California Governor Signs Expansion of State Film and TV Tax Credit

Jerry Brown Film and TV Tax
Justin Sullivan/Getty Images

A bill that more than triples the size of California’s film and TV tax credit is now law, as Gov. Jerry Brown on Thursday signed the legislation designed to stem the tide of runaway production fleeing to other states and countries.

“Yes, it’s taxpayers money, but it’s taxpayers money going to build jobs for the future,” Brown said at a ceremony at TCL Chinese Theatre in Hollywood, where he was joined by Los Angeles Mayor Eric Garcetti; the bill’s principal co-authors, Assemblymen Raul Bocanegra and Mike Gatto; and a bevy of other lawmakers and industry officials who filled the forecourt of the landmark theater.

Garcetti predicted that the expanded credit would mean that 10,000 jobs would return to the Los Angeles region next year. He said that the legislation will “level the playing field” with other states offering credits.

Dozens of crew and union members attended, as well as a smattering of stars like Warren Beatty.

“Thank you. This means a lot,” said Beatty in very brief remarks to the crowd. He was among 12 speakers, including State Sen. Kevin de Leon, California Labor Federation chief officer Art Pulaski and crew members who addressed the gathering, before Brown sat at a desk placed just above Mary Pickford’s footprints and signed the bill. No studio chiefs were present, but Steve Papazian, president of worldwide physical production for Warner Bros. Pictures, spoke briefly.

“Today, we remind the world that the Golden State is the home of the silver screen,” Brown said.

Also present were Los Angeles’ “film czar,” attorney Ken Ziffren, and Rajiv Dalal, director of the mayor’s office of motion picture and film production.

The legislation will increase the annual allocation of state tax credits to $330 million per year, more than triple the current amount, starting with fiscal year 2015-16 and lasting for five years. It will expand the eligibility to include big budget feature films and new one-hour drama series, categories of production that have migrated away from the state as studios and producers increasingly take advantage of generous subsidies elsewhere.

The legislation also provides extra incentives — beyond the current 20% — for visual effects and music scoring, as well as to producers who shoot in parts of the state outside of the Los Angeles region.

The California Film Commission can start distributing the funds on July 1, but it also will have to rework the way that the money is awarded to producers. A scoring system in which will be determined based on applicants’ abilities to employ a significant number of workers will replace the present lottery where credits were awarded by chance.

A key question will be whether the tax credit is sufficient to compete against states like Georgia and Louisiana, which have become production centers in their own rights and do not put an annual cap on credits. New York allocates about $420 million per year, and the industry coalition that lobbied for an expansion of California’s program sought to use the Empire State as a benchmark for competition.

The tax credit pool will be divvied among different categories of production. Features will get 35%, independent films will get 5%, relocating TV series will get 20% and new TV series, pilots, movies of the week and recurring TV series will get 40%.

Although the legislation, AB 1839, passed the state Assembly by a vote of 72-0, and the state Senate by 34-2, the overwhelming support masked what the bill’s co-authors said was an uphill climb to convince other Sacramento lawmakers of the need to greatly expand the program. They withheld a figure for the annual allocation until August, a strategy they said was necessary because of uncertainty over the state budget environment. But it also allowed the coalition of union, studio and civic lobbyists to press their case that the legislation would protect middle-class jobs before the total figure became the target of debate.

Gatto said that “at every step of the way, from the building of the coalition to the last hearing, the whole thing was always in jeopardy of collapsing. We are just ecstatic that it did not collapse, that we got this far.”

Garcetti made the passage of the legislation his top priority in Sacramento and among his top priorities citywide, he said. Brown, he said, was the key figure who needed convincing. “I love this governor because he is cheap and smart, so we had to make this case on the dollars and the merits, and we did.”

Garcetti said that he intends to retain the Film & TV Office, with a focus on reducing city fees, streamlining permitting among Los Angeles County cities, and marketing.

The latter may be in play as L.A. tries to high profile productions that have migrated elsewhere. But not all production is eligible for the incentives. The newly passed bill does not cover talk shows, and there are big doubts that CBS will keep “Late, Late Show” in the city when James Corden takes over from Craig Ferguson next year. New York offers a credit for talk shows that move to the state.

Nevertheless, even as studios like Warner Bros. plan layoffs, city leaders characterized the expansion as a turning point.

“I would be deeply more concerned [about layoffs] if AB 1839 had not been signed,” said Los Angeles City Councilman Mitch O’Farrell, whose district includes Hollywood. “This changes everything. It changes the landscape, for five years as well.

