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Film tax credit survives California $ woes

California's budget crisis has all the elements of a major disaster movie.

Hollywood_sign There's the big-name star politician star, Gov. Arnold Schwarzenegger.

There are the continuing battles, no special effects needed, between Democrats and Republicans in Sacramento.

There's the supporting cast of millions, an electorate that propels the main money story line by voting for projects but against ways to pay for them.

And there's the unbelievable plot twist, a state paying its bills with IOUs.

Now all we need is a studio to green light the project. That shouldn't be too hard to find since, despite all it's money troubles, California has maintained its tax breaks for movies made in the state.

No money, but tax breaks: Yes, it's true. California's film incentive program is alive and well.

On July 1, the Californian Film Commission began accepting applications for the $100 million available to TV an movie producers in this the first year of the program.

According to Commission Director Amy Lemish, as of last week about 60 productions had applied.

Most of the tax break applications are from filmmakers planning independent movies with budgets between $1 million and $10 million. But there also are studio projects with stars applying for the break. (Has anyone checked The Governator's calendar recently?)

So how does a state that's now forced to pay businesses and individual taxpayers with IOUs (officially, they're registered warrants), justify keeping such a large tax break in place?

The IOU issue doesn't affect the California film tax break, according to state officials, because unlike incentives in some states, the Golden State break is not a refundable credit. Production companies can use it only to reduce their tax obligations, or sell it to someone else who can do the same.

The thinking apparently is that while the film companies may not owe much, or any, taxes, the ancillary companies and people that it hires will. Plus, at least those folks will have jobs.

Light, camera, tax break ... maybe: Speaking of other states, some are rewriting their TV and movie making tax credits.

In recent years,states around the country have implemented tax breaks to get the productions to shoot within their borders.

But now that budgets are tight, Marketplace radio reports that some critics are raising new questions about the tax strategy.

The radio program, however, might want to do a follow-up story in Iowa. Tax Updates notes that Hollywood is flocking to the Hawkeye State's 50 percent filmmaker subsidy.

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