How California legislators aim to sweeten film tax credits for Hollywood

California legislators are proposing to increase its film tax credit to cover up to 35% of qualified expenditures for movies and TV series shot in the Los Angeles region, as the state attempts to lure back production.

For productions shot outside of the region — which stretches out to Ontario International Airport, Agua Dulce, Piru and Pomona — there will be an additional 5% to the base tax rate, which means those projects could get a credit of 40%.

These new provisions are part of dual bills in the California State Assembly and Senate aimed at modernizing the state’s film and TV tax credit program to make it more competitive with other states and countries, said Assembly Member Rick Chavez Zbur, one of the co-authors. He called it a “jobs bill.”

“Our advantage here is we’ve got the soundstages, we’ve got the skilled workforces,” he said. “But all the other states are making investments. The longer we go without making our program competitive, what we’re doing is we’re basically helping other states with workforce development programs that make them more and more competitive with us.”

California currently provides a 20% to 25% tax credit to offset qualified production expenses, such as money spent on film crews and building sets. Production companies can apply the credit toward any tax liabilities they have in California.

Boosting the tax credit to 35% brings California more in line with the caps set by other states that have successfully lured Hollywood productions in recent years. Georgia, for example, provides up to a 30% credit for productions.

The bump also was an effort to help California stay competitive with other states, such as Georgia, which allow all expenditures to be covered by the tax rate. Since California’s tax credit will apply only to below-the-line costs, increasing the amount beyond what’s offered in Georgia will allow the Golden State’s program to “be roughly equivalent,” Zbur said.

In addition to the tax credit increase, the proposed legislation would expand the criteria for projects to qualify for an incentive.

Under this proposal, qualified productions now would include animated films, shorts and series, as well as scripted series in which episodes run at least 20 minutes and certain “large-scale competition shows” that generate a lot of jobs, such as “Dancing With the Stars,” Zbur said. (Traditional reality shows, game or talk shows or documentary TV programming won’t qualify.)

Some aspects of the program are still being negotiated, including the criteria for independent films and ways to encourage the employment of underrepresented communities.

The new details come about a month after Zbur, Assemblymember Isaac Bryan and state Sen. Ben Allen first announced the two bills, which they are co-sponsoring. At the time, the legislators said the details of the bills were still being worked out by stakeholders.

Gov. Gavin Newsom last year proposed an increase to the state’s film and TV tax credit program. That proposal would more than double the money allocated annually to the program in an attempt to help California better compete with other states’ tax incentives.

The proposed $750 million will have to be passed as part of the state’s budget adoption process; the legislators’ bills lay out the terms of how that amount will be spent and allocated.

California’s film and TV tax credit program has created nearly 200,000 jobs and generated $26 billion in statewide economic activity, Allen said during a February press conference. But more projects apply to the program than there are awards, and more than 75% of projects that get rejected for a tax credit go elsewhere, he said at the time.