4 ms·

The article repeatedly mentions how production moved to Atlanta due to tax incentives. Even that is a race to the bottom, as Disney moved production of Marvel m

The article repeatedly mentions how production moved to Atlanta due to tax incentives. Even that is a race to the bottom, as Disney moved production of Marvel movies out of Atlanta last year to the UK where they got better tax incentives. Even the undercutting cities are being undercut.

noja 2mo ago
Why though? I thought Hollywood had their own accounting rules which always meant movies made a loss. What are they paying the tax on?
- throwup238 2mo ago
  Hollywood accounting rules are regular accounting rules (GAAP). The only reason “Hollywood accounting” is a thing is because of a bunch of actors who didn’t know the difference between “gross” and “net” points got screwed over. Everyone involved still pays their taxes, but the special purpose vehicle used to organize the production is essentially a passthrough entity.
  - dcrazy 2mo ago
    If you’re not a name, you’re not getting gross points. There’s a wide swathe of participants (actors, writers, directors…) who need to demonstrate risk by taking net points to get signed, and they are routinely screwed by tactics like artificially inflated self-dealing distribution fees that cause the “production” itself to show a paper loss while the IP has generated hundreds of millions of dollars more than has been invested into it.
  - schlauerfox 2mo ago
    Movie Money Understanding Hollywood's (creative) Accounting Practices 9781879505865 This is THE book on the subject. There's a lot more to it than that. Sometimes productions get creatively charged by the studios costs that may not be directly related to shift losses. Sometimes contracts redefine common terms so your points structure is completely misleading.
  - WalterBright 2mo ago
    I presume that what happens is if a movie is too profitable, other business expenses are shifted to the ledger to reduce the profits. This works because a movie is not a separate accounting entity.
    - jasode 2mo ago
      >This works because a movie is not a separate accounting entity. Each movie is set up as a separate legal business entity (LLC). That's the SPV (special purpose vehicle). https://www.google.com/search?q=each+hollywood+movie+is+a+separate+llc https://www.google.com/search?q=each+hollywood+movie+is+a+se... There's also a separate LLC for the parent production company. The production company LLC can also send invoices to the individual movie LLC for services. People can get creative with production companies "overcharging" for various expenses back to the movie's LLC but whatever creative accounting they want to do still needs to ultimately satisfy IRS scrutiny if there's an audit. There are entertainment attorneys that specialize in movie LLCs.
      - lotsofpulp 2mo ago
        Why would that matter if it's all still a subsidiary of Apple/Amazon/Disney/Comcast/Netflix/Sony? The relevant taxing authorities would be concerned with the parent companies' financials, not the subsidiaries. Moving money from right hand to left hand doesn't change one's tax liabilities. "Hollywood accounting" only refers to civil disputes due to insufficiently defined contracts between two businesses (usually actors and producers).
        dcrazy 2mo ago
        The benefit of “Hollywood accounting” isn’t necessarily tax avoidance; that’s what the tax credits are for. Rather, “Hollywood accounting” provides a way to avoid paying profit-based compensation.
      - labcomputer 2mo ago
        > whatever creative accounting they want to do still needs to ultimately satisfy IRS scrutiny if there's an audit. Well, yes, but avoiding taxes is not the point of "Hollywood Accounting", rather avoiding paying actors. The IRS can collect taxes from whichever business entity makes a profit, but, critically, actors cannot. They signed a deal with one entity, and are only payed a share of net profits if that one particular entity makes a profit. Hollywood Accounting, then, is the process of shifting costs around so that the legal entity responsible for paying the actors never makes a profit. The SPVs never own anything and never have any expertise in anything. So they have to pay the parent company for a wide range of services, from advertising and marketing to distribution to prop and equipment rental. That makes it easy to shift costs into the SPV as necessary.
  - nikanj 2mo ago
    Movies like Forrest Gump, Return of the Jedi, Men in Black or Harry Potter 5 all managed to lose money, according to "GAAP". If that's not creative accounting, I don't know what is.
    - gamblor956 2mo ago
