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Assembly Committee Greenlights Expansion of California’s Film and TV Tax Credit

Legislation to expand California’s incentives for movie and TV production cleared the Assembly’s Revenue and Taxation Committee on Tuesday, as lawmakers try to respond to the flight of production to other states with a sweeter offering of tax credits.

There had been few doubts that the legislation, AB 1839, would make it out of the Revenue and Taxation Committee, whose chairman is Assemblyman Raul Bocanegra, who co-authored the bill along with fellow Democratic Assemblyman Mike Gatto. The vote was 8-0.

The legislation would expand the incentive program to cover  feature films with budgets over $75 million as well as new TV drama series, addressing the loss of such productions to other states. The legislation also has a special 5% credit for music scoring and editing, and Gatto said that they were working on additional provisions for post-production, as well as visual effects.

But Bocanegra and Gatto have yet to specify how much to expand the tax incentive program, currently at $100 million per year. While there has been some suggestion that the state needs to match New York’s program, at about $420 million per year, they have been waiting in part to get a clearer picture of the state’s budget situation.

“We want to make sure we get it right,” Gatto told Variety after the hearing, adding that they are still having discussions with other lawmakers about the amount to seek and what the state finances will bear. Gov. Jerry Brown’s revised budget proposal left a tiny surplus after paying off past debt and making up for cuts made during years of shortfall. “We just need to be competitive” with other states, Gatto said. “We want to have a number that is significant.”

The legislation would expand credits starting on July 1, 2016, and extend the program through 2021.

The bill could face hurdles in the Senate, where Sen. Lois Wolk, chair of the governance and finance committee, has expressed opposition.

Yet about two dozen union members, studio representatives and local officials spoke out in support of the legislation, describing an ever more dire situation in which rank-and-file crew members are forced to go out of state for employment.

“We can either fight back, or we can watch them walk away into the sunset,” said Gary L. Toebben, president of the Los Angeles Area Chamber of Commerce.

Some advocates of expanding the program pointed to summer megapics like “Godzilla,” which shot for just five days in San Francisco before moving on to Vancouver, and “Dawn of the Planet of the Apes,” which shot for just two days in San Francisco before moving to Baton Rouge, where filmmakers recreated city streets for the remainder of the filming.

Other union representatives described the threat of other cities and countries building production infrastructure, particularly when it comes to such things as visual effects and music scoring. Earlier on Tuesday, members of the American Federation of Musicians delivered a petition with 12,000 signatures to Lionsgate, calling on the company to stop offshoring music scoring work.

A representative from the California Teachers Assn., Seth Bramble, expressed opposition, arguing that the state can’t afford to extend credits after years of cuts to education. “What portion of the budget should we cut in order to have this credit?” he asked.

Assemblyman Adrin Nazarian also presented legislation to provide a five-year, 25% tax credit for post production work. That legislation, AB 2700, also was brought before the committee.

Gatto also said that they would seek a provision that calls for federal measures to address whether other countries including Canada are engaging in unfair trade practices in the enticements they offer for certain aspects of production like visual effects.

The legislation next moves to the Assembly Appropriations Committee, which is chaired by Gatto. A complaint about California’s current incentive program has been that funds are distributed by lottery, making it difficult for producers to determine if they will obtain a credit after applying. Gatto, however, said that it was it was unlikely that an expansion of the program would allow for it to do away with the lottery, given the demand.

“I can’t ever imagine it happening,” he said. “The tax credit in California will always be oversubscribed.”

He also said that despite the vote on Tuesday, there is still a ways to go before the bill, with more than four dozen co-authors, reaches Brown’s desk. “The number of co-authors does not paint an accurate picture of how much of a slog it will be,” he said.

 

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