News Summary

California’s proposed expansion of its film and TV tax credit program, which aimed to increase the program cap to $750 million, has hit a stumbling block. Lawmakers have removed this critical figure from both AB 1138 and SB 630. Despite Governor Newsom’s previous commitment to the expansion, recent legislative discussions have raised concerns among industry supporters. Advocates continue to lobby for the increase, stressing the importance of maintaining California’s competitiveness in the entertainment sector. The outcome of the proposed tax credit expansion remains uncertain as debates continue among lawmakers.

California has faced a setback regarding the expansion of its film and TV tax credit program, a critical initiative aimed at protecting jobs in the entertainment sector. Lawmakers have removed references to raising the program cap to $750 million from the bills AB 1138 and SB 630, which are currently under review in the legislative process. This change has stirred concerns among industry supporters, as the proposed increase is seen as essential for maintaining California’s competitive edge in the entertainment industry.

Governor Gavin Newsom previously committed to the tax credit program expansion from its existing cap of $330 million to $750 million in the fall of last year. Meanwhile, both the Assembly and Senate versions of the bill successfully passed through their respective appropriations committees, yet the critical dollar figure of $750 million was excised in the latest legislative discussions. This development has introduced uncertainty into the future of the tax credit increase, although the figure may find its way back into the budget discussions later.

In light of the alterations, Senator Ben Allen, who authored the Senate version of the bill, conveyed disappointment, underscoring the necessity of modernizing the incentive program. He highlighted that doing so is vital for preserving California’s leading status in the global entertainment landscape. Assemblyman Rick Chavez Zbur, who penned the Assembly version, remains hopeful about garnering widespread support from both legislative chambers for the increase.

The changes occurred amid a busy voting period involving a multitude of other bills, which may have impacted the legislative focus on this significant tax credit. Just ahead of the committee votes, Governor Newsom reiterated his support for raising the cap to $750 million. Moreover, as per legislative requirements, a budget must be passed by June 15, although certain financial concerns could be revisited in subsequent trailer bills.

Advocates, including representatives from various entertainment unions, have fervently lobbied for the tax credit counterpart, urging the necessity for the state to bolster its competitiveness against incentive offerings from other regions. The legislation aims to increase the tax credit rate from 20% to 35% on qualified production expenses, enhancing the incentive to 40% for productions located in economically challenged areas or outside the Los Angeles region. Additionally, the proposed measures seek to cover animated films, TV shows, sitcoms, and large-scale competition shows, with discussions underway to expand music scoring eligibility.

Recently, the Senate Revenue and Taxation Committee passed SB 630 with unanimous approval, enabling it to progress to a full Senate vote. Similarly, the Assembly’s Arts, Entertainment, Sports, and Tourism Committee also endorsed AB 1138, propelling it toward a full Assembly consideration.

A concerted effort among stakeholders has seen over 100,000 letters sent to lawmakers advocating for the bills, with backing coming from both studio executives and union members. Furthermore, a coalition of labor unions has expressed steadfast support for the proposed legislation, emphasizing the need to safeguard union jobs and ensure the viability of California’s entertainment sector.

On the flip side, critics of the tax credit program have voiced concerns, branding it a corporate giveaway that may not deliver the desired economic benefits. Currently, California’s film and TV tax incentive program is limited to $330 million a year, and if successful, the proposed increase would position it as the second-largest incentive pool in the United States, following Georgia.

Proponents of the tax credit expansion contend that it would generate notable economic returns, supporting local businesses outside the entertainment industry and fostering broader economic growth. As discussions and votes proceed following these recent setbacks, the ultimate outcome of the proposed tax credit expansion remains uncertain yet crucial for California’s entertainment industry.