More than three-dozen California legislators are calling for Gov. Gavin Newsom to exempt the state’s film and TV production incentive program from a recently-approved cap on corporate tax credits, warning that without action it will be “significantly kneecapped.”
Though the state’s budget has already been approved, the legislators say a solution must be devised before the end of the year so that production companies do not lose the “full value of tax credits they earned in exchange for creating middle-class entertainment industry jobs,” according to a letter dated Friday and addressed to Newsom, State Senate President Pro Tempore Monique Limón and Assembly Speaker Robert Rivas.
“Tax credits earned for creating jobs in motion picture and television production are not the same as tax credits provided for research and development,” the letter states. The legislation “creates short-term budget savings by reneging on commitments made to the entertainment industry and the working families who depend upon it for their livelihoods.”
The letter comes shortly after Newsom signed his final state budget as California’s governor, a $351.7-billion spending plan that includes new limitations on corporate tax credits.
The budget includes a provision that restricts the maximum tax credit companies can claim in a given year to $5 million or 50 % of a company’s tax state tax liability, whichever is greater.
Hollywood industry representatives had warned the governor’s office that the new restrictions could affect the state’s production incentive program, which was just bolstered last year to an annual cap of $750 million.
The film and TV industry in Southern California has struggled to rebound from the effects of the pandemic, the dual writers’ and actors’ strikes in 2023 and the exodus of production to other states and countries.
Members who voted for the budget bill had believed there was a carve-out for the film and TV tax credit program, said Assemblyman Rick Chavez Zbur (D-Hollywood), chair of the Assembly Democratic Caucus.
“I don’t think that anyone understood what this cap was, what it did and that it effectively kneecapped and reverses the progress that we made last year,” said Zbur, who co-authored last year’s bill, in an interview.”We need to have people understand that these changes, which I think people believed were minor, are really significant and will result in significant job loss if we don’t fix them.”
The new changes to the state’s film and TV tax credit program, which included expanded eligibility for additional shows and films, came after intense lobbying from studios and industry workers, who argued that more funding was necessary to lure production back from other states and countries.
Last week, the California Film Commission said the expanded tax credit program was set to deliver $6.6 billion in direct production spending in-state and more than 34,000 cast and crew jobs across the 170 total film and TV shows that received production incentives this year.
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