California Film Commission Unveils Details of How Tax Credits Will Be Awarded

California Tax Credits Film Incentive
Chuck Kerr

When Gov. Jerry Brown signed into law last September a dramatic expansion of the state’s film and TV tax credit program, it was in many ways just the start of the new effort to lure production back to California.

On Thursday, the California Film Commission unanimously passed draft regulations that will govern how the $330 million in annual tax credits will be disbursed. The regulations now go to the state Office of Administrative Law for final approval, so there still could be changes.

The legislation more than tripled the amount of tax credits available to movie and TV projects, as well as expanded eligibility to include big-budget feature films, one-hour drama series and TV pilots. But perhaps the biggest change was in the way applicants will be awarded credits.

A lottery system, in which the prospects for winning a tax credit was left to chance, is being replaced by a “jobs ratio,” a competitive ranking system in which money would go to projects that promise a proportional return in employment.

So how will that ratio work? The ratio will be the amount of a project’s planned qualified wages divided by the amount of the tax credit they are seeking.

Instead of all producers competing against each other, the applicants will seek credits based on their category of production. The legislation actually established the allocation to each category: 40% will go to new TV dramas, movies of the week, miniseries, and recurring TV series; 35% will got to features; 20% will go to relocating TV series; and 5% will go to independent features.

According to the draft regulations, applicants also will be able to boost their ratio based on whether they will do visual effects work in California, whether they do a bigger share of principal photography at production facilities in the state, and whether their shooting takes place outside the Los Angeles zone. That last element is considered a sweetener to ensure that more parts of the state benefit from the incentives.

Here’s where it gets a bit complicated: This year, the film commission will phase out the old lottery program and phase in the new jobs ratio program.

So on April 1, the film commission has scheduled its final lottery for $100 million in tax credits, with the old rules still applying. It’s expected that a big portion of the credits will go to renewed TV series that are awarded credits throughout their run. No studio features are eligible for the final lottery, only independent projects.

That will leave $230 million in credits left for the 2015-16 fiscal year. So the film commission will launch the new jobs ratio program in May. The application period for TV projects and relocating TV series will be May 11-17, while the application period for other categories will be some time in the summer, with the dates to be announced. The film commission says there will be two application periods during the year for each type of project.

By next year, the jobs ratio program will be in full swing, with $330 million awarded annually — working out to $132 million for TV projects, $66 million for relocating TV series, $115.5 million for features and $16.5 million for independent projects. The expectation is that the program will lure five to six major feature films, even big-budget tentpoles, which have all but disappeared from studio backlots. With the jobs ratio in place, a big-budget tentpole would have an advantage, especially if a studio sweetens its plans with the commitment to do visual effects work in state.

The credit is set at 20%, but producers are eligible for an additional 5% “uplift” if they shoot outside the Los Angeles zone, commit to music scoring or music track recording in state or to do visual effects in California.

Attorney Ken Ziffren, Los Angeles’ film czar, and Rajiv Dalal, director of the mayor’s office of motion picture and film production, are contacting studio executives to explain the program and to pitch the idea of shooting in California. Mayor Eric Garcetti soon plans to announce the launch of a marketing campaign, Greenlight Hollywood, to spread the message about the expanded credits within the entertainment community.

There are plans to make the production push part of a public marketing campaign for the city, with a rollout expected in March or April. Also in the works is a plan to boost funding for production services in some city departments, like Recreation and Parks, which is part of an overall effort to streamline the production process in the city.

In April, Dalal appeared before the Ad Hoc Committee on Film & Television Production to outline ways to make filming more efficient on city streets and properties —  everything from improving computer systems to reducing incidents where property owners demand payment in exchange for cooperation as a crew shoots in a public area. The City Council in December approved a number of steps, like doing an inventory of city-owned filming locations, and extended a waiver of certain city fees for filming on municipal property.

While there are high hopes that the expanded credit will translate into a noticeable production uptick this year, certain categories are not eligible, like animated features.

Talkshows are ineligible as well. Although Southern California lost “The Tonight Show” to New York, James Corden recently announced that he would stay in Los Angeles when he takes over “Late, Late Show.” The production could qualify for a credit via the California Competes program, aimed at luring all types of business to the state or retaining them.

As for whether Los Angeles will go after “The Daily Show,” what with the departure of Jon Stewart, a lot will depend on the desire of his successor.

“We don’t have the weapons to work with, but we will do what we can,” Ziffren said.