California to hike film tax credits

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It’s been a slow summer at the box office, but Hollywood got a genuine blockbuster Wednesday — a $330-million deal that will help subsidize film and TV production in California for the next five years.

In a last-minute compromise reached Wednesday, Gov. Jerry Brown said he would approve legislation that would more than triple the annual tax credits available for movies and TV shows produced in California. The bill is aimed at reversing the loss of location shoots to other states that offer rich incentives to studios and producers.

Backers originally sought $400 million in tax credits over four years. Brown cut that by $70 million annually, but agreed to extend the program for one additional year.


Currently, California allows $100 million in annual credits, a fourth of what New York offers.

“This law will make key improvements in our film and television tax credit program and put thousands of Californians to work,” Brown said in a statement, indicating he will sign the bill pending its expected approval by the full Senate this week.

The legislation is widely expected to make it easier for California to compete against New York, Louisiana, Georgia and other states and countries that have grabbed a larger share of Hollywood’s business in the last decade.

AB 1839 would also make more projects eligible for tax subsidies, including new network television dramas, big-budget studio movies and television pilots. It would also provide an additional 5% credit for projects that shoot outside the Los Angeles area, a measure added to help win support of lawmakers elsewhere in the state.

Additionally, the bill would phase out a controversial and widely panned lottery system used to divvy up subsidies. Instead, tax credits would be allocated based on how many jobs a project would create. Currently, credits are awarded randomly regardless of how many crew members are hired. Funding would start in the 2015-16 fiscal year.

The deal, which has broad bipartisan support, followed intense negotiations involving Brown, Senate President Pro Tem-elect Kevin de Leon (D-Los Angeles) and Assembly Speaker Toni Atkins (D-San Diego). De Leon had pressed for several amendments to the bill, including ending the lottery.


“This is a crown-jewel industry that provides jobs and opportunity for middle-class families in every region of our Golden State,” De Leon said. “We’re sending a powerful signal today that we are 100% committed to keeping the cameras rolling and bright lights shining in our state for years to come.”

AB 1839, which was unanimously approved by the Assembly in May, cleared a major hurdle earlier this month when the Senate Appropriations Committee approved the bill in a 5-0 vote.

The measure is intended to end a sharp decline in film production that has buffeted Southern California’s multibillion-dollar entertainment industry, causing widespread job losses and hardship for prop houses, visual effects companies and other vendors that depend on local filming.

A recent report by the Milken Institute found that California lost 16,137 film and TV industry jobs from 2004 to 2012, an 11% decline. During the same period, New York saw its entertainment sector expand by 10,675 jobs — a 25% increase.

“I’m grateful to the governor and the Legislature for this important measure to protect and expand an industry that is integral to our economy and our identity,” said Los Angeles Mayor Eric Garcetti, who made expanding the credit one of his top priorities.

Garcetti singled out the contributions of his former film czar, Tom Sherak, who died in January, and his successor, veteran entertainment attorney Ken Ziffren.


Ziffren and his deputy, Rajiv Dalal, quietly worked behind the scenes for months with a coalition of entertainment unions, studios and vendors to lobby for the expanded film tax credit.

“This is a win both for the state of California and the working men and women across this state who will no longer have only one choice — to leave their families to feed their families,” said a statement from the industry coalition. “Behind the glitter that most people associate with Hollywood is the glue that holds it together — the many talented and often unheralded men and women whose names fly by in the credits.”

Some lawmakers in Northern California had initially resisted the idea of giving more subsidies to the film industry, viewing them as a giveaway to an industry concentrated in Southern California.

But much of that opposition dissipated in recent months, and the bill’s sponsors were optimistic they had the votes to get the bill approved.

“We’re in a pretty good shape right now,” said Assemblyman Mike Gatto (D-Los Angeles), who sponsored the bill with Raul Bocanegra (D-Pacoima). “We have an agreement in concept from just about everybody.”

Added Bocanegra: “This is a home run for us and the industry.”

Whether Brown would support such a large expansion was in question. The governor has preached fiscal austerity in light of the state’s past budget shortfalls, and has previously expressed skepticism toward giving tax breaks to industries.


But those close to Brown said the governor was persuaded by arguments that expanding the credit would create and preserve middle-class jobs in California.

The bill would replace a program enacted in 2009 that was intended to make California more competitive with some 40 states that offer tax breaks to the film industry. Jobs also have fled to Canada and Britain.

The program allows filmmakers to claim a 20% to 25% tax credit on qualified production expenses such as building sets and hiring crew members. The new legislation would not change those amounts.

Although the existing credit has kept some lower-budget movies in state, its effectiveness was hindered by limited funds and the fact large studio movies couldn’t qualify for the money.

Feature film production in Los Angeles County has fallen by half since 1996, and the region’s share of TV pilot production has fallen 73% since its peak in 2007, according to FilmL.A. Inc.