“This is a signal that we are sending to the industry, saying, ‘Look, this is a five year investment, a five year incentive, to bring it back, grow it again here in Los Angeles and here in the state,'” he added. “I am very optimistic at this. And it does put some responsibility and onus on industry professionals now, producers, those that make the decisions, on where and when and how they film.”

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  1. Hey, I Adore the post , i found this hypnotizing, i might want to learn more info concerning this.

  2. Rena Moretti says:

    Joe: If the goal is to bring back production to California (or at least as much as possible) I don’t see a strategy to do it.

    What the Governor signed into Law is not part of a strategy, it is just a handout to the Big Studios (who are slimming down more and more through flop after flop).

    An actual strategy might work (although I think it would run afoul of the Interstate Commerce Act and the Constitution – at least as far as the other States).

    What is really scary (but hardly anyone even thinks about is that Hollywood’s grip on the world’s imagination is quickly disappearing.

    It’s not written anywhere Hollywood has to be the center of the film world and if we keep making crappy product, we can expect the same fate as Detroit!

  3. CARort says:

    California can’t make good product anymore they forgot how they keep putting remakes and retellings and they need taxpayer money to keep churning out the crappy movies and TV shows they make. Last year alone there was a number of flops at the box office. What’s more ironic is that it was runaway production that put CA on the map in the first place, here’s a history lesson the ‘homegrown’ industry people Garcetti speak so much about was actually grown in NYC where the industry was born due to the primitive filming equipment and Edison’s greed, filmmakers fled to the far corners of the West Coast which allowed for perfect image but that was a long time ago, movies and tv shows can be made everywhere and anywhere. Hey I hope it works out but the jobs they lost in the 10+ year runaway production are not coming back, California got arrogant, companies have dug in places like NY, GA among others.

    • Rena Moretti says:

      Another issue is that the “we’re coining money” PR and the willing belief of the unions who want their share of those imaginary profits have increased prices to the degree where the industry is no longer able to function without constant injections of money (either nouveau-riche oil sheiks, internet entrepreneurs and the like or taxpayers “saving jobs”).

      The cost of making movies and scripted TV have gone up even as theater attendance and ratings have gone down. With the relative demise of home video, where is the money going to come from?

      Executives are betting “the taxpayers”. Let’s make them pay for films they won’t go see… A sad state of affairs.

    • Tami says:

      Rena & CARort must be the same person. Take away the film tax incentives in every State/Country and 80 percent of the production would come back to California. They can dig in all they want in Georgia & New York. No incentives, no filming.

      • Rena Moretti says:

        I can scare you and assure you that we’re two different people. I wish I had thought about the bit about the “home grown” industry as it’s true California was actually the first “runaway production” State.

        I actually think a lot of production would go back to California (assuming costs don’t keep climbing) is handouts magically disappeared, and I would welcome such disappearance as money should go where it’s best employed.

        What people don’t realize is that if all the handout money disappeared, a lot of productions would too as Hollywood is now incapable of maintaining the same level of production without taxpayer money.

        Sadly the “geniuses” who are running the studios have reduced us to the level of the French or Canadian industry (financially – artistically I’d argue they have now overtaken us!)

      • Joe says:

        Yeah, California will always have a piece of the industry but it will be a much smaller piece. While the new tax incentive for California is an improvement it simply too late over a decade too late. The industry is global now & that won’t change.

  4. Julienne says:

    High Taxes make people leave States and Countries, Barak. Barak needs to follow Jerry’s lead, or the Country’s going lose millions of other jobs.

    • It is unfair that the film industry, which makes multi-millions of dollars,
      doesn’t have to pay taxes. Gov Brown needs to change his perspective. California needs companies that pay their taxes.

      • Rena Moretti says:

        Ruth, the movie industry likes to PRETEND it’s making tons of money. In reality, it is teetering on the brink. That’s why getting a few hundreds of millions was so important to them that they actually resorted to begging in the name of the crews they’d happily left behind before….

  5. Julienne says:

    Jerry is now admitting with his actions, that the “Free-Market,” Republican stance works? Holy-Cow Jerry! It’s about time you grew a brain.

    • Rena Moretti says:

      I fail to see handing taxpayer money out to favored industries is “free market”…

      The governor, sadly, only uses the artifice of pretending this is a “tax break” to hide the unpalatable reality that it’s anything but a tax break. It’s just cronyism in action.

