California Boosts Film & TV Tax Credits To $660M As Governor Newsom Signs Temporary Increase Into Law – Update

UPDATED, 1:44 PM: Hurray for Hollywood indeed!

In the heart of the home of the movies, California Gov. Gavin Newsom on Wednesday put pen to paper and made the new $330 million increase in California’s film and television tax incentives a reality.

Facing a recall election in September, the longtime studio-friendly Democrat swooped into Netflix’s backyard Sunset Gower Studios on Wednesday to sign the bill.

With the stroke of his pen, California is now offering a whopping $660 million to encourage and juice production here, at least for the next two years. In that context and with an emphasis on diversity, $150 million of the new funding is intended to aid in the building or revamping of much-needed soundstages in and around Los Angeles County.

“Today’s investments ensure film and television production will continue to fuel the California Comeback through thousands of good jobs right here in the Golden State, training opportunities to increase access, and a focus on fostering diversity and inclusion for a workforce that better reflects our vibrant communities,” Newsom said at the Sunset Boulevard facility as state politicians and industry reps stood by.

Authored by state Sen. Anthony Portantino, the bill that became law today passed the legislature in Sacramento unanimously on July 15.

“The 163,000 members of the Entertainment Union Coalition thank Governor Newsom for his signature on Senate Bill 144 today,” said the Entertainment Union Coalition, which reps members of the California IATSE Council, the DGA, the Studio Utility Employees Local 724, SAG-AFTRA and Teamsters Local 399. “SB 144 enhances and improves the California Film and Television Tax Credit Program which since its inception has resulted in the creation of 156,000 below-the-line cast and crew jobs and has generated $18.4 billion in direct revenue for our state. SB 144 ensures that our members can remain working in California and that more productions will be able to shoot here for decades to come.

It added, “California became the home to motion picture production over 100 years ago. Today, this bill, keeps that magic here.”

Once lagging in tax credits and watching production flee to more lucrative jurisdictions like Georgia and Canada, California transformed its program in 2014 from a $100 million annual lottery system that excluded big-budget movies to a $330 million program with a jobs-centric approach. Signed by then-Gov. Jerry Brown in Hollywood that summer seven years ago, the newer program allowed films with budgets of more than $75 million to apply and sought to convince TV series to relocate, which likely will be reinforced by the new California Film Commission-administered cash influx.

PREVIOUSLY, 3RD UPDATE, JULY 15 AM: The California state Assembly and Senate on Thursday overwhelmingly passed a big boost to the state’s film and TV tax credit, fueled by the unexpectedly large surplus in the state’s budget.

California Gov. Gavin Newsom is expected to sign the legislation, which, over the next two years, adds $90 million annually to the state’s $330 million production incentives. It also provides a $150 million fund designed to encourage the development of new and renovated sound stages, hoping that the state will be the center of an ongoing boom in streaming production.

The author of the bill, state Sen. Anthony Portantino, a Democrat, said in a statement that by “investing in sound stage construction and the creation of studios and filming locations is a critical addition to our efforts in increasing filming in the Golden State.  By investing in the expansion and modernization of studio infrastructure, we can ensure that another generation of entertainment careers will be created in California.”

The bill passed 37-0 in the Senate and 62-0 in the Assembly.

“Let’s bring a core historical industry back to California,” Portantino said on the floor.

UPDATE, 9:55 AM PT: The California state Assembly gave the greenlight to the expanded TV and film tax credit on Thursday morning, voting 62-0, with the legislation now headed to the Senate and then to Gov. Gavin Newsom.

Lawmakers praised the legislation for including efforts to boost film and TV diversity, including a credit to boost soundstage construction that requires applicants to submit goal plans.

Assemblywoman Autumn R. Burke, chair of the Revenue and Taxation Committee, praised the legislation for what she said was a “proven track record,” with seven times the return. While she said that the industry has made progress in diversifying its workforce, “it’s clear that the entire entertainment ecosystem needs to” improve.

The state Legislative Analyst’s Office, traditionally much less bullish on the credit, “determined that about one-third of the projects receiving a credit probably would have been made in California irrespective of receiving a credit,” according to an Assembly Floor Analysis of the bill.

But the LAO “did note that because so many other states provide a film and TV credit, California’s credit is understandable and can be viewed as way of leveling the playing field by countering financial incentives to locate productions outside of California unrelated to creative considerations.”

PREVIOUSLY: A significant expansion of California’s film and TV production tax credit is scheduled to come to a floor vote on Thursday before the state Assembly and Senate.

The bill is expected to pass overwhelmingly, after garnering unanimous support out of committee on Wednesday.

At least for the next two years, the legislation also will put California more in line with New York in the amount of money offered to TV series and movie projects.

The legislation will add $90 million for each of the next two fiscal years, meaning that the California incentive program will have $420 million available in 2021-22 and 2022-23. The additional money is directed at TV, with $75 million for recurring series and $15 million for series that relocate to the state.

Another boost will come via a new studio construction tax credit, with $150 million designed to spur development or renovation of soundstages. The 10-year program will provides a 20% to 25% credit for productions on those stages. Those eligible would have to own more than 50% of the movie or series project and also be the same owners or lessees of the stages. The credit also has a set of diversity requirements, with applicants required to establish a goal plan that is “broadly reflective of California’s population,” for above and below-the-line workers. If the California Film Commission determines that an applicant has met or made a good faith effort to meet those goals, they will get up to four more percentage points of credit.

Also part of the legislation are new limits on the amount of credits that a recurring series may receive for subsequent seasons. Shows that have been receiving credits will not be able to get more in credits for subsequent seasons, as the commission grapples with having recurring series funds depleted. The bill allows the commission to reallocate its existing $330 million in annual credits to those series. Under the existing program, 40% of the credits are allocated to TV projects, 35% to feature films, 17% to relocating series and 8% to independent films.

The burst of new money flowing to the program is driven in part by California Gov. Gavin Newsom’s announcement that the state is expected to have a whopping $75.7 billion surplus. The existing program runs through 2025, so the tax credit program would revert to $330 million per year in 2023 unless the state continues the increased allocation.

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