HOLLYWOOD NOT INCLUDED IN OK'D CORPORATE TAX BILL SCHWARZENEGGER CONTINUES TO LOBBY FOR MOVIE INDUSTRY.

Byline: Lisa Friedman Washington Bureau

WASHINGTON - There was no happy ending for Hollywood this week when the House of Representatives passed a $155 billion corporate tax bill.

The measure, which provides tax breaks to American manufacturers, provided no help for the film industry despite intense lobbying and even a personal phone call from Republican Gov. Arnold Schwarzenegger to GOP Rep. Bill Thomas, R-Bakersfield, chairman of the tax-writing House Ways and Means Committee.

``He has made calls and will continue to express support for that provision,'' said Schwarzenegger spokeswoman Ashley Snee. ``We remain hopeful that the provision will be included in the final bill.''

Thomas' aides did not return phone calls inquiring why $1.2 billion in Hollywood tax benefits approved by the Senate didn't make it into the version the House passed Thursday.

But Rep. Xavier Becerra, D-Los Angeles, said he believes the film industry lost out because Thomas and other GOP leaders calculated they could get more votes by wooing Southern lawmakers and included a $10 billion tobacco buyout instead.

``It just broke down into how they could best collect votes. They thought it was better to go with tobacco, go with tackle boxes, go with bows and arrows,'' Becerra said.

Schwarzenegger has publicly committed himself to bringing show business back to California.

``Up until now, no one really paid attention in Washington to the entertainment industry,'' Schwarzenegger said in April. ``Now I will make sure it is taken seriously, and there will be tax incentives in the near future.''

In addition to prolonged Motion Picture Association of America lobbying, sources said Schwarzenegger personally worked the phones trying to get Hollywood included in the tax measure.

But instead, lawmakers added other ``sweeteners'' into the bill to win votes, including $169 million for rum producers in the U.S. Virgin Islands; $92 million for manufacturers of ceiling fans; and $4 million for makers of sonar devices that find fish.

The bill passed 251-178 with support from 48 Democrats. Others, like Becerra, who opposed the bill argued it primarily helped major corporations and predicted it would cause more American jobs to go overseas.

Republicans, however, said it will encourage companies to manufacture more goods and maintain U.S. global competitiveness.

``The legislation ... offers the kinds of incentives that will help this job boom and our economy continue to expand,'' Rep. David Dreier, R- Glendora, said.

With delicate negotiations between the House and Senate now looming, both the MPAA and the Directors Guild of America declined to comment on the bill.

The Senate version passed last month included language counting studios as manufacturers, a move that reduces the top corporate tax rate for movie studios from 35 percent to 32 percent.

The Senate version also addresses one of Schwarzenegger's pet issues - runaway production. It allows studios to expense $15 million in the first year of production of small and independent films, and $5 million more if the production expenditures are incurred in low-income communities.

Combined, those provisions could save the industry $1.2 billion over ten years, according to some estimates.

Lisa Friedman, [phone]

lisa.friedman(at)langnews.com