      Those movies didn't lose money under GAAP. However, the specific legal entities that the talent made their profit deals with did not earn profits due to the way that revenues and expenses were allocated between the companies involved in making and distributing those films. For each of those films, at least one company was and is earning $$$, but the talent doesn't get to make a revenue sharing deal with those companies.
      - thaumasiotes 2mo ago
        > For each of those films, at least one company was and is earning $$$, but the talent doesn't get to make a revenue sharing deal with those companies. That doesn't sound right. Traditionally, and in particular in the case of Forrest Gump, the distinction is between people who contract for a percentage of net profit (always zero) and people who contract for a percentage of gross revenue. The revenue is measured at the same point either way; it's just about whether you got suckered or not.
        gamblor956 2mo ago
        The revenue hasn't been measured at the same point in our lifetimes. It was never just about net and gross but also which entity you had points with. A lot of talent had gross deals with the wrong entities.
  - stephen_g 2mo ago
    That seems an incredibly generous description (or breathtakingly naive, but I'm giving the benefit of the doubt because hopefully most people aren't that credulous). The point of Hollywood accounting is to intentionally create enough inflated expenses (billed from companies controlled by the studios or related parties of the producers etc.) to ensure that the net profit is zero or less, even when the film actually generated a lot of income. It's true that tax gets paid eventually (and somewhere, maybe a tax haven) but it is intentionally creative accounting designed to minimise tax and screw people out of their royalties.
- wahern 2mo ago
  Tax incentives these days include transferable tax credits. Even if your net tax rate was 0%, you can sell the credit to someone else, typically a bank. IOW, states and countries give you money, not simply give you a tax rate break.
  - qingcharles 2mo ago
    What kind of dystopian fuckery is that? It reminds me of the eBay market in bulk lots of used scratch-offs harvested from the trash: https://www.forbes.com/sites/robertwood/2016/01/14/powerball-losers-make-lemonade-by-selling-losing-lottery-tickets/ https://www.forbes.com/sites/robertwood/2016/01/14/powerball...
    - wahern 2mo ago
      I'm not sure of the exact history, but it may have been copied from how affordable housing projects are subsidized at the Federal and state levels: https://sgp.fas.org/crs/misc/RS22389.pdf https://sgp.fas.org/crs/misc/RS22389.pdf Affordable housing tax credits are contingent on a tremendous amount of regulations and stipulations, including who ends up holding equity in the property (it's not easy to use these as passthrough vehicles to get personally rich), so the private lenders tend to be repeat players, often banks, who understand how to navigate the process. Among other things, I guess it's a way to outsource oversight, so that the government doesn't need to maintain a huge bureaucracy to police each and every development project. OTOH, the financing complexity comes at a cost; a significant fraction of the value of the tax credits pays for lawyers and accountants, rather than to actual construction. I don't know if filmmaking subsidies are more lax or easier to game. Also, I think using tax credit schemes, instead of direct payments, might be a way to obfuscate the cost of these programs from a legislative and political perspective; not unlike the Earned Income tax credit. Nominally speaking, tax credits reduce government revenues rather contribute to expenditures; the latter draws far more attention.
vjvjvjvjghv 2mo ago
The whole tax incentive business is a big race to the bottom. Sports teams also abandon their taxpayer funded stadiums once somebody else offers a better deal.
- lenerdenator 2mo ago
  Yep. See the Kansas City Chiefs. Clark Hunt is the largest recipient of welfare in the entire region.
  - mc32 2mo ago
    Sports teams are an interesting one because often times these things go on the ballot and people vote for that. So it looks like people and municipalities have varying reasons for keeping a team. That said sometimes it just doesn’t make business sense for a team to stay and other times a municipality decides it’s not worth the cost to keep a pro team.
    - lenerdenator 2mo ago
