Donnelly calls for expansion of film-industry tax credit

Gubernatorial candidate Tim Donnelly on Friday called for the expansion of film tax credits to make California competitive with other states and to halt runaway production.

“This is an iconic industry, this is an industry that is worth fighting for,” Donnelly said at a liquor store across the street from studios in Burbank whose owner said she had seen a 50% to 60% decrease in sales in recent years because of fewer productions.

“… We can set the tone for the rest of the country. California ought to be leading, we shouldn’t be following and trailing behind places like Georgia and Louisiana and Canada. We’re Californians. It’s time to bring Hollywood home.”

The state has an existing film tax credit that is due to expire in 2017. For the last five years, $100 million in credits have been allocated by lottery annually.

Entertainment officials and Los Angeles-area politicians have been vocally calling for expanding the credit, as the region has seen entertainment industry jobs move out of state.

Donnelly’s proposal would eliminate the annual cap, and allow for a credit equal to 20% of a production’s spending in California, with a minimum of $500,000.

Producers of films, television shows, music videos, commercials and video games would be eligible, and there would be no expiration date. Additional credits would be available if the production included California promotional features or is made outside of a major city.

The bill, which is set for a hearing in the Assembly’s Arts and Entertainment Committee on Tuesday, is problematic among some conservatives, who are Donnelly’s most fervent supporters in the governor’s race but have opposed a subsidy to Hollywood studios.

Donnelly’s main GOP rival in the gubernatorial contest, Neel Kashkari, opposes a tax credit specifically for the film industry, and has said he would focus on improving the overall business climate in the state.

“I don’t like the idea of Hollywood leaving California, but I know that other states are subsidizing movies now, up to 30% of the cost of a movie, which is silly economic policy,” Kashkari told the Sacramento Bee recently.

Additionally, a study by the state’s nonpartisan Legislative Analyst’s Office urged the legislature to tread cautiously in expanding the credit, saying that the state gets back 65 cents in revenue for each $1 in film tax credit.

Donnelly dismissed this finding as “a bunch of nonsense.”

“Every single state that has offered a film tax credit is thriving and booming,” he said. “Having more people working is a good thing…. This is about pride, this is about an iconic industry. We are now Hollywood in name only.”