When the makers of “Cinderella Man,” set in New York, were looking for a place to film, they headed to Toronto to take advantage of tax incentives. They were not alone. From April 2003 to March 2004, $1.9 billion in foreign projects were filmed in Canada, according to the Toronto-based Canadian Film & Television Production Association. Rather than watch billions of dollars drain out of the country, states increasingly are offering incentives to lure the industry back to the United States.

“[Filmmaking] is no longer a location-driven industry,” says Alex Schott, director of the Louisiana Governor's Office of Film and Television Development. “We wanted to duplicate Canada's success.” Currently, Louisiana is offering some of the country's most aggressive tax incentives. The state's Motion Picture Act, which went into effect in 2002, exempts filmmakers from sales tax if expenditures exceed $250,000 in one year. It also gives a tax credit equal to 10 percent of the payroll for employed residents for productions costing $300,000 to $1 million or 20 percent when production costs exceed $1 million. Since the bill was passed, the state has attracted $800 million in projects. Schott says that at least one-third of a production's budget goes back into the community.

Currently, most of the films in Louisiana are being shot in the southeastern part of the state where a variety of caterers, camera rental companies, talent, grips and sound stages are located. Those resources also ensure that more money is spent in the state. “The number one priority is to have the productions staffed by Louisiana people,” Schott says. The state's efforts include helping coordinate a workforce training program, which began in August.

Even cities well-established in the industry have lost business recently. In January, New York became the first city to offer a credit. The 5 percent tax credit is intended to supplement the state's 10 percent credit that was signed into law in August 2004. However, Pat Swinney-Kaufman, executive director of the New York Governor's Office for Motion Picture and Television Development, cautions, “Not just any city can offer incentives and expect magic to happen. If a production has to bring everything in, the incentives aren't worth it.” Since the state credit began, she says about 50 projects have taken advantage of the incentive, with 38 to 40 coming specifically for that reason.

Other cities, including Chicago, are considering tax breaks. “There have been plenty of discussions, but with city budgets being what they are, it's a tough time to be giving up money,” says Rich Moskal, director of the Chicago Film Office. For now, the city will rely on the state's incentives. In July, Gov. Rod Blagojevich signed legislation on the set of “The Break-Up,” starring Vince Vaughn and Jennifer Aniston. The bill extends the credits established in 2003 and adds incentives for hiring workers from low-income areas.

In addition to providing monetary incentives, Illinois is focusing on projecting a film-friendly image, which can entail accommodating producers' requests. “Batman Begins,” for instance, required special permits for high-speed chases and low-flying helicopters. “Permitting needs to be swift because schedules and plans can change,” Moskal says. “If it gets done on time and budget, that's savings.”

Even the federal government has gotten involved, adding into the American Jobs Creation Act of 2004 a 100 percent write-off for film and television productions costing up to $15 million. “We have to be more attractive to the bottom line,” Schott says.