California Governor Signs Expansion of State Film and TV Tax Credit

Jerry Brown Film and TV Tax Incentives
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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.”