The California state legislature passed a bill this week to expand the parameters that allow a production to qualify for the state’s Film and Television Tax Credit program. While this law does not include an increase in the funds available to the program, governor Gavin Newsom has also proposed a massive increase in the amount of available tax credits from $330M to $750M annually.
Newsom’s proposal has been included in the state’s annual budget bill which is due for a vote on June 15th. These are seen as crucial steps to re-energize California’s declining film & television industry.
The post-pandemic period has been difficult for the local film and production industry in California. This has been particularly true in LA, according to FilmLA, a non-profit that quantifies film and television production activity in Los Angeles.
In a recent report, they show that the number of film and television shoot days in the city has fallen by over 30% from 2019 to 2024. The Milken Institute has also suggested that the fall off in production within California is “at significant risk of being irreversible” with studios and production companies leaving California in favor of other, cheaper centers within the U.S. and abroad.
The report cited the high cost of operations as the biggest factor in the decline, a problem that Newsom is trying to address with his proposed increase in the state’s tax credits.
Some are resisting the tax credit increase by claiming that its benefits are unclear. After New York passed a similar increase to its film & tax incentives, analysis from the New York Times found that the state of New York loses money from these programs, with some studies showing that for every dollar spent on tax credits, only 31 cents are returned.
They claim that a “race to the bottom” has developed, in which many states are offering increased film & tax credits to lure production into their state. While this put pressure on California to join in the rush to offer tax credits, it is proving to be a delicate balancing act to offer incentives that are sufficient to spur production without giving an unfair benefit to a preferred industry on the backs of all taxpayers.
