$750 Million Tax Incentive Proposal by California Governor Gavin Newsom Could Spell Relief for Hollywood

On October 27th at Raleigh Studios in Hollywood, California Governor Gavin Newsom announced a proposal that would vastly increase The Golden State’s film and TV production incentive program from the current $330 million to a more competitive $750 million. If approved, the expanded program would go into effect July 1, 2025. 

As Film LA’s Q3 Film Production Report revealed, production in California has suffered a slow-down, dropping below levels seen in the same quarter of 2023. This proposal could be a much-needed solution to keep more production in Hollywood. 

Along with California’s unmatched crew expertise, premier infrastructure, and leadership in entertainment technology, Governor Newsom’s plan to expand the state’s Film/TV Incentive Program to $750 million annually is a bold initiative. This increase is intended not only to retain production within California but also to enhance the state’s appeal as a leading destination for projects from other production hubs. Currently, the program offers $330 million each year, with an additional $150 million set aside for projects on newly built or renovated soundstages. 

Quantifying the exact increase in production may be challenging, but the numbers suggest a strong potential impact. Doubling the funding should deliver significant results. Data from the Los Angeles Economic Development Corporation indicates that for every dollar approved under California’s program, there is a return of $24.40 in economic output, $16.14 in GDP, $8.60 in wages, and $1.07 in state and local tax revenue—clear indicators of the economic benefits that could grow with this expanded funding. 

Apart from Newsom's incentive expansion proposal, beginning July 1, 2025, California’s incentive will shift to a refundable tax credit available to all producers, ranging from 20% to 25% with potential uplifts up to 29%.

This transition is key for California to remain competitive with other incentive locations, as it opens access to a broader range of applicants. However, even with this increased funding, California faces strong competition from states like Georgia, Illinois, and Massachusetts, which operate without an annual cap, as well as from countries such as Canada, Australia, and the UK, alongside anticipated enhancements in Nevada, Texas, and Germany’s incentive programs. 

Despite these positive changes, California remains at a disadvantage in it's exclusion of ‘Above the Line’ (ATL) costs from eligible expenses. Major production centers that allow all or capped portions of ATL costs have a competitive edge. While the funding increase is promising, including ATL eligibility—even with certain limits—could further strengthen California’s position in the global production landscape. 

We have yet to see if Newsom’s proposal will be greenlit, but as production levels are still rebounding in the wake of recent strikes and the COVID-19 pandemic, leaders from across the State and the industry are eager to see creative solutions that will keep more film and television business in California.