Movies

A lifeline for Hollywood jobs or a corporate giveaway? The film tax credit debate returns

BBG News

It’s showtime for Hollywood at the California Capitol.

For several months, the entertainment sector in our state has been appealing to Sacramento for assistance, aiming to halt the decrease in film and television production and safeguard numerous employment opportunities.

This week, following numerous speeches and pledges by government figures over several months, two pieces of legislation aimed at revitalizing struggling businesses successfully passed their initial steps in the legislative process.

Proposed laws aim to boost California’s film and television production industry competitiveness against other regions, globally, by possibly raising the tax credit to a maximum of 35% on eligible expenses and broadening the scope of productions that can qualify.

The entertainment industry, hit hard by multiple challenges over the past few years such as slowed production due to the pandemic, labor disputes in 2023, reduced studio investment, the Southern California wildfires, and productions leaving California, may find a critical saving grace in this new development.

As a passionate advocate for the film industry, I wouldn’t want us to follow the footsteps of Detroit’s car industry or California’s aerospace sector, both of which have seen better days. Instead, I believe that when our movie world flourishes, it signifies prosperity for California too.

In both the State Senate’s Revenue and Taxation Committee and the Assembly’s Arts and Entertainment Committee, the bills received overwhelming approval with no dissenting voices.

Although Governor Gavin Newsom proposed increasing funding for California’s film and TV tax credit program by more than double last year, it is still uncertain if the two related bills will become law.

Hollywood Inc.

The news that film production in Los Angeles is reducing, coincides with ongoing efforts by legislators to establish an updated film and television tax credit scheme.

As a movie lover, I’ve always been intrigued by the film and TV tax credit program that was initiated back in 2009 during Arnold Schwarzenegger’s governorship. However, it seems this program has been met with a fair share of skepticism from critics. They argue that these tax credits are essentially corporate handouts, failing to deliver the significant economic benefits that supporters suggest.

Wayne Winegarden, an economist from the Pacific Research Institute, believes that a thriving economy occurs when the government refrains from choosing which industries succeed or fail. He argues this approach isn’t effective in fostering a business climate conducive to economic expansion and job creation.

As a devoted admirer, I find myself bracing for some challenging times ahead for California, given the uncertain economic landscape. We’re looking at potential reductions in federal aid, added pressures from tariffs on our state revenues, and stock market instability that might dampen tax collections supporting our programs. It’s a tricky situation indeed.

That all forces difficult questions for legislators about which priorities to fund.

In a recent statement on X, Assemblymember Corey Jackson expressed concern that Democratic voters in California are rightfully upset about the lack of investment in affordable housing, resulting in seniors becoming homeless and many children living in poverty. He believes this is occurring while substantial tax breaks continue to be given to corporations and movie studios.

Upon being contacted by phone, Jackson stated that although increasing film and TV tax incentives is commendable, it’s crucial for state legislators to think about potential sacrifices they might need to make in order to implement these incentives, especially given the current strain on the state budget.

Hollywood Inc.

For Subscribers

Even before the L.A. fires, Hollywood jobs were hard to find. Will the work ever come back?

With Hollywood undergoing significant transformations in technology, finance, and global aspects, California’s iconic entertainment sector and its labor force confront a harsh truth: There’s a strong possibility that some lost jobs may not return.

In times when we had more funds than we knew what to do with, this decision would have been obvious,” Jackson pointed out. “However, now is the moment for us to remind everyone of the real world. This isn’t a simple ‘slam dunk’; it requires careful consideration.

Advocates in Hollywood suggest that broadening the film and television tax credit could yield economic benefits not just for the industry, but also for sectors like tourism and local businesses such as dry cleaners, florists, and catering services, which are heavily dependent on entertainment-related expenditures. After facing numerous challenges, these workers believe the industry is now at a pivotal moment of change.

That has led to a major lobbying effort on Hollywood’s part.

Over 100,000 separate letters have been dispatched to state legislators advocating for these bills, while an extra 22,000 have been addressed to the Senate’s revenue and taxation committee.

