‬No‭, ‬last year‭, ‬Georgia handed out over‭ $‬1.2‭ ‬billion in film and TV credits‭. ‬Why would John Wick 4‭ ‬shoot in New York‭? ‬The Empire State offers up to 480$‭ ‬million per year in tax breaks‭. (‬“Why does the world need another John Wick movie‭?‬”‭ ‬might be a better question‭.) ‬Why does Universal shoot Jurassic Park flicks in Louisiana‭? ‬The Pelican State’s incentive program pays up to‭ %‬40‭ ‬for qualified expenses‭, ‬including actor salaries‭. ‬

Most states structure their incentives as tax credits‭. (‬Sure sounds more impressive than‭ ‬“bribes‭,‬”‭ ‬right‭?) ‬That suggests they’re refunding producers for taxes paid on profits‭. ‬But in a plot twist worthy of M‭. ‬Night Shyamalan‭, ‬they calculate those credits‭ ‬as a percentage of spending‭, ‬not profits‭. (‬Any Hollywood accountant can tell you their Prime Directive is to make sure there’s never a profit‭.) ‬Credits are typically refundable‭, ‬meaning producers can pocket them even if they don’t owe tax‭. ‬Some are even transferable‭, ‬meaning producers can sell them to local businesses that can’t get away with Hollywood’s special brand of creative accounting‭. ‬As Louisiana’s Chief Legislative Economist confessed‭, ‬“It’s got nothing to do with tax‭. ‬We’re just using the tax-filing process and the Department of Revenue as the paying agent for a spending program‭. ‬That’s what we’re doing‭.‬”‭ ‬

Naturally‭, ‬the folks back home in Hollywood aren’t taking this lying down‭. ‬In 2009‭, ‬Governor Arnold Schwarzenegger‭ (!) ‬signed California’s first film incentive into law‭. ‬Last year‭, ‬the state doubled the annual credit to‭ $‬660‭ ‬million and extended it through 2025‭. ‬Are the giveaways worth it‭? ‬The California Film Commission reports that since 2015‭, ‬they’ve spent‭ $‬1.1‭ ‬billion in incentives to generate‭ $‬8.4‭ ‬billion in direct spending and help employ 27,000‭ ‬actors and 36,000‭ ‬crew members‭. ‬They’ve lured 28‭ ‬productions from other states‭, ‬including HBO’s Veep and Ballers‭. ‬So‭, ‬while producers may be making out like bandits‭, ‬everyone else is paying like usual‭. ‬

As you settle down to catch up on this year’s Oscar winners‭, ‬spare a thought for the unsung heroes pulling the strings behind the cameras‭. ‬They know the Academy won’t ever award a statuette for Best Performance Lobbying a State Legislature or Special Achievement in Cooking the Books‭. ‬But they‭ ‬know‭, ‬just like we do‭, ‬that the right tax planning can make any financial decision a winner‭! ‬

Allan J Rolnick is a CPA who has been in practice for over 30‭ ‬years in Queens‭, ‬NY‭. ‬He welcomes your comments and can be reached‭ ‬at 718-896-8715‭ ‬or at‭.‬

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