  6. Rena Moretti says:

    Tami:

    “Hollywood is a business that is very profitable”… excuse me while I LOLROTF [an awkward moment passes by] That was nice…

    Seriously, just because they say they’re making oodles of money, they really don’t. If you look at, say, Paramount, you’ll find out the actual value of the company went down 75% in the past four years (even as the stock went up but it just shows the foolishness of people who invest in movies without looking at the actual financials which are there for all to see…), and I don’t mean to pick on Paramount. If Warner was coining money, would Rupert even conceive of trying to buy them to liquidate a competitor..?

    Yes, they do need handouts. That’s the very, very sad situation they are in now. Years of making bad films and TV shows nobody watches have come home to roost and it’s actually worth their while to beg fr a few hundred millions, which companies that are genuinely thriving don’t do (although they’ll happily collect free money – you’re right about that).

    The “loss of jobs” started 20 years ago and people have been complaining about it for that long. Why do you think the studios suddenly got interested?

    While I do understand moving to go with your job is not pleasant, there is really no reason for you to reach into my pocketbook to keep your job in town.

    Doing that is just unfair, no matter how much it is couched in “pro-job” language. The reality of it is just as unpleasant (and bad for the overall economy as more productive uses for the money are displaced).

    There aren’t only two states slashing handouts. I don’t care enough to check the number, but it’s a lot more than that.

    We do agree that no State should offer handouts (to any business). It IS counter-productive and if I believed for a second that the Studios won’t be lobbying again to increase the pot and that passing that law would make all incentives phase out (I don’t believe it’ll work out that way unfortunately) I’d be for it too.

    • Rena,

      If the stream of “bad” projects coming out of Hollywood is as long as you like to think it is, at least you offer us an even longer stream of completely incorrect nonsense that flows out of your mouth.

      Fox didn’t want to liquidate Warner, he wanted to add it to his empire. And offering $80 billion couldn’t get Warner to even entertain the idea of talking with Fox. If they needed to “beg” for a few hundred million in tax credits because they are on the verge of collapse, why would they turn down $80 flipping billion??????

      Paramount’s operating income or value is not down 75% in four years. That’s just so patently untrue that you should be ashamed for continually repeating it. Yes, the financials are there. Go look. They show how completely full of shit you are.

      If they are hurting so bad from bad product, why has there been a 1000% increase in the amount of scripted content for broadcast & cable since 1999??? They are making more productions than they ever have and are spending more and more to do it. How are they able to do this? Because they are making lots and lots of money.

      Your war with reality is entertaining as ever. Maybe Paramount can create off beat show about your cooky antics. Because, yes, they have plenty of money for new shows.

      • Rena Moretti says:

        Adrian,

        Thanks for the interesting response. :) although I could have done without the numerous insults (don’t know what makes you think insulting others is a way to advance your ideas, or even the proper way to act…)

        First I didn’t write that “Fox … want[ed] to liquidate Warner”, I said he wanted to “liquidate them as a competitor”, which is completely different. Rupert felt one fewer competitor would make his studio’s life easier (which is true as there’s be less competition for the now all-important output deals as it’s the only way left to monetize all those bad movies now that theatrical is a loss-leader and video has been reduced to a bit player through poor management and technological change – but don’t forget the poor management, it’s the #1 cause!)

        You ask “Why would they [Warner] turn down $80 flipping billion??????” The answer is simple: the jobs of the people who turned down that great opportunity would have disappeared (and a whole set of executive musical chairs would also disappear). It’s not like FOX would keep two duplicating entities. It’d “synergize” all those “great executives” out of their cushy jobs with the big paychecks…

        Also, I don’t know what the Warner catalog is worth… It may be worth more than that by itself (and it’s really the only real asset any modern studio has, along with real estate!)

        You write: “:Paramount’s operating income or value is not down 75% in four years. That’s just so patently untrue that you should be ashamed for continually repeating it. Yes, the financials are there. Go look. [various insults deleted].”

        I do apologize for not being more specific, but I did read the financials, and this is exactly where I got that piece of information that makes you ever so upset (do you work for Paramount? Own their stock? In that case I have three words for you “Sell-sell-sell!!).

        Shareholder equity, which is the actual value of what a shareholder owns, has gone down (roughly) 75% in the past for fiscal years (at least when I looked a couple months ago – don’t follow them closely so I don’t know their fiscal year of the top of my head!)

        Not sure where you get the “1000% increase in the amount of scripted content for broadcast & cable since 1999???” I can state, without the slightest fear of being wrong that it’s highly incorrect. The added production for cable has been matched by the quick drop in scripted content over hte major networks (and the disappearance of one of the erstwhile Big 6!)

