Lawmakers Unveil Overhaul of California’s Film and TV Tax Credit Lottery

Kevin de Leon Califronia Film Incentive
Kevork Djansezian/Getty Images

California’s means of awarding film and television tax credits would switch from a lottery system to one based on an applicant’s ability to create new jobs, according to an outline of a series of amendments to pending legislation to expand and extend the state’s incentive program.

The legislation, AB 1839, is heading to the Senate floor after clearing the Appropriations Committee on Thursday. It would quadruple the size of the tax credit program, to $400 million per year from the current $100 million annual allocation.

The chairman of the committee, Kevin de Leon, released an outline of a series of amendments to the legislation, reached this week. One of his major concerns is that the program find a way of phasing out the lottery, which some producers have said makes it difficult to plan ahead if their budgets are left to a random drawing.

The series of changes to the bill include:

— The $400 million per year tax credit would start in fiscal year 2015-16, and run through 2018-19.

— Instead of applicants being assigned tax credits randomly via a lottery, it would be a “competitive process where applicants go through a “competitive process based on job creation.”

— The competitive allocation process would take effect starting in January 2016, with two allocation cycles per year.

–The California Film Commission will create regulations to develop a scoring system for applicants, subject to the approval of GoBiz, the governor’s Office of Business and Economic Development. The scoring system will be based on a “job creation ratio”: aggregate employee compensation divided by the amount of tax credit requested.

— Applicants will get bonus points if they commit to shoot at least 75% of principal photography in the state and to spend 75% of their production budget in California. At a minimum, productions will still have to commit to one or the other. Bonus points also will be awarded for use of California production and post-production facilities.

–Applicants can request a credit in the range of 15% to 20% in the 20 mile radius of Los Angeles, and 20% to 25% outside of that.

–When it comes to job creation, a requirement will be that “if not for the credit, the applicant’s production would not occur in California.”

— Overestimates of job creation will be subject to penalties. A discrepancy of 10% or more will result in a credit reduction, and if it is 20% or more, the applicant will be lock out of the next year’s funding cycle.

–To make sure that like projects are competing against each other, there will be separate pots of credits for independent films, new TV pilots and renewed series, feature films and productions that relocate from out of state.

 

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  1. J Paul Ghetto says:

    “DG” and “LA Producer”: How do your statements about IATSE/labor unions make sense in light of the fact that IATSE and the Teamsters have jurisdiction over most organized labor in this industry within the entire U.S. and Canada? Runaway production hasn’t hurt the unions; to the contrary, it has led to a substantial increase in dues- & initiation-paying membership for them. Yet, while the rank & file workers often work for reduced rates per the seemingly endless variety of (literal) cut-rate contracts (side letter agreements) made with different productions for varied productions and varying budgets in various locales, the union “leadership” doesn’t show true solidarity by cutting their very comfrotable salaries and perks to match the cuts their members must labor under.

    • DG says:

      Sounds like you’re really happy with your union leaders, J Paul.

      I am a withdrawn member of the IA, of which I was a member for 35 years.

      Without fail, I always found that the IA did what was best for itself as an entity but not what was always best for its members. In fact, the “I” in IA is one of its biggest problems today for those craftspeople in the USA. We should have an “NA”–a “national” as opposed to an “international”. What can the IA do or has done to protect your job from going to Canada? Nothing! Because it can’t!

      As a producer now, I am union agnostic. If my budget can afford it, I’m happy to go IA (though the Teamsters are a matter for a different discussion altogether). Unfortunately, more often than not, industry economics dictate what a producer’s picture is worth in the marketplace and the budget has to be backed into that. It may or may not allow one to go union. And the unions need to realize that the fragmentation of the markets has created that situation. Sure, we have more venues now to play on, but each one is worth less than you’d think.

      And this idea of trying to organize pix at $700K or below merely generates laughter.

      There are plenty of skilled film craftspeople who are non-union–even George Dibie said that years ago. In fact, I have found that possession of a card does not necessarily guarantee skill level nor competence at all. Go read William Bayer’s chapter on Unions in BREAKING THROUGH SELLING OUT AND DROPPING DEAD. He wrote that in 1972 and it’s as spot-on today as it was back then.

      Also, it seemed to me that once Tom Short took the presidency, the IA starting giving gains back to the studios. The seniority (group) system was thrown out and an “open season” was declared that allowed anyone to join (gotta get that dues money to pay our reps, whether the member work or not).

      Are unions out of date? No, I believe that workers do need protection from the unscrupulous. But not all producers are evil, either. What is needed is a union that is not integrated vertically into a hundred different locals with different schedules, etc, but one that’s integrated horizontally. That’s another one of the IA’s problems that make them outdated. We need a union that believes in a win-win situation for both worker and producer. This is why I referenced the now-gone NABET-AFC earlier. Yes, the IA is trying its best to come up with these low budget agreements, but their internal structure may well be self-defeating–especially outside of Hollywood.

