More than 30 California lawmakers want Gov. Gavin Newsom to pull the state's film and TV production promotion program out of a recently approved deal on corporate tax credits, warning that without action it will “go to its knees.”
Although the federal budget has already been approved, legislators say a solution must be developed before the end of the year so that production companies do not lose “the full amount of tax credits they have earned to create jobs in the middle-class entertainment industry,” according to a letter written Friday to Newsom, State Senate President Pro Tempore Monique Limón and Congressional Speaker Robert Rivas.
“Tax credits for creating jobs in motion pictures and television production are not the same as tax credits for research and development,” the letter said. The legislation “creates short-term budget savings by lifting obligations on the entertainment industry and the working families who depend on it for their livelihoods.”
The letter comes shortly after Newsom signed his last state budget as California governor, a $351.7 billion spending plan that includes new limits on business tax credits.
The budget includes a provision that limits the amount of tax credits companies can claim in a given year to $5 million or 50% of the company's tax credit, whichever is greater.
Hollywood industry representatives have warned the governor's office that the new restrictions could affect the government's production promotion program, which was recently boosted last year to $750 million a year.
The film and TV industry in Southern California has struggled to recover from the effects of the pandemic, two writers and actors strikes in 2023 and the migration of production to other states and countries.
Members who voted for the budget bill believed there was consideration for the film and TV credit program, said Assemblyman Rick Chavez Zbur (D-Los Angeles), chairman of the Assembly Democratic Caucus.
“I don't think anyone understood what this cap was, what it did and that it was knee-jerk and reversing the progress we made last year,” said Zbur, who wrote last year's bill, in an interview. “People need to understand that these changes, which I think people believed were small, are really important and will lead to huge job losses if we don't fix them.”
The new changes to the state's film and TV tax credit system, which includes expanded eligibility for additional programs and films, came after intense lobbying from studios and industry workers, who argued that more funding was needed to attract production from other states and countries.
Last week, the California Film Commission said an expanded program of tax credits is set to bring $6.6 billion in direct production spending to the state and more than 34,000 jobs for actors and crew across the 170 movies and TV shows that received production incentives this year.
