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Calif. Extends Film and TV Tax Credit

Calif. Extends Film and TV Tax Credit
Photo Source: Getty Images

Hollywood is celebrating the extension of a lucrative incentive program that will see the entertainment industry in California reap another $200 million in taxpayer-funded benefits.

Just hours before the signing deadline, Gov. Jerry Brown (D) Sunday approved two identical bills, A.B. 2026 and S.B. 1197, that will extend the $100-million-a-year California Film & Television Tax Credit Program to July 2017. Before the extension was signed, the program was set to expire in the fiscal year 2014-15, with the last credits being allocated in July of 2014. A coalition of labor groups, including SAG-AFTRA, the Directors Guild of America and others, issued a statement praising Brown and Assembly Member Felipe Fuentes, D-Los Angeles, and Sen. Ronald Calderon, D-Montebello, the authors of the two extension bills.

"[T]housands of our members who live in California and want to work in California are dependent upon this state remaining competitive. We know firsthand that this program has created employment opportunities for them, and with that, health and pension coverage for them and their families," stated the labor groups, which also included the International Alliance of Theatrical Stage Employees, International Brotherhood of Teamsters, Local 399, Laborers’ International Union of North America, Local 724, Professional Musicians Local 47 and the Recording Musicians Association.

"We commend the legislature and Governor Brown for recognizing that the motion picture business is an integral part of the economic and cultural powerhouse that has been California during the last 100 years and that this is just as important a part of this state’s future as its past."

Motion Picture Association of America Chairman Chris Dodd called the extension a "big step forward."

“The two-year extension of the state’s production tax credit will keep California competitive for tens of thousands of production-related jobs," he said in a statement. "This is an important victory for California’s economy, our national economy, and the hardworking men and women who comprise the film and television industry.”

According to Fuentes' office, of the $400 million in tax credits allocated since the program began, only $229,139 has actually been claimed for tax credits.

That's because a producer can only claim the tax credit after a film or television series wraps and an audit proves that its budget was actually spent in California.

Proponents claim that the tax credits have resulted in $3.9 billion in economic activity in California—$728 million of which have been spent on wages to create an estimated 40,000 jobs, according to Fuentes's office. Moreover, an additional 172,000 individuals are estimated to have received daily employment as background extras.

Opponents of the program have pointed to a June analysis prepared by the non-partisan Legislative Analyst’s Office that found the program “appears to result in a net decline in state revenues.”

There's a running debate among economists about the effectiveness of incentive programs for the entertainment industry. Still, many states are engaging in an arms race of sorts, augmenting their programs with each passing year. New York, for instance, allocates more than $400 million a year in order to attract film and TV projects.

In a statement, Fuentes took a shot at New York for trying to lure productions away from the Golden State.

“The entertainment industry is one of the signature industries not only in Los Angeles, but throughout the State of California," he said. "New York would never let their signature industry— the financial industry—leave, and I believe we can’t afford to let our signature industry walk away from our great state.”

Leo T. Reed, secretary treasurer of Teamsters Local 399 and Gary Toebben, president of the Los Angeles Chamber of Commerce, also issued statements praising Brown for signing the extension.

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