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Newsom calls for big boost in funding for California’s film and TV tax credit, throwing Hollywood a lifeline

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Newsom calls for big boost in funding for California's film and TV tax credit, throwing Hollywood a lifeline

As a seasoned movie critic with roots deeply entrenched in the heart of Tinseltown, I have witnessed the ebb and flow of Hollywood like a masterful maestro conducts an orchestra. The recent proposal by Gov. Newsom to expand California’s film and TV tax credit program is not just music to my ears, but a symphony of progress that resonates with the pulse of the industry.

Governor Gavin Newsom presented a plan on Sunday to significantly increase the yearly funding for California’s film and television tax credit program, aiming to boost it over twofold. This move comes as Hollywood faces stiff competition from other film-making locations offering generous incentives.

The governor plans to boost the yearly tax credit to a whopping $750 million, significantly raising it from its current $330 million. If successful in gaining approval from the legislature, California would lead the way in capped film incentive programs, outshining New York’s offerings by next summer at the earliest, as early as July 2025.

Gavin Newsom stated, “California, known as the global hub for entertainment, has been built over decades through creativity, groundbreaking ideas, and extraordinary skills.” By broadening this initiative, he explained, we can retain more production within our borders, create numerous high-paying jobs, and reinforce the strong bond between our neighborhoods and California’s renowned film and television industry.

The announcement arrives amidst intensifying demands for action from Newson and other authorities, since Hollywood’s productions are finding it difficult to recover post-pandemic and due to last year’s consecutive strikes by both writers and actors.

More productions are choosing to shoot their films and shows in other states because they offer greater tax incentives, which is causing a decline in California’s well-known film and television industry. This highlights California’s competitive disadvantage, as around 71% of projects that didn’t qualify for California’s film and TV tax credit program decided to film elsewhere instead, according to the governor’s office.

California’s movie and television tax incentive scheme was initiated in 2009 with an aim to keep film and television productions within the state rather than moving to other regions. Initially, this incentive had a cap of $100 million per year.

After five years, the roof increased to an annual $330 million, granting studios tax credits worth up to 25% to help cover qualifying production expenses like set building, stunt gear, and salaries for workers. This credit can be used against any California-based tax obligations a company may have.

In the year 2023, Newsom prolonged the operation of that specific program for an additional five years and incorporated a “reimbursement” aspect, enabling studios to receive money from the state whenever their credits surpass their tax liabilities.

While Newsom’s Sunday proposal boosts funding significantly, it doesn’t eliminate all constraints in California’s incentive program. Notably, it still excludes actor salaries and other upfront costs (a significant chunk of film budgets) from the benefits. In contrast, states like Georgia don’t impose such limitations.

However, making such a move is generally seen as politically unfeasible in California, given that the film incentive program often faces criticism due to the belief that funding entertainment takes away resources from other important areas like education and healthcare.

As a passionate movie enthusiast based in Los Angeles, I’ve found myself advocating for increased investment in our city’s film and television tax credit program. The aim is to combat what we call ‘runaway production’, which is the unfortunate trend of productions leaving our beloved city in search of greener pastures. This move not only preserves our local jobs but also stimulates our thriving entertainment industry, ensuring that LA continues to be a global hub for cinematic excellence.

Previously, The Times shared this news: Industry insiders and experts widely concur that I’ve been struggling to compete with places like Georgia, New York, Canada, the UK, and other popular filming destinations globally due to the comparatively modest incentives in place.

For instance, the film and television tax incentive scheme in New York maxes out at $700 million, whereas Georgia – a preferred location for Marvel and Netflix productions – does not set any such limit.

Mike DeLorenzo, president of Santa Clarita Studios, stated to The Times last month that he thinks some of the greatest filmmakers worldwide are based in Los Angeles, but due to tax incentives, their work is often being sent elsewhere.

Activity in Southern California has not only been slow due to its own pace, but also influenced by various elements such as a reduction in overall production, which hit its maximum during the streaming wars, and cost-saving measures taken by large media firms.

In the third quarter of 2024, film production in Los Angeles decreased by 5% as compared to the same period in 2023. This decrease was largely due to a significant slowdown in scripted productions caused by the Hollywood strikes at that time.

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2024-10-27 20:31

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