Gov. Gavin Newsom on Monday called for a significant expansion of the state’s film and TV tax incentives in the face of mounting evidence that producers are fleeing California in search of cheaper locales.
Newsom said in a statement Monday that he favors expanding California’s current Film and Television Tax Credit Program from $750 million to at least $1 billion annually.
Notably, Newsom’s proposal would include credits for actors and other above-the-line talent and extend the tax credit through 2040, according to the statement. That would make California’s program more competitive with those of other states such as Georgia and New York that allow tax credits to offset the cost of actors’ salaries.
If approved by the state Legislature, the credit would be the country’s largest capped film and TV tax credit, Newsom’s office said.
“We’re the capital of entertainment and we’re going to keep it here,” Newsom said in the statement. “Through this expansion, we will maintain the momentum and success of our historic expansion last year.”
Newsom’s announcement comes as the outgoing California governor and possible presidential candidate is looking to burnish his image as a champion of Hollywood as the state is increasingly losing production to other hubs in the U.S. and abroad, where tax incentives are higher and production costs lower.
The proposal puts pressure on fellow Democrat Xavier Becerra, who is widely expected to be California’s next governor, to take up the mantle of helping Hollywood at a time when the state faces rising financial pressures.
Newsom expanded the program last year, when the annual credit was raised from $330 million to $750 million through 2030. Since then, the credit has generated more than $8 billion in direct production spending and over 43,000 jobs, according to the governor’s office.
Newsom also recently signed California’s first stand-alone postproduction credit to bring back jobs for the industry’s editors, sound mixers, composers and visual effects artists.
With a budget of $10 million, the program will allow a 35% to 50% credit on qualified expenses related specifically to postproduction work done in California, even for productions that don’t shoot in the state.
Despite the expanded incentives, local film and TV production in the Los Angeles area continues on a downward trend.
On-location shoot days in the Los Angeles area fell nearly 5% between July and September from the same period a year earlier, and were 29% below the five-year average, according to FilmLA, the nonprofit group that handles film permits for city and county.
Newsom said the expanded credits would address some of California’s limitations.
For example, the new incentives would allow companies that commit to shooting two different productions in California to get a 5% boost in credits. Independent productions would be eligible for $100 million in annual funding, up from $26 million.
Steve Kang, president and chief film liaison for the city’s Board of Public Works, welcomed the proposed enhancements.
“This is a huge win because the current expanded program is helpful, but there were a lot of exceptions and caveats, which limited its full potential,” Kang said.
Others welcomed Newsom’s proposal as “a good start,” but said more was needed to keep the industry in Southern California.
Many productions that shoot locally still face logistical and operational problems with permitting and specific shoot requirements, said Cale Thomas, policy legislative director for Stay in L.A., a grassroots coalition.
“We just need to make it cheaper and easier to shoot here,” Thomas said. “A multifaceted problem takes multifaceted solutions.”
Scott Budnick, a producer of the successful “The Hangover” franchise who lobbied for the state’s enhanced film tax credits last year, also praised Newsom’s proposal, but said the state needs to remove a cap on funding that has created significant hurdles for filmmakers.
“I feel very strongly that the biggest problem with the current credit is because we have a cap,” Budnick said. “It makes every piece of the credit 10 times harder.”
The effort in California comes after congressional leaders introduced the Motion Picture, Television and Entertainment Revitalization Act in September. The bill would establish a 20% federal tax credit on U.S. labor for eligible film and TV productions, including postproduction and visual effects work.
If the federal incentive passes, the hope is for U.S. productions to stack incentives and make the U.S. more attractive for major studio shoots. The federal incentive, however, also is likely to raise the competitive stakes for California as other states compete for Hollywood’s business.
“This is about protecting the future of an industry that has helped define California for generations,” Assemblymember Rick Chavez Zbur (D-Los Angeles) said in response to Newsom’s proposal. It would ensure “the next generation of creative workers and small business owners can raise their families right here at home,” he said.
Newsom has faced tense relations with Hollywood. Many in the industry remain angry with Newsom over his role in the Paramount acquisition of Warner Bros. Discovery. Newsom was instrumental in behind-the-scenes lobbying to get state Atty. Gen. Rob Bonta to abandon the court fight challenging Paramount-Skydance’s takeover of the legacy studio, which is expected to lead to widespread layoffs.
Newsom’s support for the deal came after Paramount threatened to move operations to Tennessee or Texas, placing more pressure on Bonta to come to an agreement and blunt efforts to lose California’s signature industry.