Film Florida - DRAFT Priorities & Recommendations 20132014 Fund Statewide Leadership Organization...

8/13/2019 Film Florida - DRAFT Priorities & Recommendations 20132014 Fund Statewide Leadership Organization for the Ind

1/13

09/18/2013

DRAFT

** Please note that this is a draft document - a work-in-progress so to speak.

The ideas contained in this document are presented for discussion and vetting purposesand do not necessarily reflect the opinion or position of Film Florida and/or its Board of

Directors at this point in time **

LEGISLATIVE PRIORITIES & RECOMMENDATIONS FOR FLORIDASENTERTAINMENT INDUSTRY FINANCIAL INCENTIVE PROGRAM

PRIORITY #1

Provide adequate funding for the program.

Many of our direct competitor states (i.e. Georgia, Louisiana) offer unlimited funding fortheir incentive program. Industry stakeholders realize that there may be a number ofobstacles prohibiting Florida from doing the same, but we feel it is of the utmostimportance to find a way to adequately fund the Entertainment Industry Tax incentiveprogram.

There are many diverse entertainment industry sectors that can potentially qualify fortax incentive dollars under the Florida Entertainment Industry Tax Incentive program,none of which can create a successful and vibrant entertainment industry cluster all ontheir own.

We would like to alleviate the need for one industry sector to compete with anotherindustry sector. In fact, we feel it is imperative to the successful growth andsustainability of our developing entertainment production industry clusters that we workto find a way to fully fund the program so that all sectors of the industry are empoweredto create the maximum amount of jobs and bring the most new money to our State aspossible.

To stay competitive in the entertainment production industries, it is of the utmostimportance that this program receive adequate funding - it is the cornerstone element

necessary to cultivate and grow this 21st-century industry cluster throughout the State.Without funding we will not even be in the game.

In 2010 Georgia offered $140 million in tax credits generating over $617 million.

In 2010 Louisiana offered $202 million in tax credits generating over $1 billion in output.

** Please note that this is a draft document - a work-in-progress so to speak. The ideas contained in this documentare presented for discussion and vetting purposes and do not necessarily reflect the opinion or position of FilmFlorida and/or its Board of Directors at this point in time **

v1 09/18/2013 - DRAFT page 1 of 13


2/13

PRIORITY #2

Increase Floridas long-term commitment to the program.

Whether you are speaking with a film producer, a television producer, a gamedevelopment company or an app developer, the one thing our clients have in common isthe need for consistency. If there is uncertainty regarding the future of a states taxcredit program, producers throughout every sector of the entertainment industry willchoose to take their projects elsewhere.

Industry stakeholders would like to work with decision-makers to begin to look forsolutions to offer our clients and developing businesses the consistency and security

that they require to base and bring their projects here not just in the short-term, butwith the hopes of building a long-term relationship that will develop a pipeline for contentproduction, and and bricks and mortar development, in our state, not only for theimmediate future, but for the next decade and possibly even the next century as well.


v1 09/18/2013 - DRAFT page 2 of 13


3/13

PRIORITY #3

Fund statewide leadership organization for the industry.

The Florida Entertainment Industry Financial Incentive Program is a potent economicdevelopment incentive which creates conditions that make job growth more likely in anindustry that is a significant part of Floridas current and future, economic roadmap.

The Office of Film & Entertainment (OFE) is responsible for administering the FloridaEntertainment Industry Financial Incentive Program; OFE staff is also responsible foridentifying potential clients interested in filming their projects in the Sunshine State andmarketing our state as a location destination for film and entertainment project to clients

throughout the world.

Since FY2007/2008, funding for the Florida Entertainment Industry Financial IncentiveProgram has increased dramatically, proportionally increasing the amount ofadministration and oversight necessary to maintain the integrity of the program, yetOFEs operating budget has been consistently slashed.

In order to continue to reap the rewards, it is imperative that the state maintain itscommitment to properly monitoring, marketing and administering this successfulprogram; in addition there must be an organization that provides a leadership role inworking with both the public and private sectors throughout the State to better addressthe challenges and seize the opportunities presented in OFEs 5-Year Strategic Pan forthe Entertainment Industry.


v1 09/18/2013 - DRAFT page 3 of 13


4/13

OTHER GENERAL ITEMS FOR DISCUSSION

(1) DEFINITIONS

(b) Digital media project

The term includes a video game or production intended for Internet or wirelessdistribution, an interactive website, digital animation, and visual effects, including, butnot limited to, three-dimensional movie productions and movie conversions.

