Over three dozen California legislators are urging Governor Gavin Newsom to exempt the state's film and television production incentive program from a recently implemented cap on corporate tax credits, expressing concern that the program will be "significantly kneecapped" without intervention.
The lawmakers conveyed their concerns in a letter addressed to Governor Newsom, State Senate President Pro Tempore Monique Limón, and Assembly Speaker Robert Rivas. They emphasized the need for a resolution before the end of the year to ensure production companies receive the full value of tax credits earned for creating jobs in the entertainment sector. The letter argues that tax credits for motion picture and television production are distinct from those for research and development, and that the new legislation imposes short-term budget savings by potentially reneging on commitments to the industry and its workforce.
This development follows Governor Newsom's signing of the state budget, a $351.7 billion spending plan that introduces new limitations on corporate tax credits. The budget provision restricts the maximum annual tax credit claim to $5 million or 50% of a company's state tax liability, whichever is greater.
Hollywood industry representatives had previously warned the governor's office that these restrictions could negatively impact the state's production incentive program, which was significantly enhanced last year with an annual cap of $750 million. The Southern California film and TV industry has faced challenges recovering from the pandemic, the 2023 dual writers' and actors' strikes, and the relocation of production to other states and countries.
Assemblyman Rick Chavez Zbur, chair of the Assembly Democratic Caucus, stated that members who voted for the budget bill believed there was an exclusion for the film and TV tax credit program. He expressed that the new cap was not fully understood and effectively reverses the progress made in incentivizing production. Zbur, a co-author of last year's enhancement bill, warned that these seemingly minor changes could lead to significant job losses if not rectified.
The recent amendments to the film and TV tax credit program, which included expanded eligibility, were a result of intense lobbying from studios and industry workers advocating for increased funding to retain production within California. Last week, the California Film Commission reported that the enhanced program was projected to generate $6.6 billion in direct production spending and support over 34,000 cast and crew jobs across 170 film and TV shows receiving incentives this year.
