Dissecting the Bill That Could Transform Hollywood, With Its Co-Author

0:04Matt Belloni:It is Thursday, September 24th. Today, something happened that was unthinkable only a couple years ago. A bipartisan bill was introduced in both houses of Congress to create a federal production tax incentive for making movies and TV shows in the United States. We've talked about this effort before and the Trump endorsement, John Voight's role in it all. Sorry, Hollywood Ambassador John Voight's role in convincing the president to, quote unquote, save Hollywood. And in the process, take a shot at Canada and the UK, things that Trump likes to do. But until today, we didn't know exactly what would be in this bill.

0:41Matt Belloni:It's a 20 percent tax credit on labor expenses by American workers on qualifying productions with some sweeteners that we will discuss could bring it up to about 30 percent. And the backers, everyone from Democrats in Southern California to Republicans in Georgia and Texas, they say it will create more than 143 ,000 full-time equivalent jobs each year. So what else is in the bill and what's the process now for getting this thing passed? Today, we've got one of the bill's authors here to explain. Laura Friedman is a first-term congresswoman representing Burbank, Hollywood, other parts of L.A., and she's a former movie producer.

1:21Matt Belloni:In the 90s, Friedman was VP Development at Reisher Entertainment, had other film development jobs, and she was the mayor of Glendale, was elected to the California Assembly. And last year, she became a member of the House of Representatives, taking over Adam Schiff's seat when he became senator. We're going to get into what's in this bill, importantly, what's not in it, whether a vote could actually happen this year, and the path to making a federal tax incentive a reality. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

1:55Matt Belloni:All right, we are here with Congresswoman Laura Friedman, representative of Burbank, Glendale, West Hollywood, all the fun parts of LA, right? Am I right there? And Hollywood. And Hollywood. And Hollywood proper as well. That's right. Well, thank you for coming on the show. I appreciate it. I know this is a long time coming for you. You've been working on this for a long time. But I want to get, I want to discuss less the path to this because we have discussed this. We've had the Film USA people on. We've had Senator Schiff on. I want to talk specifically about what is in this bill and what is not in this bill.

2:36Matt Belloni:So can you just give us the overview of what you put in this bill, why you put it in there, and how it's strategically designed to help get it passed? Great. So when you hear the details of the bill, you'll see that what this bill is mostly about is encouraging the creation of jobs here in America and making sure that we encourage productions that do offer those job opportunities that we have been losing here in Los Angeles and around the country as so many productions have gone overseas. So what the bill does at its heart is it establishes a 20 % tax credit for qualified productions, which are film and TV productions, to be paid against labor expenses.

3:19So that's why it's about the job creation. So it's 20 percent and it can go up to 30 percent because there are extra bonus credits that you can get if you have certain extra qualifications, such as shooting in a federally qualified disaster area, shooting in a rural area.

3:38Matt Belloni:That's basically all of L.A., correct? After the fires? It would be all of LA for five years post-disaster declaration. So then there's other parts of the country that also are under disaster declaration. So it would also encourage those economic engines to locate in those parts of the country. You get a bump up if you're an indie producer of 5%. You get a bump up if you're a company that's shooting a lot of your productions overseas, like many of our studios are, and you bring a large percentage of those back to the United States. But you can only get two of those plus-ups. and they're 5 % each.

4:13So you have a 20 % base that goes up to 30 % if you can qualify. And this is stacked, right? It includes post-production and post-production is standalone. So if you have a film that's, let's say, shot overseas and you want to do post here in Los Angeles, the post-production labor expenses would also be eligible for the tax credit.

4:32Matt Belloni:Oh, that's interesting because California just passed a modest, but a first of its kind post-production tax credit this past week. Right. And special effects also qualify. Okay. Interesting. So this is stacked, right? States can now, if this passes, and we'll get to the machinations here, but if this passes, states will then compete against each other. And some of these states are offering 20, 30 % on their own. So next thing you know, we could be looking at 50, 60 percent of labor expenses deductible for shooting in certain states. Is that correct? Yeah, depending on how the state does their tax credit and different states do their tax credit differently.

