Credit the 30% Tax Credit: Shooting ‘Em Up in Chicago

Hollywood’s been braving the cold, shooting on the ‘L’ and eating plenty of the world’s best pizza – 2010 was a banner year for filming in Chicago. Michael Bay’s Transformers 3, Ron Howard’s The Dilemma, Steven Soderbergh’s The Contagion, and Jake Kasdan’s, Bad Teacher, each contributed to the record $161 million spent filming in the Windy City last year. That number represented a 54 percent increase over a dismal 2009.

The city also benefited from five pilots shot there in 2010, including The Boss, starring Kelsey Grammer. Produced by Lionsgate and set to air on Starz, director Gus Van Sant began shooting episodes in Chicago in April. The show is said to be only loosely based on the mayoral careers of Richard J. Daley and his son, Richard M. Daley, each of whom served for more than 20 years. Legendary columnist Mike Royko’s book about Richard J. Daley is called, Boss.

Also, Fox TV’s, Playboy Club – think, Mad Men with bunnies – is a series about the first playboy club which opened in Chicago in 1960. The show has been picked up and will air on NBC in the fall. It’s currently shooting in Chicago.

While some governmental bodies dither over whether to pass incentives packages, the Illinois legislature has been squarely behind the concept since 2003 when the state passed its first wage credit. In fact, the state is so gung-ho about its incentive plan that the law has no sunset.

Following three tough years from 2007 through 2009, when the film business in Chicago and the state was hit by the same trio of negative factors that affected the rest of the industry (the writer’s strike, the threatened SAG strike, and the national economic meltdown), Illinois enjoyed a strong comeback last year. The $161 million in spending and 8,000 job hires were both record marks. The state’s incentive plan was a big part of the success, with a 30 percent tax credit as its cornerstone, Betsy Steinberg, director of the Illinois Film Office, says.

Steinberg says the tax credit has been responsible for pulling half a billion dollars worth of film business into the state since its inception, and creating 10,000 jobs.

“Our tax credit is like having a gift card with the Illinois Department of Revenue,” Steinberg explains. “You can use it to reduce or eliminate your taxes, and if you don’t have a tax liability with the state, you can sell it to someone who does,” she says.

But what if an out-of-state production company has no Illinois tax liability, or owes taxes that are less than the tax credit it’s earned?

“That’s often the case,” Steinberg says. “The third-party market for these credits is very, very strong.” Banks, utilities, a large department store and many others are all eager buyers because there is usually about a 10 percent discount on the credits. The selling price “has consistently been 88 – 91 cents on the dollar,” Steinberg says. “No production company has ever been left with a tax credit it couldn’t sell,” she says. Production companies don’t have to use the tax credit immediately; they can be carried forward five years.

When it was first passed, the tax credit was 25 percent and only covered the wages of Illinois workers, but eventually the lawmakers worked it up to 30 percent and expanded the umbrella to cover all “qualified Illinois production spending,” Steinberg says. “The law focuses on Illinois vendors and residents, but it’s incredibly broad,” Steinberg says. “It covers anything you would purchase or rent for use in your production, and any and all wages and salaries” paid to workers who were valid Illinois residents prior to the commencement of the production. The limit on salaries is $100,000.

In order to qualify for the tax credit, productions are required to submit a diversity plan demonstrating efforts to include minority workers on the crew. The state gives productions an additional 15 percent tax credit (for a total of 45 percent) on the wages and salaries of workers who earn at least $1,000 and live in economically disadvantaged neighborhoods with at least 10 percent unemployment.

Chicago’s film and television infrastructure got a huge shot in the arm last month when a long-planned $85 million deal was finalized for Toronto-based Cinespace Studios to buy an enormous, shuttered steel mill on the city’s near southwest side and refurbish it into the largest U.S. studio outside of Hollywood. Toronto’s famed Mirkopoulos family has run Cinespace Studios there for 23 years. The facility is a critical piece of Canada’s film and television infrastructure and has hosted more than 1,000 films.

“We’ve always had great respect for our crews here,” Steinberg says. “That’s perhaps the number one reason such a huge percentage of our business is repeat customers,” she says. Pointing to the recent run of films, she notes Ron Howard’s positive experience burning up the city with Backdraft (1991) and Steven Soderbergh’s favorable reaction to his previous time in Chicago making The Informant (2009). Meanwhile, Michael Bay was effusive in his praise for the city after officials and citizens alike patiently accommodated the production’s closing of the city’s premier commercial district on Michigan Avenue for most of an entire weekend. The “Magnificent Mile” serves as the location for the film’s concluding battle scenes.

“Yes, we’ve had highly skilled and hard-working crews, and we’ve been respected for that,” Steinberg says, “and our iconic locations speak for themselves. Now, however, opening Cinespace, and especially after it’s fully built out, this absolutely takes us to another level,” she says.

Governor Pat Quinn said the new stage space was a game changer. “Now we are the complete package – truly a world class film destination,” he said.

Cinespace Chicago Film Studios is located on nearly 50 acres of the former Ryerson Steel property just three miles southwest of Chicago’s downtown Loop area. When it’s fully built out the facility will include 1.2 million square feet of space. The studio has already served as the location for filming Boss, as well as portions of Transformers 3, A Nightmare on Elm Street, and the already-canceled TV show The Chicago Code.

The purchase by the Mirkopoulos family also has national implications. When the family opened Cinespace Studios in Toronto in 1988, it heralded the continuing flight of shooting from Los Angeles and the U.S. to Toronto and Canada. “We hope this is part of accelerating the turnaround,” Steinberg says.

Steinberg is one of a number of film office directors with a strong production background, having made documentaries for A&E and the History Channel, as well working as a line producer filming commercials. She relocated to Chicago from the East Coast in 1998 and took the film office position in January 2007.

Asked whether Chicago can turn the corner from its traditional position as a location productions travel to when they need a large, older city, to becoming a destination for any kind of shooting, Steinberg points to The Express, the 2008 Gary Fleder bio-pic about Ernie Davis (Rob Brown), the first African-American to win college football’s Heisman Trophy. The film was released in 2008. Dennis Quaid plays Davis’s Syracuse University coach.

“There were 103 locations in the film, none of them in Illinois,” Steinberg says. “But every frame of the film was shot here and I can tell you the tax credit was a big part of Universal’s decision to come here.

“And that was before the opening of the new studio. Just watch what we can do now,” she says.