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Expansion of California Tax Incentives Clears First Assembly Committee

Legislation to expand California’s tax incentives for movie and TV production moved forward on Tuesday, as the state assembly arts and entertainment committee unanimously gave their approval to the bill that would, among other things, make big budget motion pictures eligible for the credit.

The Assembly’s Arts, Entertainment, Sports, Tourism and Internet Media Committee cleared the legislation 7-0 after a parade of crew members, union officials, film commissioners and some studio officials spoke out in support and warned of further flight of jobs from the state is nothing is done.

Support had not been in doubt, and the legislation now moves to the Assembly Revenue and Taxation Committee. Although more than 70 co-sponsors have signed on, a question it can pass through committees and various amendments and still be substantial enough to have an impact. Gov. Jerry Brown also has not said whether he supports it.

And in testimony before the vote, a representative of the California Teachers Assn. spoke in opposition, saying that “we are losing counselors, nurses, this year, maybe not so many teachers, but [cuts are] still going on.”

“The legislature should this very carefully about any and all tax credits,” said Estelle Lemieux of the CTA, noting the impact they have on the general fund after a period when education suffered massive cuts in the state. The teachs union has opposed previous efforts to renew the credit.

The bill, the California Film and Television Job Retention and Promotion Act, sponsored by Assemblyman Raul Bocanegra and Assemblyman Mike Gatto, would renew California’s tax incentives so it runs an additional five years, through the 2021-22 fiscal year.

The legislation would lift a $75 million budget cap on productions that are eligible for the program. Projects would still be limited to $100 million in expenditures that would qualify for the tax credit, but lifting the budget cap is seen as a way to lure back tentpoles and other megapics that have gone to other states like Georgia, Louisiana and North Carolina.

In addition, all network and cable dramas would be eligible to participate. The current program limits participation to basic cable dramas.

Assemblyman Richard Bloom said that while there are misgivings about tax credits in general, the reality is that other states have expanded their programs to the point where Gov. Andrew Cuomo (D-N.Y.) “brags” about taking jobs from California.

“This is not something we want to do…we have to decide whether to compete,” he said, even with other states that have “questionable practices” in their offering of generous incentives. Otherwise, “we can kiss the industry goodbye,” he added.

Other lawmakers on the committee, including Ian Calderon, its chairman, said that without industry jobs producing tax revenue, there won’t be the budget to fund education.

Gatto said that they will work with the opposition “to see if we can get a point where we can address all of those concerns.” He said that the legislation should not be viewed as a “zero sum game,” but reflects the realities of how California collects it revenue, dependent on payroll income taxes.

“The ripple effect through the overall economy is powerful,” he said. Bocanegra cited a recent study from the Southern California Assn. of Governments showing that for every $1 of tax credit certificate issued, $1.11 was returned to state and local governments.

In an effort to draw support from lawmakers outside of Southern California, the legislation would give a 5% increase in the tax credit done outside of the Los Angeles zone. The current among is 20%.

There also would be a 5% “bump” for productions that do music scoring and editing in California, an effort to lure back post production that has also left to other states.

But the key measure of whether California will be able to compete with credits in other states will be how much money is allocated each year for the program. Bocanegra and Gatto have not inserted an annual allocation for the tax credit program into their legislation, a strategic move to gauge the state’s budget condition later this spring and to prevent it from being whittled down as it proceeds through committees.

“We will have that firmed up, in very short order, in the next few months,” Bocanegra said.

The state’s $100 million per year is depleted on the first day of a lottery held each year, while New York allocates about $430 million per year in an application process without a lottery.

Bloom suggested that the annual figure should be “in excess” of New York’s to have an impact.

Industry professionals and labor leaders spoke of the urgency in passing the legislation, describing a dire situation in which crew members increasingly are forced to look elsewhere for jobs.

“If the present trends continue, and we fail to compete, this industry will not be part of the state anymore,” said Bruce Doering, national executive director of the Intl. Cinematographers Guild, Local 600.

Some of the first speakers of the morning highlighted the flight of production from areas outside of Southern California. Jim Beaumont, a studio technician from the Bay Area, said that a steady stream of movies used to come to San Francisco to shoot, lured by its scenic beauty.

“Nowadays, they just go where the rebate is. They don’t care what it looks like,” he said. He cited the case of the latest “Terminator” movie, which will shoot in San Francisco for a week then move to Louisiana for the bulk of the production.

 

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