5:16But yes, it's certainly conceivable in California. The credit is on labor expenses and also on non-labor expenses, like just on hard production costs. So you wouldn't get the bump up on the non-labor part, but you would get the bump up on the labor expenses.

5:31Matt Belloni:And this includes above the line expenses. That's been the big criticism of California is that it doesn't include actor, writer, director. And that's where a lot of these big studio movie costs go. So it's not competitive with the UK, which does offer above the line. So the federal credit wouldn't would include above the line. The federal credit includes above the line. Yes. OK. And was that a tough negotiation? You know, because this is a bipartisan effort. This is both House and Senate, both Republicans and Democrats. Your colleague, Representative Jack, has been involved on behalf of Georgia.

6:08Matt Belloni:And was that a tough sell? Because these Republicans, this is they're going to have to deal with the fact that we are now going to be, if this passes, subsidizing Tom Cruise's salary. So it so far has not been a tough sell. I hope you're not trying to make it a tough sell for them. I'm not. I'm just stating the reality here. Look, I know. I know you guys don't want to talk about this element, but this is a big deal for a lot of constituencies around the country. Yeah. And absolutely. That is the criticism that we hear sometimes. And that's one of the reasons why California doesn't do above the line.

6:42Also, California, to be clear, is a capped credit. So California has a certain pool of money, and California decided that they didn't want a large percentage of that going, like you said, to tax credits that would help sort of subsidize these larger salaries. They wanted to make sure that more of it went to the below-the-line cast and crew and to the physical productions themselves. So California, I think, made it not a bad strategic choice and a choice that with a capped credit makes total sense. With an uncapped credit, it's a different equation.

7:15Matt Belloni:I agree. No disrespect to California, but the whole point of these things is to be competitive. And if you're going to go halfway, you're not going to be competitive. You've got to go all in. Hey, I'm not saying I disagree with you. And I worked on the California tax credit. And I will tell you that the people like me and other people who were part of negotiating that and trying to get it through got what we could get in a state where it was not an easy sell. You know, people think that this becomes a breakdown between like Democrats and Republicans. It's not. These people have concerns regardless of what side of the aisle they're on.

7:53Matt Belloni:But that's changing, right? I mean, Politico posted a poll yesterday on this very subject. And people in California, now 62 % of them think that there should be some kind of a incentive to keep entertainment jobs in California. And that's a change. Yeah. So when California first started, we didn't see as we weren't seeing quite the amount of job losses that we have been seeing more recently. And, you know, some of this comes down to, like you like you said, it's it's public support. but sometimes the public support comes after something becomes a crisis. You know, you can go around and warn, this is going to be a crisis.

8:31We're going to see big economic impacts of this industry leaving across Los Angeles, not just to the people working directly in the industry, but to the coffee shops and the restaurants and the dry cleaners and everybody else. And I think that when we were having the conversation six, seven years ago, it didn't seem as immediate as it does now. So absolutely, I would support California going back and making their tax credit much more competitive. And I think that with this tax credit and with what is in the Paramount deal that Rob Bonta just negotiated, there's a lot more reason why making California's tax credit would pay a bigger bonanza back to the state of California.

9:07So I would absolutely support them going back and doing what they can to make it more competitive.

9:13Matt Belloni:Well, okay, so a lot of things you just brought up. And first, I think it's hilarious to see people like Gavin Newsom and Karen Bass and Nithya Raman all talk about how they're pushing, pushing, pushing for these jobs to stay in Los Angeles. Where were these people over the past 10 years? I mean, Karen Bass has been in office and it's not like she has been a champion of entertainment jobs until she probably saw the polling and said, oh crap, this is a real big problem for this city. It's kind of amazing to me, but whatever, it is what it is. Well, look, some of us, myself included, who have represented this area for a long time have been raising the alarm for a long time, you know, and not everyone in the state kind of saw what was coming.

9:57And, you know, other, if you're a representative representing an area in Northern California or in the Central Valley, you know, let's be honest, you're looking at a different set of challenges in your own district. So that's something that we have to overcome federally as well, you know, to bring it back to this bill. And we haven't, you know, one of the things I would say, you mentioned like subsidizing these big star salaries. Let's not forget that when you're paying a big star, this huge salary in another country, you're also denying that payroll tax coming back into the United States. That's being paid to a foreign government.

