California Extends Film Tax Credits to 2025

Gov. Jerry Brown on Wednesday signed legislation extending California’s film and TV incentives to 2025. The tax credit program will continue to provide a total of $330 million in tax credits per year to eligible productions, with increased diversity efforts but little economic change from the existing scheme, which was set to expire in 2020.

Those credits represent the state’s effort to keep projects from decamping to New York, Atlanta, Canada and the U.K (a favorite for big-budget films) and to lure back television productions that had previously relocated. Although Georgia ($600 million in 2016) and New York ($420 million a year) dole out more and offer more lucrative credits, California’s program has been “highly successful,” according to a June 14 Milken Institute report.

“As a coalition that represents working men and women of the entertainment industry, we are elated that the California film and television production tax credit program has been extended through 2025,” said the Entertainment Union Coalition, composed of the California IATSE Council, Directors Guild of America, International Brotherhood of Teamsters Local 399, Laborers International Union Local 724 and SAG-AFTRA. “Our members are those who lose when film and television production leaves this state and they are also the direct beneficiaries when it returns to and stays in California.”

Hollywood’s employers weighed in as well.

“The MPAA and its member companies are grateful to the leadership of the California legislature for extending the state’s film and television production incentive program,” said Charles Rivkin, chairman and CEO of the Motion Picture Association of America. “We are especially grateful for the support of Senator Holly Mitchell and Assembly Majority Leader Ian Calderon, who authored key legislation, and Governor Jerry Brown, for signing the bill into law. As the birthplace of American cinema, California has seen a fledgling industry grow into a global economic powerhouse that today supports the livelihoods of more than 715,000 Californians. The enactment of this bill helps ensure that California will be home to many more productions, jobs, and local businesses for years to come.”

Los Angeles Mayor Eric Garcetti also applauded the move, saying, “By extending the film and television tax credit, this budget protects and an industry which is integral to L.A.’s economy, and to our identity as the creative capital of the world.”

The new legislation is the third iteration of the state’s film and TV tax credits. The first program was enacted in 2009, making California a latecomer to the tax credit race that spread to numerous states — including such now also-rans as Michigan, New Mexico and Louisiana — and countries (think Lord of the Rings and The Hobbit in New Zealand). A 2014 version shifted the rules significantly, replacing a lottery based system with ranking based upon the number of jobs created and other economic factors, as well as providing special incentives to lure television programs back to the state.

The new program makes some further tweaks.

“This year’s version promotes diversity in the industry, provides more opportunities for underserved communities, and aims to strengthen sexual harassment policies,” said Calderon. The new program:

? Creates a one-of-a-kind, first-in-the-country pilot program – the Career Pathways Training Program — for training Californians from underserved communities for careers — not temporary jobs — in the skilled craft occupations in motion picture and television productions (below-the-line positions);

? Addresses diversity in above-the-line (actors, writers, directors, producers) jobs by providing for a voluntary survey of employees and the disclosure of programs and initiatives to increase the representations of minorities and women;

? Incentivizes the use of California musicians for film and television scoring;

? Requires that employers/applicants provide their harassment prevention policies, including who receives such complaints, procedures for reporting and investigating, distribution of harassment prevention policies to employees and statement there will be no retaliation;

? Allocates more tax credits to projects produced by independent (non-publicly traded studio) production companies; and

? Creates an additional 5 percent incentive for the hiring of locally based crew members when productions film outside the Los Angeles 30-mile zone.

The California Film Commission reports that 150 film and TV series have been or are scheduled to be produced across the state under the program, resulting in expenditures of $5.9 billion (including $2.3 billion in wages paid to production employees and $1.7 billion in payments to supporting businesses) and more than 45,000 local jobs. Sen. Mitchell breaks it down as 29,000 castmembers and 18,000 crewmembers hired, and says that of the 150 projects, 13 were TV series that relocated to California from out of state. The total tax credits granted was $840 million.

Sony’s Quentin Tarantino drama Once Upon a Time in Hollywood, Paramount’s Transformers spinoff Bumblebee and Disney’s Captain Marvel are among the major studio films that have received tax incentives under the current program.

But programs like California’s are not without controversy. Academics often say tax credits seldom produce enough public benefit to justify the expense, and a recent study by the Pew Charitable Trusts says that states such as Georgia don’t even engage in adequate cost-benefit analysis.