      In the case of the Chiefs, Jackson Co., MO voters voted not to fund a new stadium. The reasoning was pretty simple: the Hunt family is worth $25 billion [0]. They could likely pay for any sort of improvements to Arrowhead, or to replace it altogether, without taxpayer funds, which comes from people in a metro area where the average income is on the lower side of things in a time when costs for everything keep going up. On the other side of the state line, Kansas lawmakers specifically targeted the goal of moving two professional sports teams to the state using public funds called STAR bonds. The end result is that the Kansas City metropolitan area will be spending, in total, about $3-4 billion to give the Hunt family a new place for their sports team to play, likely far away from the city center, and that Arrowhead needs to be torn down, which will cost at least tens of millions of dollars, once again, at taxpayer expense. $3 billion could probably build out a real public transit system for the KC metro. [0] https://sports.yahoo.com/meet-25-billion-hunt-family-202410403.html https://sports.yahoo.com/meet-25-billion-hunt-family-2024104...
pixelesque 2mo ago
I mean, the VFX part of the Film industry (and actual location shooting to some degree) has been chasing subsidies / tax credits since around 2002 with the Harry Potter movies that mostly were shot and produced (and more specifically the VFX were done in London, rather than in California) in the UK. Since then Canada and the UK in particular (and NZ and Australia) have had various different fluctuations in subsidies for various parts of filming / doing post-production of movies over the intervening years.
echelon 2mo ago
Film in Atlanta has dropped significantly. We had a boom from 2010-2022, but post streaming era the gravity has moved to the UK and Eastern Europe.
jarjoura 2mo ago
Not that you're wrong, but I could have sworn that Marvel production was always based in the UK. Post-production is very much still in California though.
- moate 2mo ago
  https://discoveratlanta.com/stories/things-to-do/atlantas-marvel-filming-locations-visit-attractions-and-scenes-from-the-marvel-cinematic-universe/ https://discoveratlanta.com/stories/things-to-do/atlantas-ma... Atlanta did a lot of the big ones.
moduspol 2mo ago
I just saw the new Spider-Man movie and there were a ton of notices about Canada-based film credits and from various provinces, too. I'm not sure how these credits work, but maybe spreading the work out to various tax incentivized areas is the current play.
Theodores 2mo ago
What has yet to be mentioned is why Hollywood, in the first place? Out of the many reasons, one is quite simple: daylight. This used to be really important with film. Historically, this was why efforts to move filming to somewhere like 'Scunthorpe, UK' didn't really work, despite tax fiddles, because you need light and some places just don't have it. But this doesn't matter now, because film has moved on, there is no need to have a massive glowing unshielded nuclear fusion reactor, 93 million miles directly overhead, just to get some lens focused on some bits of silver halide.
- saalweachter 2mo ago
  My understanding is that an important consideration at the time was that it is very far from New Jersey. Edison had a lot of early patents for film, and wanted to monopolize the industry. Film makers in California were far enough away that it was inconvenient for Edison to sue them, both because it required sending people there in person, and because the district courts were favorable.
  - moate 2mo ago
    The irony here being that Netflix is currently in a massive layout to build a studio in NJ (like, 20 minutes from the old Bell Labs). Almost feels like giving that troll the finger!
    - expedition32 2mo ago
      A hundred years ago they were practically giving away land in LA. The real estate value has flipped.
      - moate 2mo ago
        You, uh, you're not from New Jersey are you? I promise you, we're not giving away land around here.
        2mo ago
dominotw 2mo ago
soon they will be filming in mumbai. already setup for movie making.
- alephnerd 2mo ago
  Much of the VFX and CGI industry is already in India. Movies and shows like Inception, Interstellar, Ex Machina, Tenet, Dune 1&2, Odyssey, Chernobyl, Foundation, and The Last of Us were VFXed in large part by Indian companies like Prime Focus, Makuta, Phanton, and their subsidiaries. A number of these overlap with HPC and Distributed Systems with a number of major players in the space coming out of the GPU design space like Raja Koduri (AMD, Apple, Intel). Nvidia, AMD, Intel, Apple, and others having dedicated GPU design teams in India since the early 2000s also helped.
  - brettermeier 2mo ago
    Why is this downvoted? Is it wrong?
babypuncher 2mo ago
Nobody really wins in a race to the bottom
deleted 2mo ago
[deleted]

