New California Film and TV Tax Incentive Bill Approved by Key Committee

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Mike Gatto

The bill to extend and expand the program got strong support from government, industry, unions and guilds at a Sacrament hearing.

Legislation to expand and extend California's Film and TV Tax Credits program passed the California Assembly Revenue and Taxation Committee Tuesday by a unanimous vote of 8 to 0. 

This bill would extend the tax credit program -- which offers incentives of about 20 to 25 percent -- through 2022. It would also, for the first time, make big budget movies and network TV series eligible for incentives.

According to comments by Assembly Member Mike Gatto (D-Los Angeles) at the hearing in Sacramento, the bill is also expected to be amended to include incentives for musicians and postproduction, including visual effects.

It already offers an additional 5 percent incentive to projects that are shot outside of the L.A. area, which is expected to help convince northern California legislators that it is not just going to benefit SoCal.  

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This approval is an important but anticipated step, as the head of the committee is Assembly Member Raul Bocanegra (D-Pacoima), co-author of the legislation along with Gatto, who was the first and last to speak on behalf of the legislation.

The tax incentive program currently allocates $100 million a year, but backers are hoping to see that pumped up to as much as New York State offers, which is about $430 million a year. Currently, there is still no dollar amount in the bill, but that is expected to happen in the next two weeks now that Gov. Jerry Brown has issued his projections that the state will enjoy a budget surplus of at least $850 million this year.

Brown has not said if he will sign legislation that extends and expands movie-TV tax incentives, and has not included it in his initial plan for how to spend the surplus.

Gatto told The Hollywood Reporter prior to the Tuesday vote that it is unlikely the amount will compete with New York state. One reason is that prospects for a big increase were dampened by a May 1 report from the California Legislative Analysts Office that counters claims that tax incentives pay for themselves. The report said California gets back 65 cents for each dollar spent (and local governments receive another 35 cents).

"This will be something that is held up by the bill's opposition," says Gatto, adding that, "It provides fuel for people who want to analyze this in the most simplistic terms."

Gatto notes the analysts report did agree entertainment jobs are being lost -- down 65 percent since 2004 -- and points to numerous programs that don't make their cost back, such as childcare for working mothers and funding for community colleges. "Trying to analyze return on investment is a fool's errand," says Gatto. "How do you quantify the benefit from tourism dollars?"

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California is losing movie and TV work to at least 37 other states and countries, and needs this legislation to reverse the runaway production trend, say proponents for the bill.

Gary Tobin of the L.A. Chamber of Commerce said that in 1993 the state had 183,000 workers in movies and TV; and in 2013 that was down to 101,000, and it continues to drop.

The state is at a critical point, said Scott Roth, business agent of IATSE local 800, because so much work is leaving the state that the businesses, crews and institutions which have supported film and TV work are closing or being lost to other locations. "If we don't act now," said Roth, "we will lose this industry and all the jobs and benefits."

They were among more than 40 people who spoke in favor of the bill during the hearing Tuesday and only one spoken in opposition. Those who spoke in favor of the bill included representatives of Los Angeles Mayor Eric Garcetti and the mayors of San Francisco and Beverly Hills, the L.A. and San Francisco chambers of commerce, and spokespersons for Warner Bros., Disney, NBC Universal and the MPAA.

There were several dozen people speaking on behalf of unions and guilds in favor of the bill, including multiple locals of IATSE, the Directors Guild, the Screen Actors Guild, the American Federation of Musicians and several Teamsters locals.

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The one person who spoke in opposition represented the California Teacher's Association, who said every dollar of tax breaks takes money away from the state's general fund, which decreases the amount that goes to schools and teachers.

However, a spokesperson for the Los Angeles Unified School District spoke in favor of the legislation.

Since 2009, the program has provided subsidies to 270 projects created 51,000 jobs and meant $4.75 billion in economic activity in the state, says Gatto. Each dollar also creates additional jobs and revenue.

The bill has about 70 co-sponsors, including most of the members of the state Assembly. It is expected to pass the full Assembly in the coming weeks after it makes its way through the Assembly Appropriations Committee.

After that it will face its real challenge, first in the state Senate and, if approved there, then by Gov. Brown, who will have to decide to sign or not. In the past few years, Brown has waited until the last minute, but has signed the bill.