News Summary

California lawmakers have removed references to a proposed increase of the film and television tax credit program’s cap to $750 million. Governor Gavin Newsom had promised a cap increase to bolster the state’s entertainment industry, but this setback has raised concerns about the program’s future. The current cap remains at $330 million, and the proposed bills aimed to enhance tax incentives for producers. Despite disappointment from some lawmakers, there is still hope for reinstating the cap later in the budgetary process amid strong support from industry advocates.

California lawmakers have made a significant move regarding the film and television tax credit program by removing references to a proposed increase of the program’s cap to $750 million. This is a notable setback for efforts aimed at bolstering the state’s entertainment industry and protecting jobs amid competition from other states.

Currently, California’s film and television tax incentive program is capped at $330 million per year. Governor Gavin Newsom had previously promised to raise this cap significantly in the fall of last year. The proposed increase, detailed in bills AB 1138 and SB 630, aims to make the program more attractive to producers by boosting the tax credit rate from 20% to 35% on qualified expenses, and potentially up to 40% for projects in economically disadvantaged areas or outside of Los Angeles.

Despite both bills passing through their respective appropriations committees in the Assembly and Senate, the crucial $750 million cap proposal was removed during a busy voting session on numerous other legislative measures. This decision has raised questions regarding the future of the tax credit expansion, although there remains a chance that the cap could be reinstated later in the budgetary process.

Lawmakers including Senator Ben Allen, author of the Senate bill, expressed disappointment over the removal of the funding figure. He stated that modernizing the tax credit program is essential for California to remain competitive in the entertainment industry. Conversely, Assemblyman Rick Chavez Zbur, author of the Assembly bill, maintains optimism about the support the bills are receiving across both legislative houses.

Governor Newsom recently reaffirmed his backing for the proposed increase just before the appropriations committees voted. Meanwhile, the Legislature must finalize a budget by June 15, although certain funding issues may still be addressed later in the form of trailer bills.

A broad coalition of entertainment unions has been actively lobbying for the expansion of the tax credit program, asserting the urgency for California to enhance its competitive edge against incentive programs offered by other states. Over 100,000 letters have been sent to lawmakers advocating for the bills’ passage, with strong support from both studio executives and union members. This widespread backing highlights the critical nature of protecting jobs within the state’s entertainment sector.

The proposed expansion aims to encompass various types of productions, including animated films, television shows, sitcoms, and large-scale competition shows. Amendments to include music scoring eligibility may also be included in future considerations.

The Senate Revenue and Taxation Committee has already voted unanimously to move SB 630 to the full Senate for consideration. Similarly, the Assembly’s Arts, Entertainment, Sports, and Tourism Committee has advanced AB 1138 to the full Assembly. This legislative momentum underscores the palpable interest in advancing the tax credit program despite the setback regarding the funding cap.

While proponents argue that enhancing the tax credit will yield substantial economic returns that benefit local businesses beyond just the entertainment sector, critics of the program claim it could represent corporate giveaways without guaranteed economic benefits. Nonetheless, the proposed increase would place California’s film and TV tax incentive program as the second-largest in the U.S., following Georgia.

As discussions continue and lawmakers navigate the budgetary landscape, the future of California’s film and television tax credit expansion remains uncertain but is poised for further examination in upcoming votes and negotiations.