noja 2mo ago

Why though? I thought Hollywood had their own accounting rules which always meant movies made a loss. What are they paying the tax on?

throwup238 2mo ago
Hollywood accounting rules are regular accounting rules (GAAP). The only reason “Hollywood accounting” is a thing is because of a bunch of actors who didn’t know the difference between “gross” and “net” points got screwed over. Everyone involved still pays their taxes, but the special purpose vehicle used to organize the production is essentially a passthrough entity.
- dcrazy 2mo ago
  If you’re not a name, you’re not getting gross points. There’s a wide swathe of participants (actors, writers, directors…) who need to demonstrate risk by taking net points to get signed, and they are routinely screwed by tactics like artificially inflated self-dealing distribution fees that cause the “production” itself to show a paper loss while the IP has generated hundreds of millions of dollars more than has been invested into it.
- schlauerfox 2mo ago
  Movie Money Understanding Hollywood's (creative) Accounting Practices 9781879505865 This is THE book on the subject. There's a lot more to it than that. Sometimes productions get creatively charged by the studios costs that may not be directly related to shift losses. Sometimes contracts redefine common terms so your points structure is completely misleading.
- WalterBright 2mo ago
  I presume that what happens is if a movie is too profitable, other business expenses are shifted to the ledger to reduce the profits. This works because a movie is not a separate accounting entity.
  - jasode 2mo ago
    >This works because a movie is not a separate accounting entity. Each movie is set up as a separate legal business entity (LLC). That's the SPV (special purpose vehicle). https://www.google.com/search?q=each+hollywood+movie+is+a+separate+llc https://www.google.com/search?q=each+hollywood+movie+is+a+se... There's also a separate LLC for the parent production company. The production company LLC can also send invoices to the individual movie LLC for services. People can get creative with production companies "overcharging" for various expenses back to the movie's LLC but whatever creative accounting they want to do still needs to ultimately satisfy IRS scrutiny if there's an audit. There are entertainment attorneys that specialize in movie LLCs.
    - lotsofpulp 2mo ago
      Why would that matter if it's all still a subsidiary of Apple/Amazon/Disney/Comcast/Netflix/Sony? The relevant taxing authorities would be concerned with the parent companies' financials, not the subsidiaries. Moving money from right hand to left hand doesn't change one's tax liabilities. "Hollywood accounting" only refers to civil disputes due to insufficiently defined contracts between two businesses (usually actors and producers).
      - dcrazy 2mo ago
        The benefit of “Hollywood accounting” isn’t necessarily tax avoidance; that’s what the tax credits are for. Rather, “Hollywood accounting” provides a way to avoid paying profit-based compensation.
    - labcomputer 2mo ago
      > whatever creative accounting they want to do still needs to ultimately satisfy IRS scrutiny if there's an audit. Well, yes, but avoiding taxes is not the point of "Hollywood Accounting", rather avoiding paying actors. The IRS can collect taxes from whichever business entity makes a profit, but, critically, actors cannot. They signed a deal with one entity, and are only payed a share of net profits if that one particular entity makes a profit. Hollywood Accounting, then, is the process of shifting costs around so that the legal entity responsible for paying the actors never makes a profit. The SPVs never own anything and never have any expertise in anything. So they have to pay the parent company for a wide range of services, from advertising and marketing to distribution to prop and equipment rental. That makes it easy to shift costs into the SPV as necessary.
- nikanj 2mo ago
  Movies like Forrest Gump, Return of the Jedi, Men in Black or Harry Potter 5 all managed to lose money, according to "GAAP". If that's not creative accounting, I don't know what is.
  - gamblor956 2mo ago
    Those movies didn't lose money under GAAP. However, the specific legal entities that the talent made their profit deals with did not earn profits due to the way that revenues and expenses were allocated between the companies involved in making and distributing those films. For each of those films, at least one company was and is earning $$$, but the talent doesn't get to make a revenue sharing deal with those companies.
    - thaumasiotes 2mo ago
      > For each of those films, at least one company was and is earning $$$, but the talent doesn't get to make a revenue sharing deal with those companies. That doesn't sound right. Traditionally, and in particular in the case of Forrest Gump, the distinction is between people who contract for a percentage of net profit (always zero) and people who contract for a percentage of gross revenue. The revenue is measured at the same point either way; it's just about whether you got suckered or not.
      - gamblor956 2mo ago
        The revenue hasn't been measured at the same point in our lifetimes. It was never just about net and gross but also which entity you had points with. A lot of talent had gross deals with the wrong entities.
- stephen_g 2mo ago
  That seems an incredibly generous description (or breathtakingly naive, but I'm giving the benefit of the doubt because hopefully most people aren't that credulous). The point of Hollywood accounting is to intentionally create enough inflated expenses (billed from companies controlled by the studios or related parties of the producers etc.) to ensure that the net profit is zero or less, even when the film actually generated a lot of income. It's true that tax gets paid eventually (and somewhere, maybe a tax haven) but it is intentionally creative accounting designed to minimise tax and screw people out of their royalties.
wahern 2mo ago
Tax incentives these days include transferable tax credits. Even if your net tax rate was 0%, you can sell the credit to someone else, typically a bank. IOW, states and countries give you money, not simply give you a tax rate break.
- qingcharles 2mo ago
  What kind of dystopian fuckery is that? It reminds me of the eBay market in bulk lots of used scratch-offs harvested from the trash: https://www.forbes.com/sites/robertwood/2016/01/14/powerball-losers-make-lemonade-by-selling-losing-lottery-tickets/ https://www.forbes.com/sites/robertwood/2016/01/14/powerball...
  - wahern 2mo ago
    I'm not sure of the exact history, but it may have been copied from how affordable housing projects are subsidized at the Federal and state levels: https://sgp.fas.org/crs/misc/RS22389.pdf https://sgp.fas.org/crs/misc/RS22389.pdf Affordable housing tax credits are contingent on a tremendous amount of regulations and stipulations, including who ends up holding equity in the property (it's not easy to use these as passthrough vehicles to get personally rich), so the private lenders tend to be repeat players, often banks, who understand how to navigate the process. Among other things, I guess it's a way to outsource oversight, so that the government doesn't need to maintain a huge bureaucracy to police each and every development project. OTOH, the financing complexity comes at a cost; a significant fraction of the value of the tax credits pays for lawyers and accountants, rather than to actual construction. I don't know if filmmaking subsidies are more lax or easier to game. Also, I think using tax credit schemes, instead of direct payments, might be a way to obfuscate the cost of these programs from a legislative and political perspective; not unlike the Earned Income tax credit. Nominally speaking, tax credits reduce government revenues rather contribute to expenditures; the latter draws far more attention.