10:31So we are losing tax revenue here in the United States by allowing the payroll, by allowing the production overseas. So there is every economic reason in the world to include above the line. We need to be competitive. And there's reasons why other countries have seen this industry as being so particularly valuable that they are willing to put the investments that they've been putting out there to lure it away. And I think it's high tide that this country decides that they're serious about what's a growth industry, what's an industry that carries a tremendous amount of soft power along with it, that has a variety of really aspirational jobs, some of which don't require a college degree and still pay a great salary, jobs that people like me, I moved all the way across the country knowing like three people in Los Angeles to work in this industry.

11:16How many job sectors are that attractive to young people, right? So we have every reason in the world to want to bring this industry back and protect it. And, you know, this is the time to do it.

11:29Matt Belloni:I agree with you. The Bonta settlement. Can we both agree this is not ideal? there is no guarantee of job growth in California. All he does is he guarantees$300 million a year extra in U.S. spend. That's not California. He's the attorney general of California. What did he do for us? Well, Matt, let's not forget that within that settlement is also a plus-up of a higher amount to be shot in the U.S. if this film tax credit bill passes. And then if California improves their own incentive program, another bump up from what they have. So there's actually within there something that hasn't been getting a lot of attention is a huge commitment to move what right now is 5 percent of their of their productions are being shot in the United States to move up to.

12:20I think it's around 40 percent if those things happen.

12:23Matt Belloni:But those are big ifs, right? I mean, and Bonta, to his credit, Bonta says he's going to help introduce a bill to get the California credit uncapped and to increase the amount of money. But that's a big if. But there's also a bump up, and I think it's 30 percent if the federal film tax credit passes. That is true. So that's on you. And that's the part that I'm working. That's on me and Schiff and, you know, everybody else we're working with. And so, you know, I've been working, as you know, you know, for a couple of years on this now since I've been in Congress. And that that would be big. And that is in writing.

12:56As far as I can see, it's enforceable. And that would be huge for production here in Los Angeles.

13:01Matt Belloni:But don't you think he should have gotten a commitment up front to California? Yeah. Look, I'm not I'm not a lawyer. I know I look like a lawyer. I always think I'm a lawyer. I just play one on zooms. I'm not a lawyer. You know, I actually am a lawyer, but I haven't practiced in a long time. And I know that he had some leverage and it doesn't feel like he got the most out of that leverage. Look, he negotiated. It was a bad he was in a bad position from day one with federal regulators that were willing to bless this merger with other countries that had already said it was legal. There are certainly a lot of attorneys in this area who, you know, some attorneys thought he had a strong case and many did not.

13:41And it was a big gamble.

13:43Matt Belloni:Well, he's got the leadership of the state telling him to settle. So I think that mattered a lot. Well, look, you have you have a company that's not only threatening to leave, but was seem to be taking real steps to leave, which would have been really devastating. I mean, can you imagine if both of those film lots within a couple of years were empty and what that would mean for Los Angeles? I agree. You know, And so I think that, yeah, you know, he was being pressured, but he was also being pressured by a company that I would not bet money would not have made good on those threats. And that would have been really awful for everybody.

14:14Matt Belloni:So I hate to bring up the T word, but this is all dependent on Trump. Right. He's if he says to the Republicans, get this done, this bill is going to pass. He said, what are the next steps here? I know he did, but but OK, but he says a lot of things. I'm talking about following up and pushing it across the line. So what are the next steps here? How do you get this bill passed? Well, look, I'm a big fan of taking the momentum that you have and turning it into real action. So as soon as we've been working for a long time, and I'll give Brian Jack and John Boyd a lot of credit. You know, we've been working strategically about making sure that Trump's interest in the industry, which he has had for a while.

14:55You know, he comes from this industry. He's a product. Oh, we know. He does. And he has talked about, you know, us losing this industry.

