Films seek best TAX BREAKS

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NEWARK, N.J.

Canada easily could have stood in for New Jersey in the new movie "Gracie."

It doesn't matter that the film is about a New Jersey girl who wants to play soccer on a boys' team or that part of the story line involves a trip to the famous Jersey shore.

For the right price, Canada can become Jersey -- or any other location, for that matter -- thanks to the magic of Hollywood. However, New Jersey offered millions in incentives for the film company to shoot in the Garden State.

The "Gracie" courtship illustrates the fierce competition among states and countries for a piece of the lucrative film and television production business. When a major studio shoots a big-budget film on location, that can mean $225,000 per day to the local economy, according to the Motion Picture Association of America. Even a brief shoot creates local jobs and generates waves of positive publicity.

"It isn't surprising that states are doing everything they can to attract film production to their areas because of the impact they can have on the local economy," says Seth Oster, a spokesman for the group. "The movie industry wants to keep production here in this country whenever possible."

Incentives range from breaks on hotel room taxes to cash back in a few states. Often the biggest carrots states can offer production companies are breaks from state taxes, usually income or corporate business taxes.

For production companies or networks that have permanent facilities in a state, the tax credits can offset their own tax liabilities. Film companies working in the state for a single production can sell their tax credits to companies based in that state.

To land "Gracie," New Jersey forked over a tax credit of more than $1 million and a $1.5 million loan guarantee on a $4.5 million loan -- in addition to a $500,000 loan that doesn't have to be paid back until November 2008.

The independent film's budget was just $9.5 million. Andrew Shue, the former "Melrose Place" heartthrob and lead producer for "Gracie," says the producers used the tax credit money to shoot two extra days and pay for music rights for the soundtrack, including a Bruce Springsteen song.