In recent years, Europe, Canada and New Zealand have been the hot locations for international film production. Now, though, those regions are seeing competition from the US - and the competitive inducements are not just keeping US producers at home but also beginning to lure non-US producers across the Atlantic.

With world film economics in their current state, 'the US is the place to make movies again', says Simon Horsman, CEO of Future Films USA (and a participant in this week's Screen International conference, Financing Films in America).

A number of factors are combining to make the US a newly attractive location.

The dollar exchange rate means that producers who have raised budgets in pounds or euros now see around 15% more for their money in the US than they would have a few years ago. And that, says Los Angeles-based Samuelson Productions partner Peter Samuelson, 'amounts to a fairly substantial discount on the cost of filming in North America compared to the UK'.

Reform of tax-based film financing schemes in the UK and Germany, meanwhile, has made those territories look less enticing to producers. The recent clampdown on Gaap tax schemes by the UK Treasury will probably make that territory less alluring still.

And then there are the production incentives available in the US itself. Over the past few years, almost every individual US state has created some form of tax-based programme designed to boost the local economy with film production dollars; dollars that might otherwise have been spent in Canada or overseas.

Producers and tax experts say the schemes in Connecticut (which offers a 30% tax credit), Louisiana (a 25% investor tax credit plus other breaks), Massachusetts (20% on payroll and 25% on non-payroll expenses), New Mexico (a 25% tax refund) and South Carolina (20% rebate on payroll and 30% on other in-state expenses) are among the most valuable and workable.

Though some states require producers to set up local companies to qualify for credits, few if any of the schemes have US nationality requirements and most allow the use of out-of-state or foreign crews (though the incentives are usually bigger when crews are hired locally).

Using the incentives has been made easier by the establishment of companies that help producers monetise their tax credits. Future Films USA, for example, an offshoot of the UK's Future Films, was launched last November to lend producers funds using state-sponsored incentives - from any state - as security.

The state incentives have sparked interest from European producers. Michele LeBlanc, whose Art & Entertainment Law Group of LeBlanc & Associates represents Louisiana's Pelican Film Fund, says calls to her office from the UK 'almost immediately quadrupled' after that country revamped its film-financing tax regime.

The benefits offered by the US federal production incentive - Section 181 of 2004's American Jobs Creation Act - are less clear. Section 181 allows film and TV productions costing $15m or less ($20m or less if they are made in 'distressed areas'), and spending at least 75% of that on services performed in the US, to write off their entire production costs for tax purposes.

Productions do not have to be from the US, but non-US producers would have to work with US intermediaries or investors to exploit the write-offs.

So far, though, the incentive has been used mostly by TV productions. And a ruling by the US Department of the Treasury that participations and residual payments must be included in the $15m or $20m of production costs has made some feature producers especially wary.

HandMade Films International co-head Michael Ryan, who also serves as chairman of US trade group the Independent Film and Television Alliance (Ifta), says that if his company was thinking of financing films in the US, 'this recent directive would make us think again'.

Still, some producers and financiers have begun, in a variety of ways, to use the incentive.

Grand Army Entertainment recently worked with Inferno Distribution and a major institutional backer to use Section 181 in financing Diane Keaton comedy Smother. Grand Army principal Stewart McMichael says that while the industry has struggled with Section 181, the provision could help producers rely less on debt finance. 'There are a lot of films that are looking for that last 10% of the budget,' he notes.

Inferno Distribution partner Bill Johnson says that while most of the benefit gained on Smother was eaten up by legal fees, 'we feel like we've built a business for the future'.

New York independent Ted Hope says that while his This Is That operation has not used Section 181 directly, it does alert potential investors to the write-off. That way, he says, the provision 'is an additional incentive for somebody to consider the risky investment of independent film'.

Bianca Bezdek, Los Angeles-based managing partner of Bezdek Law, puts it more forcefully. 'For independent producers, (Section 181) is revolutionary,' she asserts, 'because it, for the first time, empowers them to significantly and genuinely retain profit participation.'

With exchange rates and incentives making more Europeans look to the US as a viable filming location, some industry players are re-floating the idea of a US-UK or US-Europe co-production treaty.

Ifta president Jean Prewitt, however, suggests that discussion of the idea would have to be preceded by a careful study of its costs and benefits and by clarification of both the UK and US tax regimes. 'If we're going to talk about it, there are many more conversations that have to take place within the industry and some significant analysis that has to be done,' she says.

LEADERS LINE UP FOR US FINANCE CONFERENCE

Prolific producer Ed Pressman is the keynote speaker at Screen International's 'Financing Films in America' conference in London later this month. The event on March 20, at the Institute of Contemporary Arts on The Mall, looks at what the US has to offer in terms of state tax incentives, private equity and, indeed, cheap dollars.

Pressman, with more than 70 films to his name, will offer an overview of the market.

He has specialised in discovering new talent and finding new sources of financing. Recent credits include Jason Reitman's Thank You For Smoking.

