California Lawmaker Mike Gatto Introduces Bill to Expand State’s Production Incentives

Legislation Would Make Movie and TV Credits

Califronia Tax Incentives Sacramento Capitol
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Assemblyman Mike Gatto on Monday introduced legislation to expand California’s film and TV production tax credit, including measures to make the credit permanent and expand the availability of incentives to big-budget blockbusters.

Gatto and state Sen. Kevin de Leon said in October that they planned to introduce the legislation, designed to address increasing concerns that California is losing its production base to other states and countries.

Gatto’s bill, AB 1435, would set no expiration date for California’s tax credit, making it permanent. Since it was introduced in 2009, it has been renewed twice but is due to expire in 2015. Producers have complained that it has been difficult to plan ahead because of the uncertainty of the renewals and of the current lottery system in which qualified productions are selected at random.

Gatto’s legislation would also raise the cap on the amount of tax credits that can be distributed each year, currently set at $100 million, although Gatto has not yet determined what the increased figure would be.

Another big complaint against the current program is that it limits the incentive to productions below a budget of $75 million: Other states and countries have been able to capture recent big-budget movies like “Iron Man 3,” which shot in North Carolina, and “The Hunger Games: Catching Fire,” much of which was lensed in Georgia. Gatto’s bill would lift that budget cap and instead place a limit on qualified expenditures as a way to ensure that no one production gobbles up the available credit. His legislation places a cap on the first 20% of expenditures totaling $100 million.

The legislation also would expand to cover pilots for broadcast and cable networks, and a certain percentage of the incentive money would be set aside to lure or retain post-production work.

Other provisions of his legislation include an additional incentive for productions that invest in goods and services provided by in-state residents, as well as additional credits for productions in “underutilized” areas, defined as a rural area or city with a certain unemployment level. It also calls for providing up to a 5% tax credit for investments in infrastructure like soundstages and post-production facilities.

Gatto’s legislation still needs to be updated with additional figures, like the increased cap on annual incentives, and those numbers are expected to be determined as the state’s budget picture becomes clearer by the spring. Gatto is chairman of the Assembly appropriations committee.

Assemblyman Raul Bocanegra, chair of the Assembly revenue and taxation committee, is expected to complete his own tax credit legislation soon and unveil it later this month.