Up for discussion - are these definitions still relevant? Maybe remove interactivewebsite, three-dimensional movie productions and movie conversions projects? Needmore information regarding the potential economic benefits of these types of projects tomake an informed decision on this issue.

(d) High-impact television series

Consider redefining high-impact television series - min. $625,000 per episodewith an order of at least 7 episodes per season or minimum $4.5 million spend with aminimum of 45 principal photography production days, 90% of the entire project beingproduced in Florida and 90% of cast and crew are qualified florida residents).

This would incentivize and give priority to Florida-based content creation companies -should we limit the number of High-impact projects a Florida-based company can

qualify for if they are high-impact? What would be the proper number of projects?

(g) Production

means a theatrical or direct-to-video motion picture; a made-for-television motionpicture; visual effects or digital animation sequences produced in conjunction with amotion picture; a commercial; a music video; an industrial or educational film; aninfomercial; a documentary film; a television pilot program; a presentation for atelevision pilot program; a television series, including, but not limited to, a drama, areality show, a comedy, a soap opera, a telenovela, a game show, an awards show, or aminiseries production; or a digital media project by the entertainment industry.

Recommend clarification of language to include direct-to-internet method ofdistribution for qualifying projects.

Possibly removing reality show and awards show.


v1 09/18/2013 - DRAFT page 4 of 13


5/13

(h) 4. Production expenditures

Up to $300,000 of the costs of newly purchased computer software and hardwareunique to the project, including servers, data processing, and visualization technologies,which are located in and used exclusively in the state for the production of digital media.

Consider possibly lowering this threshold or removing this as a qualifiedexpenditure - would like clarification of exact expenditures from OFE in order to betterevaluate the effectiveness of these expenditures. Hard to allocate percentage of assetsto individual productions and hard to police/control.

(j) Qualified production

Qualified production means a production in this state meeting the requirements of thissection.

1. Florida Resident worker requirement

We recommend raising the requirement for Florida resident workers - to 70% /

80% digital media?

(l) Qualified digital media production facility means a building or series of buildingsand their improvements in which data processing, visualization, and soundsynchronization technologies are regularly applied for the production of qualifieddigital media projects or the digital animation components of qualified productions.

Currently, this bonus is a nightmare to administer this particular bonus becauseonly expenditures made at the qualified facility qualify.

Refine the definition - the current definition is too broad.

Possibly remove the qualified production facility bonus for digital mediaprojects?

Discuss whether or not Florida-based digital media production companies qualify

for this bonus if they are producing projects in facilities they own?

(m) Qualified production facility means a building or complex of buildings and theirimprovements and associated backlot facilities in which regular filming activity forfilm or television has occurred for a period of no less than 1 year and which containat least one sound stage of at least 7,800 square feet.


v1 09/18/2013 - DRAFT page 5 of 13


6/13

Possibly remove the one year requirement and add a better definition of whatqualifies as a proper Qualified production facility?

Discuss whether or not Florida-based production companies qualify for thisbonus if they are shooting in facilities they own?

(p) Underutilized region

Consider redefining regions near Production Centers - counties close totraditional Production Centers i.e. Miami & Orlando get penalized for their geographicproximity. e.g. Monroe County and Volusia County are probably under-utilized ifcalculated on their own?

(q) Interactive website

Recommend that this possibly be eliminated - there might be severe unintendedconsequences. Need more info from OFE.

(3) APPLICATION PROCEDURE; APPROVAL PROCESS.

(a) Program application.

Discuss shortening the application period to 90 or 120 days prior to the start ofproduction - this will help the queues more accurately reflect projects that are ready tobegin production.

Recommend requiring proof of financing at the time of applicationfor a potentialprojects.

(c) Application process.

No pre-certifying future years for high-impact productions. Instead, give them

sequential priority position in the general production queue for funds when they

become available for the next fiscal year (like CA).

High-impact TV and digital media projects could still alternate with each other

in priority positioning, once new monies are allocated for a fiscal year, the basis for

qualification should return to first-come first-serve with prioritization for high-impactprojects.


v1 09/18/2013 - DRAFT page 6 of 13


7/13

Discuss discontinuing the conditional certification of tax credits.

Continue to keep a waiting list for projects that are applying for funds that may become

available for the current fiscal year - high-impact projects get prioritized. If/when

funds become available, applicants/projects on the list will be certified

Find language that protects high-impact recurring television projects where production

bridges fiscal years.

(f) Verification of actual qualified expenditures.

