Montreal: The two primary issues to emerge following the tabling of the March 11 Quebec budget are the termination of a five-year program which gave broadcaster affiliates access to the Quebec tax-credit program and the issue of which productions are eligible to be grandfathered under the higher, pre-budget tax-credit rates. Only productions that file with SODEC by April 30 can apply for grandfather status.

Finance Minister Pauline Marois’ budget says broadcaster access to the tax credits has ‘not produced anticipated effects. Accordingly, there is no justification for renewing it.’

The principle extends to independent productions because the budget also makes all labor charges resulting from the use of broadcaster personnel by producers ineligible for the tax credit. All Quebec broadcasters, including pubcasters Radio-Canada and Tele-Quebec, (but not specialties that don’t have production staff such as the Chaines Tele-Astral services) have generally provided manpower on independently produced programs.

Affiliate production companies which will no longer have access to the tax credit include JPL Productions (Reseau TVA), Point-Final (TQS), Carrefour International (Cogeco), TV MaxPlus (MusiquePlus) and Creation Total, a Radio-Nord regional affiliate.

And because broadcasters initially got the tax credit based on the condition that they reinvest half of their savings in French-track features, that funding, approximately $1.5 million a year, essentially has been lost.

‘This [measure] will affect many of our members,’ says Claire Samson, APFTQ president and CEO. ‘There are a lot of productions for next year which are financed but which use broadcaster manpower. The actual impact will vary from program to program, but it’s certain there will be an impact.’

Variable impact

In many instances, Samson says, replacing in-house broadcaster manpower, already on the payroll, with outside technicians will inflate the cost of programs for broadcasters. Or programs could be cancelled.

Stephane Cardin, director, SODEC tax-credit program, says all broadcaster-provided services (manpower and equipment) are still eligible production costs, but the manpower component of those costs is deemed ineligible for purposes of the tax credit.

Cardin says the impact of the new regulation will vary and depends on the total percentage of a show’s labor costs as a function of production costs.

The tax-credit calculation is one-third of the labor costs up to a maximum of 45% of total production costs. ‘[Producers] will only be affected if [they] cannot reach their 45% cap with labor other than the labor provided by the broadcaster,’ says Cardin.

In other words, if the loss of the broadcaster manpower cost brings a production’s admissible cap to below 45% of total costs, then there will be a reduction or loss to the tax credit. ‘If you remain above the 45% cap, then there’s no effect at all from this change,’ says Cardin.

The broadcaster affiliate and manpower amendments are applicable as of March 31.

More discretionary funds

The budget allocates an additional $20 million for discretionary program funding, $16 million in additional funding for SODEC.

The budget also introduces an across-the-board reduction of the production tax-credit benefit – from 16.66% to 15% for TV production and English features, and from 22.5% to 20.25% for French features, POV docs and large-format films, as a percentage of total costs. Those were the base rates in place prior to July 2001.

Samson says the increase in SODEC funding ‘is welcome, and there is a doubling of resources [$9 million more for a total of $17 million] for feature films.’ She says the additional $4 million for development funding ($5.3 million total) will help in an area which ‘is risky, costly. Obviously we’re never happy when there’s a cut to the tax credit.’

Grandfathering issues

All the other budgetary measures are effective May 1, but the budget includes important grandfathering clauses. Most of the calls to Cardin’s office from producers have been on the grandfathering issue, he says.

The budget broadly states that if a production was sufficiently advanced as of March 11 it may be grandfathered. That determination will be made by SODEC. ‘So the important thing for producers to know is to file no later than April 30, and the evaluation we’ll have to make is as of March 11 and not what was signed or done between March 11 and April 30,’ says Cardin.

‘Basically, what we look at is… the acquisition of rights, a detailed budget and the [status of the] financing structure. We can’t [generally] make assessments over the phone; we will have to look at the actual paperwork,’ he says.

Cardin says the principle is not to penalize productions that are generally well advanced, but to make sure the old, higher tax-credit rates do not apply to productions which are basically in pre-development or development.

‘Anything which is in a preproduction to production stage could be grandfathered.’

Programs which have filed to CTF and anticipate CTF financing in the current round as part of their financing structure will be deemed to have a completed structure, adds Cardin.

SODEC and the Quebec Revenue department had scheduled meetings last week on the status of private regulatory funds in the calculation of the tax credit.

Marois’ budget also amends the eligibility of variety and TV magazines to shows broadcast exclusively in primetime, between 7 p.m. and 11 p.m., regardless of the day. The change does not apply to TV magazines for children under 13.

The budget also establishes a regional bonus for Montreal producers shooting 50 kilometers outside of Montreal.

-www.sodec.gouv.qc.ca

-www.finances.gouv.qc.ca