Many significant figures from various prominent entertainment industry unions, along with studio heads, their advocates, and the Motion Picture Association (MPA) organization, all made their way to Sacramento to endorse the proposed legislation.

Last week, as I stood among the bustling crowd at Burbank’s Evergreen Studios, State Sen. Ben Allen and Assemblymember Rick Chavez Zbur, co-sponsors of a significant bill, called upon us, the hardworking souls of the entertainment industry, to take action. They encouraged us to directly reach out to our representatives, appealing for the show of force they envisioned. In essence, they were asking us to use our voices and influence to help shape the future we all desire.

Allen shared with the crowd that it might be challenging to accomplish this task due to various obstacles,” he said, pointing out that there are numerous pressing issues being addressed at the state government level. Merely bringing up the topic of legislation sparked a wave of applause and cheers from the audience.

Critics’ accusations that this is a corporate giveaway have been countered by industry experts and legislators, such as those at the Burbank town hall meeting.

They characterized these as work-focused bills, offering incentives to the productions which create the most jobs. These bills also prohibit businesses from claiming tax credits until the production has been completed.

Currently, California offers a tax credit of between 20% and 25%, designed to help offset production costs like paying for film crews and constructing sets. This credit can be utilized to cover any existing California-based taxes that production companies owe. Proponents argue that increasing the credit to 35% is substantial, while projects filmed within other parts of the state could qualify for a 40% credit.

The law additionally broadens the scope of eligible productions, encompassing animated movies, short films, and series, as well as grand-scale competitions. Moreover, the share reserved for independent productions within the program has been increased to 10%, previously at 8%.

In my opinion, the challenges or obstacles, as I like to call them, have surprisingly fortified the proposal in a way that I hadn’t anticipated. They’ve led to meticulous, deep-rooted discussions and bargaining sessions that have been both focused and precise.

Beyond Hollywood, the proposed bills receive endorsement from the California Labor Federation. Their executive board, in a unanimous decision made in February, opted to back this legislation, as stated by President Lorena Gonzalez.

Despite the organization often being skeptical about tax credits, the federation has consistently backed the film and television industry, she noted.

Gonzalez pointed out the unusual state of Hollywood being heavily unionized,” he said. “To maintain these valuable union positions and the middle-class lifestyle they foster, we aim to keep these jobs within our locale.

Through the lobbying process, we’ve seen some unexpected partnerships emerge, especially following the strikes. Notably, movie studios and Hollywood labor unions have found themselves standing together. Interestingly, they’ve collaborated before, specifically when it comes to proposing tax credits for films and TV productions in the past.

In a correspondence sent to the heads of the Assembly’s Revenue and Taxation Committee, the Chief Executive of the Motion Picture Association, Charles H. Rivkin, expressed that alterations to the movie and television tax credit scheme would serve to draw additional filming activities and employment opportunities to California.

Should the bill be passed, he noted, it could result in an increase in studio applications to the California Film Commission. This influx, in turn, might encourage them to film more projects in California. Consequently, this would generate and preserve job opportunities for Californian residents.

Despite a general trend in Hollywood towards certain goals, it’s important to remember that various stakeholders have distinct priorities. At a recent Burbank town hall meeting, postproduction workers and music scoring professionals voiced their need for exemptions, explaining that other regions and nations now provide special incentives for this type of work.

Due to this situation, there’s been a significant drop in the number of workdays for these laborers, with the average booked recording days at L.A.’s scoring stages being only 11 days for 2025 so far – a stark contrast compared to the average of 127 days during the entire year of 2022, which represented the peak of the streaming boom. Peter Rotter, founder of Encompass Music Partners and one of the organizers of the town hall, made this observation.

A significant amount of production work has shifted towards European cities, including Nashville, while certain post-production tasks have been redirected to locations such as Canada and London.

”It’s going to take a village,” Rotter told The Times. “We have one shot at this right now.”

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2025-04-25 13:32

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