        The networks also abandoned Saturday completely, have multiply unscripted shows and have 1/4 of the replacement shows they sued to have.

        Don’t be fooled by the “number of shows” stats emanating for PR offices. A 24 episode network show still takes three 8-episode cable shows to replace as far s the amount of production…

        taking 199, ratings have collapsed (from poor quality) That’s why they’re producing less at the major networks. They’re not “making lots and lots of money” (though I’m curious to know why it makes you so mad to hear the reverse…)

        I am actually giving you ‘reality”, but you seem to be vested in believing the PR spin. Sadly there’s all too many people like you making decisions in the business, and it’s killing it. :(

    • Tami says:

      Rena you obviously know nothing about this business. The big studios, Paramount, Warner, and Universal are not the ones making the majority of films, of course they are struggling. If they are lucky they might be renting out a sound stage or two or buy a film that is already made and distribute and market it. You have a lot to say on this issue so you really should do your homework. Here is a link to all states that offer a film tax incentive:
      http://www.ncsl.org/Portals/1/Documents/fiscal/2014FilmIncentivePrograms.pdf

      Why do all these states offer an incentive? Because it brings revenue and jobs.

      • Rena Moretti says:

        Tami: Thanks for the response, but excuse me if I can’t take seriously some one who can write: “If they are lucky they might be renting out a sound stage or two or buy a film that is already made”…

        I may “know nothing about the business” but I do know you don’t buy movies by renting soundstages… ;)

        I am well aware of film incentives. That’s why I know they have been on the way down for several years.

        It’s not coincidental that the studios are suddenly so concerned about the same Hollywood crews they cared nothing about for the past 20 years (when they started going to Canada!)

        The reason those states are cutting back is because they found out that all those “studies” that don’t count the cost of the money handed over to Hollywood to the rest of the economy are fallacious and that they is actually a cost to a handout model, not a benefit (otherwise you’d just go deep in debt and hand money over to everything in sight!!)

  7. Rena Moretti says:

    Another sad day for the beleaguered California taxpayer… Now we get to pay more to make bad movies and bad TV shows we won’t watch…

    What economic nonsense!!

  8. the problem that California has that other incentive states do not have, is that they have more takers by thousands than any other state that has an incentive. Therefore the money will run out very fast. Also Louisiana gives 30 percent to any person working on a film or tv project regardless of what state or country they come from. There is no State to compare that too. I have many clients in Los Angeles and come there often but few of my client films are filmed there. They go elsewhere. I will wait to read the rules and regulations for the new incentive. I hope it helps. Many need the help. I have my doubts.
    Corky Kessler

    • Rena Moretti says:

      Don’t be fooled. Under the guise of “saving jobs” this is a handout to big donors. California taxpayers get to pay for part of the labor costs of the Big Studios because other states don’t want to any longer and their actual box-office (as opposed to the “estimates”) and TV ratings keep tumbling down…

  9. Brian says:

    5% for independent films? Lol .. Are you kidding me? So much for rewarding entrepreneurial spirit. Do Indys shot in California not employ California labor? What am I missing ?

    • Rena Moretti says:

      What you’re missing is that this isn’t about workers. It’s about an industry that can’t make good product any longer and needs taxpayer handouts to keep the music going (and the big paychecks to the executives) going a while longer.

      Five years ago, Hollywood studios were just happy to go to other States and couldn’t have cared less about Hollywood crews. Now that the other states are starting to slash the handouts (because they don’t bring the much-vaunted economic benefits) the studios turned to begging their home State.

      Sadly, since our politicians receive the campaign contributions of the aforementioned executives, they obliged.

      • Tami says:

        Rena Hollywood is a business that is very profitable despite your views on the their “product”. No, they don’t need handouts to make a profit but why turn down free money? Other states saw the opportunity to poach this business by offering tax incentives. California is finally responding to the real loss of jobs, 5 years too late in my opinion.
        The push behind this legislation is the Hollywood crews and vendors that have had to travel to other states to find work for the past five years (my family being one of them). True the Studio’s don’t care where they film, the Producers aren’t the ones spending months away from their families. The only states slashing the handouts are N. Carolina and Michigan. There are 39 other states that offer a filming tax incentive. Hollywood is not begging. My hope is that now that the playing field is more level the other states will eventually get rid of the incentives (since they will lose the bulk of their production) and in five years California can let the incentives expire. For the record I don’t think ANY state should offer incentives for Film & Television production.

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