Will soft money be the next casualty of the recession?

Wisconsin legislators hyping their tax credits for film and TV production

Studios rely on tax incentives from more than 40 states (and other countries) to help cover the cost of production. There’s even an open market for those credits — similar to the derivatives that caused such a mess on Wall Street.

States like New York, Pennsylvania, Louisiana and New Mexico refund as much as 40% of the money studios spend on below-the-line workers for a movie or TV production. The money means producers can be comfortable with a lot more short-term debt, knowing they’ll be repaid.

Now the executives at big studios (and presumably indies) who take advantage of this so-called soft money are feverishly reworking their risk assessments to take into account the probability that some of that rebate money will dry up — a casualty of state governments trying to stay solvent themselves.

“There are forces within each state that are against (soft money) because they look at it as a big giveaway,” said a studio executive. “That’s only going to intensify in the current economic environment.”

Studios worry that shows already in production may see their tax credits revoked, forcing them to be moved to another location, she said. New York, hard hit by the financial meltdown is particularly worrisome since many shows are produced there, and the state has one of the most generous soft money programs. Right now, the state has committed its soft money through 2011.

“It’s all about risk assessment,” she said. “No one knows what’s going to happen.”

Posted under Michael's Blog