But he is perhaps best known for productions such as Terrence Malick's Badlands, Oliver Stone's Wall Street, Barbet Schroeder's Reversal Of Fortune, David Byrne's True Stories and Wolfgang Petersen's Das Boot.

FINANCING FILMS IN AMERICA
Tuesday 20th March 2007, ICA, LONDON


08:45 Registration & refreshments

WHY AMERICA

09:25 Chairman's opening remarks

Colin Brown, Editor in Chief
Screen International

09:30 KEYNOTE: US PRODUCTION PARTNERSHIPS & THE CHANGING HOLLYWOOD ECO-SYSTEM
Edward R. Pressman, one of the industry's most prolific independent producers, with an internationally renowned career & founder of Edward R. Pressman Film Corporation which has produced over 65 world-class motion pictures and helped launch the careers of several of the most prominent figures in the movie industry.

Edward R. Pressman, Founder of
Edward R. Pressman Film Corporation

10:00 PRESENTATION: DE-MYSTIFYING PRODUCTION IN THE US
Find out everything you need to know about shooting in the US. From clarity on union issues and the costs of taking your team into the US, to any hidden costs and practical production concerns.

Ted Hope, Co-Founder of
Good Machine & This Is That Productions


10:30 Morning coffee & networking break

US PRODUCTION INCENTIVES
11:00 OVERVIEW: US TAX CREDITS AND PRODUCTION REBATES
Choose the right location to shoot your film and you can get more than more than 40% of your budget covered through a combination of incentive schemes. This session weighs up the relative strengths of the various state tax incentives currently on offer and asks which ones will work best for overseas producers

Bianca Bezdek, Founder
Bezdek Law

11:30 CASE STUDY: LOUISIANA / PUERTO RICO / ALABAMA

Michele LeBlanc, Senior Partner
Art & Entertainment Law Group of LeBlanc & Associates, PLC
Luis A. Riefkohl, Executive Director and Film Commissioner
Puerto Rico Film Commission
Tonya S. Holly, President
Alabama Filmmakers Association & Cypress Moon Productions

12:30 OPEN Q & A DISCUSSION: THE PROS & CONS
This session weighs up the relative strengths of the various state tax incentives currently on offer and asks which ones will work best for overseas producers

12:45 Lunch

DEAL-MAKING IN AMERICA
13:45 AFTERNOON KEYNOTE: NEGOTIATING THE STUDIO SYSTEM
The Hollywood studio system as we know it is changing. Not only are they willing to entertain revenue-sharing partnerships with outside financing entities, they are also pushing aggressively into international markets by working with local producing and filmmaking talents. How will this benefit you'
Are the studios investing straight into talent'
How do you broker the deal'
Do studios want projects on a slate basis'
How to create films that are appealing
What new deals are the studios offering'

Stuart Ford, President
First Look International

14:15 PANEL SESSION: THE REPS, AGENTS & FINANCIAL PACKAGERS

Meeting the puppet masters and string pullers who between them are responsible for most, if not all, that happens in the world of independent film financing and brokering.
What role do they play'
Why work with them'
What is the rite of passage for producers and how do they get their foot in the door'
How do agencies arrange the financing, what deals are brokered, and what breakdown can producers expect to see'

Moderator: Cassian Elwes, Senior Vice President
William Morris Agency
Stephen Woolley, Co-Founder
Number 9 Films
Alison Thompson, President
Focus International
Stuart Ford, President
First Look International

14:55 PRESENTATION: CASH-FLOWERS & SUPER-GAPPERS
Simon Horsham looks at why the US is the place to take films, just who is turning tax breaks and sales contracts into production realities. Who exactly is cash-flowing the US production incentives and who do you approach to bridge your budget gaps' And on what terms'

Simon Horsman, CEO
Future Films USA, LLC

15:25 Afternoon refreshments

US FILM FINANCE & THE NEW HOLLYWOOD
15:55 THE EQUITY PLAYERS
A look at the rising number of privately-backed financial players that are taking over the US and international production scene. How do you structure your project to appeal to this new breed' Are equity financiers and hedge funds just a fad' Will UK changes to UX tax breaks drive more and more investors into the US market' And how can international producers tap into this new well-spring'

Ryan Kavanaugh, CEO
Relativity Media

16:25 CLOSING DEBATE: ARE PRODUCERS BETTER OFF FILMING IN THE US'
We ask seasoned producers, tax analysts & funding bodies from both sides of the Atlantic to realistically under pin the merits of filming in the US. We ask whether producers and financiers need to look to the US, particualry in light of the sudden plug on UK tax schemes. And whether this mean create even more incentives to filming in the US'

Moderator: Michael Gubbins, Editor
Screen International
Peter Samuelson, Executive Producer
Samuelson Productions
Gary Smith, CEO
Intandem Films Limited
Andrea Calderwood, Managing Director
Slate Films

17:05 Chairman's Closing Remarks

17:10 Close of the conference


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