WASHINGTON -- From the Astoria movie studios to eastern Long Island vineyards, the corporate tax bill presented by President George W. Bush plans at the end of October carries several major surprises.
Enacted to close off a $5 billion-a-year tax break for U.S. manufacturers, the bill closes it, then opens other loopholes worth $137 billion. It also tries to encourage new manufacturing in the United States by expanding the definition of "manufacturing" to provide tax breaks for U.S. film production, residential and commercial construction, coffee stands, Long Island fishermen, breweries and winemakers.
The central benefit is a phased-in deduction for manufacturing companies that cuts the corporate tax rate from 35 to 32 percent, a $77 billion bonanza and a creative definition of "manufacturing".
"Manufacturing now includes filmmaking, construction, engineering and architecture," said Alan Frankel, a Manhattan accountant and a director for the New York Society of CPAs. "This is a huge benefit for our companies."
What's more, "manufacturing" now includes firms designing, building or renovating residential or commercial buildings, he said. That will likely be a boon for the region's already booming home-improvement industry.
The bill is good news to Katherine Oliver, commissioner of New York City's office of film, theater and broadcasting. Her responsibility is the city's $5 billion filmmaking and television industry. "It may be the film industry, but it is real jobs and real business," she said.
Increasingly, producers do their filming and editing in cheaper locales overseas. The filmmaking provision extends that reduced tax rate for films when more than half the production costs occur in the United States. "Warner Brothers produced 'New York Minute' starring the Olsen twins. They were barely in New York for a New York minute -- four to six days -- before going to a sound stage in Toronto to finish the film," she said.
The bill, which is expected to save filmmakers $336 million over five years, provides new leverage. "In the end, it comes down to cost," she said, and tax breaks reduce the costs.
