State lawmakers poised to boost Hollywood tax breaks despite budget woes

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Although there are worries about a potential budget shortfall in California, it seems probable that they will expand their film tax credit scheme to prevent productions from moving to other areas.

Governor Gavin Newsom, along with key figures in the California state legislature, have struck a deal to boost the yearly funding for the state’s film and TV tax credit program up to $750 million. This move offers a glimmer of optimism to an industry struggling in Hollywood.

The deal significantly boosts the funding for the program beyond its existing limit of $330 million, honoring a commitment Newsom made last year to enhance Hollywood’s competitiveness against other regions offering attractive tax incentives for productions. This promise was aimed at helping Hollywood maintain and even surpass its standing in the face of competition from states and nations.

Lawmakers are expected to vote on the budget bill Friday.

Hollywood Inc.

According to the commission’s announcement, it is projected that the combined roster of major studio productions and indie films will earn over $302 million in wages for California workers.

Various entities such as Hollywood studios, lobbyists, unions, and workers have united in support of the production incentive issue, given that the state’s primary industry has faced challenges like the pandemic, labor disputes (such as writers’ and actors’ strikes in 2023), and recent wildfires in Southern California.

Beyond enhancing the limit, an ongoing Assembly bill is also proposing changes to the incentive program. This proposal aims to boost the tax credit, reaching up to 35% for eligible expenses related to films and TV shows produced in the Greater Los Angeles region, and as high as 40% for productions filmed outside this area.

In the state of California, there’s a tax credit system that ranges from 20% to 25%. This incentive is offered for costs associated with approved production activities, like hiring film crews and constructing sets. These expenses can be utilized to lessen any existing tax obligations in California for production companies when they submit their claim.

Enhancing the tax credit to 35% makes California’s incentives similar to the limits established by other states that have effectively attracted Hollywood filming recently. For instance, Georgia offers up to a 30% tax credit for productions.

The legislation expands the range of productions that can qualify for consideration, encompassing animated movies, short films and series, as well as some large-scale competitive programs.

In the upcoming days, the proposal is likely to be one of several measures that Governor Newsom and Democratic legislators intend to push forward as part of the proposed $321.1 billion budget. California is projected to experience a $12 billion budget shortfall in the coming fiscal year.

Legislators have been hesitant to implement drastic reductions, instead adopting a strategy of watching and waiting due to the unpredictable nature of the state’s fiscal situation.

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2025-06-25 20:01