State Senate Appropriations Committee approves expanded film tax credit

In a dramatic play to keep Hollywood close to home, California lawmakers are poised to quadruple the amount of money available to subsidize location film and TV production and scrap a controversial lottery system that was used to divvy up state incentive money.

A bill that would significantly expand funding for California’s television and film tax credits cleared a major hurdle on Thursday when it was approved in a 5-to-0 vote by the state Senate Appropriations Committee.

The measure would renew and increase a state tax credit to $400 million a year to better compete with generous tax subsidies available in about 40 states, including New York, Louisiana and Michigan, as well Canada and Britain. California currently allocates $100 million annually to film and TV productions, less than a quarter of what New York provides.

Funding would begin in fiscal year 2015-2016 and run through fiscal year 2018-2019.

The amended bill (AB 1839) will go back to the Assembly, where it was overwhelmingly approved in March, and must still be voted on by the full Senate later this month and be approved by the governor.

Legislative backers, however, are confident they have the support to get the measure passed into law. It’s unclear, however, whether Gov. Jerry Brown will agree to such a substantial increase in funding.

The measure is intended to reverse a steep loss in film production that has hammered Southern California’s homegrown entertainment industry, causing widespread job losses and hardship for prop houses, visual effects companies and other vendors that depend on local filming.

“One of California’s most important and iconic industries has been the film and television industry,” said Kevin de Leon (D-Los Angeles), chairman of the Senate Appropriations Committee. “Hollywood is synonymous with that industry, but in the past decade that industry has been cannibalized by other states and countries that have poached tens of thousands of California jobs with lucrative financial incentives. To halt that steady outward march of jobs and creativity, California must have a robust, smart and efficient tax incentive program of our own -- a tax incentive program that guarantees job growth and economic expansion, coupled with strong accountability and transparency measures.”

AB 1839 both extends and expands a program enacted in 2009 that was intended to address the problem of so-called runaway production.

Although the existing credit has kept some lower-budget movies in state, it hasn’t stemmed the exodus of production.

The bill would broaden eligibility to include big movie productions (those with budgets above $75 million), all new television series and provide an additional 5% credit for shooting outside of the L.A. area.

What’s more, it would also dismantle the controversial lottery used to allocate funds and replace it with a system that awards credits based on their economic impact, including how many jobs a movie or TV show would create.

That change had been urged by De Leon, Senate President Pro Tem elect, who had raised concerns that the current system was flawed because it treated all productions alike, regardless of how many jobs they created.

“When it comes to fueling an engine of job creation with taxpayer dollars, we have an obligation to ensure we are doing everything in our power to maximize their return on investment,” De Leon said. “This way – we can finally be assured – clearly and transparently -- that California’s taxpayers are receiving the maximum possible economic return on this investment.”

Twitter: @rverrier