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California lost $8 billion from runaway productions, report estimates

Kate McKinnon and Jerry Seinfeld inside a car
Kate McKinnon and Jerry Seinfeld in “Comedians in Cars Getting Coffee” on Netflix. Seinfeld’s latest film project is among the movies approved for California state tax credits.
(Netflix)

California lost out on nearly $8 billion in economic activity, 28,000 jobs and over $350 million in revenue for state and local coffers from film and TV projects that chose to film elsewhere in recent years.

That’s one of the takeaways in a new report by the Los Angeles County Economic Development Corporation (LAEDC) for the Motion Picture Assn., a trade body for the major studios.

The eye-popping estimate was based on a review of 157 out of 312 projects that applied for but did not receive a California tax credit and took their productions elsewhere between 2015 and 2020.

“If these productions had stayed in the state, California would have reaped the economic benefits. Instead, the loss of this spending in California cost the state $7.7 billion in generated economic activity,” the study’s authors said.

The findings — intended to bolster support for California’s film and TV tax credit program that provides $330 million annually to film and TV productions — were highlighted at an event held Friday on the set of HBO’s “Perry Mason” at the Warner Bros. Ranch in Burbank.

“These programs are investing in local workers and small businesses here in California,” said Lt. Gov. Eleni Kounalakis in a statement. “This program also has an immeasurable impact on tourism in this state, by inspiring people to visit and explore California.”

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The current state program, which sunsets in 2025, allows filmmakers to recoup 20% to 25% of spending on qualified costs, such as money spent building sets and hiring crews. Producers use the credits to offset state taxes.

“The tax credits are an investment in keeping the film and TV industry in California, potentially reversing a loss and retaining a critical mass that will generate future tax receipts,” the report said.

The authors estimated that during the five-year period the program contributed $22 billion in economic output and 110,300 jobs, including 64,600 in direct employment. This returned $962 million in tax revenue to the state and local governments.

A total of 169 productions got tax credits between 2015 and 2020, receiving $915 million in incentives, they said. Those projects generated $7.37 billion in spending.

For each tax credit dollar allocated, the initial tax revenue returned to local and state governments was $1.07, according to the report.

“The study confirms what we believe,” Sen. Anthony Portantino (D-La Cañada Flintridge) said at the Warner Bros. Ranch. “Tax credits work. They create middle-class union jobs.”

The LAEDC report recommended that California extend the period of the program to encourage additional investment in infrastructure and consider adding a tax credit program for visual effects to prevent further loss from Hollywood’s post-production industry. California is the only major production hub without a stand-alone visual effects (VFX) tax credit.

State lawmakers last summer extended and expanded the program, adding a $150 million credit for the construction of soundstages.

California faces continued competition from New Mexico, New York and other states that offer lucrative tax incentives to attract film and TV crews.

Streaming productions from Netflix have been among the biggest beneficiaries of the program. Jerry Seinfeld’s movie about the creation of the Pop-Tart was among 30 movies in line to receive state tax credits last month.


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