California Assembly Passes Expansion of Film and TV Tax Credit

California State Capitol Tax Incentives
Justin Sullivan/Getty Images

An expansion of California’s film and TV tax credit overwhelming passed the state Assembly on Wednesday, legislation that would for the first time allow big-budget features and most one-hour TV shows eligible for incentives.

But the legislation, AB1839, passed 62-0 with a key ingredient undetermined: Just how much the state will allocate each year for the incentive program, a figure that will determine the extent to which California will be competitive with dozens of other states offering generous tax credits.

Although it is somewhat unusual for legislation to clear the Assembly without such a figure, the bills principal authors, Assemblymen Raul Bocanegra and Mike Gatto, both Democrats, said that they wanted to wait a few more weeks to get a better sense of the state budget. That should be soon, as the deadline for passing the state budget is June 15.

“We felt that, after a lot of back and forth, the most responsible thing to do is to wait until California’s budget picture gets clearer,” Gatto said in an interview.

California’s current incentive program provides $100 million per year for tax credits, but that money is well short of demand. Proponents of expanding the program have often pointed to the need to at least be competitive with New York, which offers about $420 million per year in its program.

The legislation would lift a cap on the current incentive program, currently set at movies budget up to $75 million, allowing for bigger-budgets features to qualify. It will limit incentives to the first $100 million of qualified expenditures.

The legislation also will expand eligibility to include premium cable, network and Internet dramas, as a way to lure back production of those shows that have migrated to other states. Additional incentives will be offered for such things as visual effects and film scoring, as well as productions that shoot in the state but outside the Los Angeles area.

The legislation will next head to the state Senate, which is expected to take it up in August.

The legislation would renew the incentive program to extend through 2022. Although it would not take effect until 2016, Gatto is offering up an amendment with would allow the California Film Commission to start issuing credits under the expanded program on Jan. 1, 2015, although producers could not start redeeming them until July 1, 2016.

On the Assembly floor, Gatto addressed some of the criticisms of tax credits, noting that “it is impossible to calculate the benefits [of retaining] a healthy flagship industry.” He cited not only jobs but the economic effect of tourism and of having Hollywood as a world cultural capital. He also said that “it is impossible to assign a financial figure” to having families able to stay together because a parent isn’t forced to seek employment for productions out of state.

Assemblyman Tim Donnelly, a Republican running for governor, supported the legislation but said that it didn’t go far enough. He proposed that it lift the annual allocation for credits so that the film commission wouldn’t have to conduct an annual lottery to pick each year’s recipients. The lottery for the coming year will take place on Monday, and it is expected that the funds will be depleted quickly because demand far outstrips supply of credits.

“Other states have stolen away this industry,” Donnelly said on the floor of the Assembly. “We are now Hollywood in name only.”

Update: The California Film & Television Production Alliance, an organization of studios, unions and other groups to lobby for increased incentives, said in a statement,  “The strength of the unanimous vote demonstrates the Assembly Members’ clear understanding of the vital economic importance of the motion picture industry to California and their determination to return this state to a competitive position.”

Los Angeles Mayor Eric Garcetti said, “This unanimous vote of support from the Assembly provides strong momentum as we look ahead to the Senate and the Governor’s desk. California needs jobs, and this legislation would generate thousands of middle class jobs across our state.”