'Tonight Show' getting $20 million tax break

Feb. 18, 2014. Jimmy Fallon is seated at his desk during 'The Tonight Show Starring Jimmy Fallon,' in New York. (Associated Press)

"The Tonight Show" made its return to New York City with a splashy opening sequence showcasing Grand Central Terminal, the Chrysler Building, Lincoln Center and Jimmy Fallon's glamorous new studio at Rockefeller Center — a fitting tribute to the place that helped foot the bill.

An unconventional 30 percent tax credit aimed at luring "Tonight" away from California after four decades is reportedly saving NBC more than $20 million a year.

The network said that while the show relocated to New York for creative reasons the move wouldn't have been possible without the tax credit.

New York's mayor believes the show's relocation was a triumph with wide-ranging benefits.

"Bringing 'The Tonight Show' back to our city means we're bringing more than a hundred jobs to hard-working New Yorkers, and giving travelers another great reason to visit," said Mayor Bill de Blasio.

Others are less certain of the show's benefit — or the need to use a tax incentive to lure it back.

"We're going to change our tax policy — in the heaviest-taxed city and state in the country — to get another late night show in Manhattan?" asked E.J. McMahon, head of The Empire Center for Public Policy, a non-partisan think tank. "Even the money that they bring is a rounding error in the New York City economy."

"Other industries don't get 30 percent credit," he continued. "It's because it's a glamorous industry."

The tax incentives were inserted into the state budget by Gov. Andrew Cuomo's administration in early 2013 as NBC was debating dropping the show's then-host, Jay Leno, for Fallon and potentially leaving Los Angeles to return to New York, where the show started in 1954.

The language of the 30 percent annual tax credit was remarkably specific: It would only benefit a show that had filmed at least five years in another state before moving to New York (check), spends at least $30 million in production costs (check) and films in front of a studio audience of at least 200 people (check). In other words: "The Tonight Show."

Cuomo's team has downplayed the idea that the credit was specifically for "Tonight," though Kenneth Adams, commissioner of the New York State Department of Economic Development, said this week that changed were made to "attract these long-running, high-budget productions to New York State."

While NBC did not release financial stats for the new "Tonight" production, The Hollywood Reporter estimated the 30-percent credit would yield the network an annual savings of $22 million, based on the show's recent annual production budget of more than $75 million.

An NBC spokesman said the network anticipates creating nearly 250 new staff jobs and then another 300 or so "indirect jobs" — such as tour guides — and hundreds more part-time jobs. The show's arrival is just the latest in a filmmaking boom in New York City that dramatically increased under de Blasio's predecessor, Michael Bloomberg. Twenty-nine TV shows in the 2013-14 season have filmed in the city as well as dozens of movies and several late night talk shows, including those hosted by David Letterman, Jon Stewart and Stephen Colbert.

All told, the television and movie industry created $8.2 billion in direct wages in New York state last year, trailing only California's $17 billion. The growing industry in New York has been helped by a tax incentive program, which is capped at $420 million for all productions filming statewide. By comparison, California's is $100 million, Florida's is $119 million and Louisiana's is $229 million.

"The tax incentives game is played by a lot of states and some have used it more than others," said Sam Craig, director of the Entertainment, Media and Technology program at New York University. "But it's not just that: New York City has made it much easier to shoot films here by making it easier to get permits and block off streets."

Craig said the return of an iconic show such as "Tonight" has a "psychic impact that's hard to quantify" that is good for civic pride as well as a more tangible one.

"Even if the tax credit saves NBC $20 million, the show's production costs are still pumping, in one way or another, $50 million into the economy," said Craig, who couldn't recall another show-specific tax break.

The show's pride in returning home has been obvious. Fallon, a New York native, made it clear he wanted to stay. The show's producer, Lorne Michaels, told The New York Times last week that "it simply never came up that we would move to Los Angeles." And during its premiere episode, the show placed U2 on the roof of Manhattan's GE Building to showcase the city's skyline as well as the band's music.

"We're at the world famous 'Top of the Rock' atop Rockefeller Center, 70 stories above the city," Fallon roared as the band kicked in. "I couldn't think of a better way to show off our beautiful city."