Governor Gavin Newsom unveiled a proposal Monday to more than double the annual amount of money allocated to California’s film and TV tax credit programs as Hollywood struggles to compete with other production hubs dangling lofty incentives.
The governor announced his intention to expand the annual tax credit to $750 million, from the current total of $330 million, which would make California the top state for a closed film incentive program, surpassing New York. If approved by the Legislature, the increase could take effect starting in July 2025.
“California is the entertainment capital of the world, rooted in decades of unparalleled creativity, innovation and talent,” Newsom said in a statement. “Expanding this program will help keep production at home, create thousands of good-paying jobs, and strengthen the important relationship between our community and the nation’s great film and TV industry.”
The announcement comes as Newsom and other elected officials come under pressure to act as Hollywood productions struggle to rebound after the pandemic and two strikes last year by writers and actors.
Production is increasingly choosing to film in other states due to higher tax incentives, impacting California’s signature film and TV industry. Underscoring the state’s competitive disadvantage, about 71% of projects rejected by California’s film and TV tax credit program chose out-of-state films, the governor’s office said.
California’s film and TV tax credit program was established in 2009 as a way to prevent film and TV production from fleeing to other states. At that time, the credit was limited to $100 million per year.
Five years later, that ceiling was raised to $330 million annually, giving the studio a 25% tax credit to offset qualified production costs such as aircraft construction, stunt equipment and wages for crew members. The credit is applicable to tax-responsible corporations in California.
In 2023, Newsom extended this version of the program for another five years and added a Feature “refundable” studio right for cash payments from the state when the credits exceed the tax bill.
Although Newsom’s Sunday proposal would represent a substantial increase in funding, it does not remove other restrictions on state incentive programs, including provisions that exclude actor salaries and other above-the-line costs that are a large part of the film budget. . Georgia and other competitors do not have these restrictions.
But the move is considered politically untenable in California, where the film incentive program has faced opposition from critics who argue that subsidizing entertainment will hurt other causes, such as education and health.
Members of the Los Angeles entertainment community recently called on the government to put more money into the film and TV tax credit program to curb so-called runaway production and stimulate jobs.
As reported by The Times, industry insiders and experts strongly agree that relatively weak incentives are the main reason California is losing out to Georgia, New York, Canada, England and other filming locations around the world.
New York’s film and TV tax credit program, for example, is capped at $700 million; and Georgia – a popular production destination for Marvel and Netflix – has no restrictions at all.
“I believe the best filmmakers in the world are in Los Angeles, but they’re leaving because of tax credits,” Mike DeLorenzo, president of Santa Clarita Studios, told The Times last month.
The slow activity in Southern California is also driven by other factors, especially production withdrawals that peaked during the streaming wars and cost cutting by major media companies.
Earlier this month, the Los Angeles film licensing office FilmLA reported that the production rate in the region fell by 5% in the third quarter of 2024 compared to the same price in 2023, when script production almost stopped due to the Hollywood strike.
Times staff writer Stacy Perman contributed to this report.