vjvjvjvjghv 2mo ago

The whole tax incentive business is a big race to the bottom. Sports teams also abandon their taxpayer funded stadiums once somebody else offers a better deal.

lenerdenator 2mo ago
Yep. See the Kansas City Chiefs. Clark Hunt is the largest recipient of welfare in the entire region.
- mc32 2mo ago
  Sports teams are an interesting one because often times these things go on the ballot and people vote for that. So it looks like people and municipalities have varying reasons for keeping a team. That said sometimes it just doesn’t make business sense for a team to stay and other times a municipality decides it’s not worth the cost to keep a pro team.
  - lenerdenator 2mo ago
    In the case of the Chiefs, Jackson Co., MO voters voted not to fund a new stadium. The reasoning was pretty simple: the Hunt family is worth $25 billion [0]. They could likely pay for any sort of improvements to Arrowhead, or to replace it altogether, without taxpayer funds, which comes from people in a metro area where the average income is on the lower side of things in a time when costs for everything keep going up. On the other side of the state line, Kansas lawmakers specifically targeted the goal of moving two professional sports teams to the state using public funds called STAR bonds. The end result is that the Kansas City metropolitan area will be spending, in total, about $3-4 billion to give the Hunt family a new place for their sports team to play, likely far away from the city center, and that Arrowhead needs to be torn down, which will cost at least tens of millions of dollars, once again, at taxpayer expense. $3 billion could probably build out a real public transit system for the KC metro. [0] https://sports.yahoo.com/meet-25-billion-hunt-family-202410403.html https://sports.yahoo.com/meet-25-billion-hunt-family-2024104...

