Lawmakers Unveil Overhaul of California’s Film and TV Tax Credit Lottery

Kevin de Leon Califronia Film Incentive
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California’s means of awarding film and television tax credits would switch from a lottery system to one based on an applicant’s ability to create new jobs, according to an outline of a series of amendments to pending legislation to expand and extend the state’s incentive program.

The legislation, AB 1839, is heading to the Senate floor after clearing the Appropriations Committee on Thursday. It would quadruple the size of the tax credit program, to $400 million per year from the current $100 million annual allocation.

The chairman of the committee, Kevin de Leon, released an outline of a series of amendments to the legislation, reached this week. One of his major concerns is that the program find a way of phasing out the lottery, which some producers have said makes it difficult to plan ahead if their budgets are left to a random drawing.

The series of changes to the bill include:

— The $400 million per year tax credit would start in fiscal year 2015-16, and run through 2018-19.

— Instead of applicants being assigned tax credits randomly via a lottery, it would be a “competitive process where applicants go through a “competitive process based on job creation.”

— The competitive allocation process would take effect starting in January 2016, with two allocation cycles per year.

–The California Film Commission will create regulations to develop a scoring system for applicants, subject to the approval of GoBiz, the governor’s Office of Business and Economic Development. The scoring system will be based on a “job creation ratio”: aggregate employee compensation divided by the amount of tax credit requested.

— Applicants will get bonus points if they commit to shoot at least 75% of principal photography in the state and to spend 75% of their production budget in California. At a minimum, productions will still have to commit to one or the other. Bonus points also will be awarded for use of California production and post-production facilities.

–Applicants can request a credit in the range of 15% to 20% in the 20 mile radius of Los Angeles, and 20% to 25% outside of that.

–When it comes to job creation, a requirement will be that “if not for the credit, the applicant’s production would not occur in California.”

— Overestimates of job creation will be subject to penalties. A discrepancy of 10% or more will result in a credit reduction, and if it is 20% or more, the applicant will be lock out of the next year’s funding cycle.

–To make sure that like projects are competing against each other, there will be separate pots of credits for independent films, new TV pilots and renewed series, feature films and productions that relocate from out of state.