Narrow the time for submitting expenditures to within 180 days after production

ends in this state.

Possibly allow for projects to file for an extension of up to 45 days, due to undue

hardship (this process must be cumbersome and bear a financial burden), in order to

submit all Florida expenditures?

(g) Promoting Florida.

Consider changing this requirement to a bonus, similar to GA (see attacheddocument FEPI 10 for more info). This might help us to better leverage our potentialmarketing opportunities?

(4) TAX CREDIT ELIGIBILITY; TAX CREDIT AWARDS; QUEUES; ELECTION ANDDISTRIBUTION; CARRY-FORWARD; CONSOLIDATED RETURNS;PARTNERSHIP AND NONCORPORATE DISTRIBUTIONS; MERGERS AND

ACQUISITIONS.

(a) Priority for tax credit award

Recommend continuing first-come, first-serve approach (again similar to CA).

There is already threshold criteria for qualification in place.

Maybe require a minimum number of production days or require that over 50% ofthe project be produced/shot in Florida?


v1 09/18/2013 - DRAFT page 7 of 13


8/13

(b) Tax credit eligibility.

1. General production queue.

$8 million per project cap

Our current statute has an $8 million cap per project.

This project cap was initially set up as a protective measure to insure that our finiteresources were leveraged appropriately to produce the greatest economic benefitpossible for our State.

We feel that this project cap is fair and reasonable; it means that productions mustspend a minimum of approx. $26-40 million in qualified Florida expenditures in order toreceive the maximum tax credit award of $8 million.

To the best of our knowledge, no projects that have been lost to Florida due to thisproject cap.

The project cap allows us to give less money to more projects, rather than more moneyto fewer projects and it helps us to leverage our tax credits to create the biggest impactin jobs and economic stimulus possible.

a. An off-season certified production

We believe that it is still necessary to protect this bonus which was instituted to

offset the additional cost of production insurance during off-season (hurricaneseason).

Film and TV productions are forced to pay a huge increase in their production insurancecost when they film during the off-season (hurricane season), which the other types ofproductions dont pay. Films and TV series also face the greatest threat of additionalcosts if impacted by a hurricane or named storm.

b. High-Impact Television capped to no more than 45% of total funds allocated to theGeneral Production Queue

If more than 45 percent of the sum of total tax credits initially certified and awardedafter April 1, 2012, total tax credits initially certified after April 1, 2012, but not yetawarded, and total tax credits available for certification after April 1, 2012, but not yetcertified has been awarded for high-impact television series, then no high-impacttelevision series is eligible for tax credits under this subparagraph.


v1 09/18/2013 - DRAFT page 8 of 13


9/13

Remove the above stated 45% cap on television productions.

By successfully attracting and sustaining television productions, Florida had begun to

rebuild its vibrant, thriving, professional entertainment industry cluster, which in turnbegan attracting other types of productions, incentivized and non-incentivized alike. Tolimit the ability of a building block like television production to create and attract jobs isnot only counter-productive to the intent of the Entertainment Industry Tax Incentiveprogram, it is destructive to the ability for the industry to properly cluster and grow.

The area where the Florida program has seen the greatest level of success andcompetitiveness, without any doubt, is in the arena of attracting television production,and this is not accidental or by chance. As an industry, we looked to structure anincentive that would take decisive steps to regain and build all sectors of theentertainment industry, which not only serves as a vital source of pride for our citizens,

but more importantly provides high-wage, high-tech jobs and sustainable revenue forthe future.

Attracting television productions is the arena where Florida has been most successfullyable to compete on a national level; despite intense competition, the past few yearshave proven that Florida can remain competitive in this arena, while still remainingfiscally responsible to its taxpayers, even when the incentives it offers are not asattractive as those offered by direct competitor states.

Lack of funding for the program has meant that there are little to no incentive fundsavailable for, or to continue to attract, television productions. Entertainment Industry

stakeholders feel that this is a tremendous mistake, as do major production companiesand studios.

d. Under-utilized production areas

To achieve the intent of this language this bonus needs to be associated withproductions that make location-based (where) decisions so as to encourageproduction to choose to work in underutilized areas.

The bill language ties the 5% bonus to the percentage of principal photography days inthe area, but the qualifying threshold of 67% of total production days has been too highto entice productions to utilize this bonus; lowering the threshold to 50% of totalproduction days and increasing this bonus to 10% would strengthen this bonusand make it more effective with respects to its intended purpose of spreadingproduction throughout our state outside into under-utilized areas.


v1 09/18/2013 - DRAFT page 9 of 13


10/13

If the qualifying threshold of production days is met, we would suggest the bonus apply

to all qualified expenditures for the production.

f. A qualified production facility

Possibly remove the qualified production facility bonus for digital mediaprojects?