pixelesque 2mo ago

I mean, the VFX part of the Film industry (and actual location shooting to some degree) has been chasing subsidies / tax credits since around 2002 with the Harry Potter movies that mostly were shot and produced (and more specifically the VFX were done in London, rather than in California) in the UK. Since then Canada and the UK in particular (and NZ and Australia) have had various different fluctuations in subsidies for various parts of filming / doing post-production of movies over the intervening years.

echelon 2mo ago

Film in Atlanta has dropped significantly. We had a boom from 2010-2022, but post streaming era the gravity has moved to the UK and Eastern Europe.

jarjoura 2mo ago

Not that you're wrong, but I could have sworn that Marvel production was always based in the UK. Post-production is very much still in California though.

moate 2mo ago
https://discoveratlanta.com/stories/things-to-do/atlantas-marvel-filming-locations-visit-attractions-and-scenes-from-the-marvel-cinematic-universe/ https://discoveratlanta.com/stories/things-to-do/atlantas-ma... Atlanta did a lot of the big ones.

moduspol 2mo ago

I just saw the new Spider-Man movie and there were a ton of notices about Canada-based film credits and from various provinces, too. I'm not sure how these credits work, but maybe spreading the work out to various tax incentivized areas is the current play.

Theodores 2mo ago

What has yet to be mentioned is why Hollywood, in the first place? Out of the many reasons, one is quite simple: daylight. This used to be really important with film. Historically, this was why efforts to move filming to somewhere like 'Scunthorpe, UK' didn't really work, despite tax fiddles, because you need light and some places just don't have it. But this doesn't matter now, because film has moved on, there is no need to have a massive glowing unshielded nuclear fusion reactor, 93 million miles directly overhead, just to get some lens focused on some bits of silver halide.

saalweachter 2mo ago
My understanding is that an important consideration at the time was that it is very far from New Jersey. Edison had a lot of early patents for film, and wanted to monopolize the industry. Film makers in California were far enough away that it was inconvenient for Edison to sue them, both because it required sending people there in person, and because the district courts were favorable.
- moate 2mo ago
  The irony here being that Netflix is currently in a massive layout to build a studio in NJ (like, 20 minutes from the old Bell Labs). Almost feels like giving that troll the finger!
  - expedition32 2mo ago
    A hundred years ago they were practically giving away land in LA. The real estate value has flipped.
    - moate 2mo ago
      You, uh, you're not from New Jersey are you? I promise you, we're not giving away land around here.
      - 2mo ago

dominotw 2mo ago

soon they will be filming in mumbai. already setup for movie making.

alephnerd 2mo ago
Much of the VFX and CGI industry is already in India. Movies and shows like Inception, Interstellar, Ex Machina, Tenet, Dune 1&2, Odyssey, Chernobyl, Foundation, and The Last of Us were VFXed in large part by Indian companies like Prime Focus, Makuta, Phanton, and their subsidiaries. A number of these overlap with HPC and Distributed Systems with a number of major players in the space coming out of the GPU design space like Raja Koduri (AMD, Apple, Intel). Nvidia, AMD, Intel, Apple, and others having dedicated GPU design teams in India since the early 2000s also helped.
- brettermeier 2mo ago
  Why is this downvoted? Is it wrong?

babypuncher 2mo ago

Nobody really wins in a race to the bottom

deleted 2mo ago

[deleted]