      Getting back to this new state incentive program, as I said, I’m glad that California has something to compete better with other states. But it’s clearly geared toward the needs of the studios and the IA. Before, an indie had a chance of being randomly selected in the silly lottery system. That’s not likely now under these revisions. But if it keeps more tent-poles in the state, then that’s good and the unions and the studios will have succeeded in their goals. But will it…really?

    • LA Producer says:

      It’s just another way for the labor unions to “police” and bully smaller productions into signing. Meanwhile, more producers and production companies are finding ways to shoot non-union and more union labor are willing to work under fake names because they have to eat and pay the rent. The union “fat cats” feed off of the high fees they extort from producers. Labor unions are outdated and completely unnecessary in today’s world as jobs dry up and leave the country, the last thing we need are more barriers for employers.

    • J Paul Ghetto says:

      typo: “comfortable”, not comfrotable.

  2. Jeremiah Clements says:

    The bureaucratic mess u guys are talking about is vastly over exaggrated here are the resaons why. 1 mayor garcceti has cut alot of red tap for aquiring film permits. Goverment buildings can be used for free and in fact film permits are now free. Plus their are dozen little things they did to make things easier for filmmakers shoot. 2. It clearly said in the article that independent films tv poilts will also qualify they will be put into a diffirent pot. 3. The infrastructure in the so called runaway productions states are weak and pathetic. I know first hand because I worked In those states. These states dont have the infrastructure, the talent pool or the vast locations as california. The only city and state that is close and even that is a distant 2 is new york thats it.

  3. relocated AD says:

    After 10 years of LOS ANGELES CITY/COUNTY AND THE STATE OF California’s Governments ineptitude, negligence and/or complicity in decimating L.A’ s film/TV business, and now this quagmire of beauracratic razor wire, you can only come to one conclusion .People with power want it to be this way…..can you explain all of Wall street, the Stock exchange and investment banks just inch by inch step by step up and leaving downtown Manhattan over a 10 year period for other states because of tax incentives….it’s unimaginable that it could happen with no one a dressing it ….

  4. Jeremiah Clements says:

    All u haters shut the hell up. I work in the film and tv industry and this bill is what the state of cali needed. The are offering almost the same money as new york and what they want in return is for creation of the most jobs as possible. You idiots act like thats a bad thing. It only makes sense that they want most of the productions to stay here. Plus the productions get extra incentives and perks if they do. Most producers already came out and said they prefered to shoot in California and the only reason why they dont is beacause of no tax credit. Now they have 400 million to work with. So like I said shut the f up

    • DG says:

      Jeremiah, it’s the producers who create the projects you work on. I work both above & below the line, so believe me when I say that I’ve experience the gamut. I *am* glad that California passed a better program of *some* kind–but, as MJ said below, they have turned it into “a bureaucratic nightmare that is not business friendly”.

      This program will probably work-out fine for the majors who may now be inclined to keep some tent-poles in state, but it virtually guarantees that independent producers working on lower budgets will either move away or fly below the radar. [And if it takes some major projects away from other states, those states might find it in their hearts to treat the indies a little more kindly now. (You heard me NM).]

      While I appreciate the fact that the lottery system was axed, I do not believe this was the correct alternative route. I smell IATSE bosses having influenced this–their strings being pulled by the majors.

      As I said before, time to jump states–or maybe it’s time to form another NABET-AFC in town. (Any of you old enough to know what I’m talking about there?)

    • LA Producer says:

      That’s right, you “work” in the business. You don’t make business decisions as to where to film with your money. That’s the problem, this will be a flop because it was designed by people who are not making those decisions. It was designed by labor unions whos work force and revenue are drying up, especially in California. This will make a tiny impact on the industry, other state programs are far superior with much less bureaucracy and that allow producers to plan and make business decisions. FAIL!

  5. LA Producer says:

    Big win for labor unions, their lobbyists and the politicians in their pockets. These decisions were clearly not made by business principals who decide where to produce their movies. Are you guys out of your minds? Same kind of thinking that is driving this state and the country into the ground. California just gave producers one more reason to take productions out of state. Brown and his gang of idiots won’t be happy until everyone in California is gone. Seriously, all of that build up for this?

  6. Richard Middleton says:

    15% – 20% tax credit, even with the added benefit of staying close to home for actors and other ATL personnel, will not be financially competitive with the other better programs around the country. A tepid effort that will barely stem the tide of runaway production.

  7. DG says:

    It’s clearly what the unions wanted, to gain control over the “job creation” information. This will benefit the studios, not the indies. No surprise here, really. But definitely going out of state now. This is even making Nevada & Utah’s programs look attractive.

  8. MJ says:

    Hey Georgia, Louisiana and NY you have nothing to worry about. California did what we all expected, turned the program into a bureaucratic nightmare that is not business friendly. Way to go CA, keep up the good work.

  9. SHAFTRA says:

    And the “race to the bottom” begins…

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