Discuss whether or not Florida-based production companies qualify for thisbonus if they are shooting in facilities they own?

30% cap on tax credit award

Industry stakeholders are of the opinion that the current 20-30% tax credit offered onqualified in-state expenditures is adequate to continue to attract and grow a successfulentertainment industry cluster here in the state of Florida.

We need to protect the return on investment to the Florida taxpayer and ourstakeholders feel that this level of incentive is both competitive and fiscally responsibleuse of public monies.

Considering the recommendation of lowering the base tax credit award to 15%with numerous a la carte bonuses designed to encourage behaviors wed like to attractto appropriately cultivate and grow the entertainment production industries throughout

our State.

Also considering the recommendation to reduce the overall cap to 25%, but weneed more info on how that would affect the effective ROI for our clients.

While many states have offered up to 40+% in tax credits on both in-state and out-of-state expenditures, Florida has been quite successful in the past year in attractingprojects of all shapes and sizes with our current, conservative, tax credit structure andcriteria.

2. Commercial and music video queue.

Discuss the recommend that commercials and music videos be required to obtaincertification in advance like other projects

At this point in time, we do not support lowering the per project threshold in thisqueue, although we would recommend possibly allowing commercials to qualify


v1 09/18/2013 - DRAFT page 10 of 13


11/13

at that overall lower threshold rather than having to bundle multiple projectstogether.

We are waiting on further recommendations from our member/partner AICP-FL.

3. Independent and emerging media production queue.

Recommend raising the threshold from $100,000 to $200,000 minimum.

Recommend limiting individual companies to no more than 2 certified

productions in this queue at any given time during a fiscal year.

Consider adding an Indigenous Florida production prioritization for this

queue requirements are:

90% Florida residents cast and crew (not including extras)

90% Florida based vendors (must have been established in business for at least 1

year)

90% Produced in Florida, showcasing Florida for Florida and shot in Florida.

Recommend strengthening Proof of Financing requirements for projects in this

queue.

Recommend requiring proof of distribution agreement.

(7) ANNUAL ALLOCATION OF TAX CREDITS.

(a) The aggregate amount of the tax credits that may be certified pursuant to paragraph(3)(d) may not exceed:

3. Funding for fiscal years...2014-2015, and 2015-2016

We recommend at least $100 million per fiscal year for the remainder of theprogram.

Thereafter, we recommend a minimum five (5) year commitment to the programwith annual funding in the amount of $200 million per fiscal year.


v1 09/18/2013 - DRAFT page 11 of 13


12/13

(a) Carry-forward

Recommend continue the carry-forward provision of unused funds.

(d) Conditionally certified projects

Recommend doing away with conditionally certifying projects.

OTHER DISCUSSION ITEMS...

Governors Targeted Project Queue

Set aside 10% of all allocated tax credits for a Governors Targeted Project Queue.

DEO could set up additional review criteria under which a project might be certified tax

credits from this queue.

The Governor must be able to have a set visit and have a photo op with producers and

key actors.

Productions Declaring Bankruptcy

Any certified production that declares bankruptcy immediately forfeits any tax credits

certified

Definition that sets aside tax credits by certification, but that the credits are not owned

by the production until they are awarded

Calculating Florida Spend that are NOT qualified expenditures

Add to application form the amount a production intends to spend in Florida that is NOT

certified. This would help us figure out its actual economic impact. If we can make that

information part of what they substantiate in the end, we could use it for studies as

factual info.

Require a Post Application

Most states with limited funding require a post application so that certified tax creditscan be released more efficiently.


v1 09/18/2013 - DRAFT page 12 of 13


13/13

Limit Productions to either the tax credit award or the sales tax exemption

Using the Sales Tax Exemption as either/or to tax credit awards, consider not allowing

companies to receive both.

Add to Compliance Contract- contact information

When a project is certified they must provide and post an email address to the State

website for cast, crew and vendors to be able to send resumes/provide information

about their businesses.


v1 09/18/2013 - DRAFT page 13 of 13

Film Florida - DRAFT Priorities & Recommendations 20132014 Fund Statewide Leadership Organization...

Documents

Transcript of Film Florida - DRAFT Priorities & Recommendations 20132014 Fund Statewide Leadership Organization...