15:02Matt Belloni:You know, he used to call me. He not. He called me a couple times to complain about the apprentice ratings coverage when I was the news editor at the Hollywood Reporter. Now, he wasn't president, but that's how much he cares about the entertainment industry. He cares. And that's a great thing for us. Let's not discount that. He cares about it. And he tweeted about it. Now, he originally, as you know, talked about tariffs and it took a while and quite a lobby effort to get him over to a tax credit solution, you know, being publicly supportive of this solution rather than a tariff, which would have been, you know, very problematic, you know, and difficult to understand how that would even work and, you know, potential to hurt consumers and hurt the industry.

15:46So now that he has said that, that really opened the door to us dropping the bill when we did. And we have been also putting this together and negotiating what was going to be in this for quite a while, because as you know, you've got labor unions, you've got independent producers, you've got studios, you've got a whole range of of different groups and voices within this very large tent. And we had to make sure that everyone was on the same page about every single thing that was in this. And that took a while.

16:11Matt Belloni:Yeah, the Teamsters often don't go along with these incentives because that's money that doesn't go to them. It goes to others and they are on board with this. So, yeah, there's a lot of voices and we got everybody on the same page and everybody supportive. And that took a lot of doing. So once that happened, you know, we were able to put this bill to we've been working. Everyone says this happened like in a week. No, it didn't happen in a week. Obviously, we've been working on this now for a couple of years. But as soon as Trump did that, we were really ready to then bring it into ways and means.

16:40You know, because of Trump's tweet, it gave us a much more I think people were fairly supportive because we have Republicans there who represent Texas and represent states that have production and have seen the benefits right in their own states and have seen shrinkage. As you know, you seem to lose, you know, Marvel. And and so they understand, too, what's at stake. So once the president opened the door to this particular solution, we moved as fast as we could to get the language into alleged counsel and to get the bill in print. As you saw, I came out just today. And my job now is to work with my colleagues on this and particularly our ways and means partners who will shepherd it through the committee of jurisdiction to get it done in the way that, you know, that's fastest, but also the kind of most bulletproof.

17:23And that's what we are going to be working on next. And what's the timing on all of that? Well, it's still being looked at and still being negotiated. And there's a lot of sort of discussion about whether, you know, this is something that we can do this year in the lame duck, whether we have a vehicle that will enable it, whether we can do that in a way where we can get it done quickly without people raising a lot of objections, but also making sure that we do have the time to socialize it with my colleagues who maybe are not up on the issue, because we're going to have to have the votes from all of the, you know, from all of Congress, right out from across different districts.

17:56So what do we say to the person who's in Missouri or in Kansas or any of these other states? We have to be able to make the argument to them when people do bring up, well, you're subsidizing Tom Cruise's salary and explain to them that this is actually not money going to Tom Cruise. This is money that's coming back into the United States. We have to have the time to make that argument, which is why Ryan and I have formed a Filming States Caucus so that we can bring all the Filming States people on board and make sure that they spread that information and that they have the information to give to any colleagues who might not be as up on the issue.

18:32Matt Belloni:And the speed here, from what I've read on the subject, is an important element because once the Congress changes, the whole dynamic of politics changes. And Trump may not have the influence over some of these states that he does currently. So do you see this as something that if it doesn't get done before the Congress switches over, it? potentially weakens the chances of it getting done at all? Well, I wouldn't say that. I would say we don't know. And I don't like uncertainty. I'd rather move in an environment that I have a little bit more understanding of. So if we can get it done this year, you know, we will.

19:12But we're not going to put speed ahead of making sure that we do what we need to do. The last thing I'd want is to move so quickly that we put something out there that doesn't have the support it needs. We need to have a balance of moving as quickly as we can so that we do move in a more certain environment. but making sure that if we do move forward, we know for a fact that we have the votes that we need.

19:35Matt Belloni:All right, so let's talk a little bit about what is not in this bill because I think a lot of people in the industry will be disappointed that unscripted productions are not included, reality shows. Actually, it's not excluded. It's not excluded. Oh, it's not? No, excluded right now is news, live sports, talk shows, daytime dramas, radio, social media content. Oh, that's okay. So potentially unscripted shows can get credits. As far as I read it, they can. And, you know, I want to make as expansive a program as I can to keep those shows in the United States. So they're not excluded. So my position is that they're included.

20:14Okay.