California Governor Proposes $750 Million in Annual Film Tax Credits

As seen in the New York Times.

Responding to pleas from California’s film industry, which has struggled to rebound from labor unrest and industry disruption, Gov. Gavin Newsom on Sunday announced a proposal to more than double the size of the state’s film tax incentive program to $750 million annually.

If the proposal is approved by the State Legislature, California would offer more money to entice film productions than any state except Georgia, which provides unlimited tax credits. California’s existing program is capped at $330 million annually. The increase would go into effect on July 1, 2025.

“California is the entertainment capital of the world, rooted in decades of creativity, innovation and unparalleled talent,” Mr. Newsom said in a statement. “Expanding this program will help keep production here at home, generate thousands of good-paying jobs, and strengthen the vital link between our communities and the state’s iconic film and TV industry.”

In recent weeks, state economic development officials and entertainment executives in Los Angeles have publicly expressed concern over the persistent slump in film production, begging officials to do more to keep film shoots in the state.

Over the past 20 years states have aggressively wooed Hollywood, offering movie and television productions more than $25 billion in filming incentives, according to a survey by The New York Times. Thirty-eight states offer some form of incentive, including Georgia, which has extended more than $5 billion in film tax credits since 2015, and New York, which has provided at least $7 billion in credits.

Officials in California, who have seen Hollywood productions flock to other states and last year witnessed lengthy strikes by writers and actors, have dedicated more than $3 billion to retain film productions in that time frame. But state officials say that the $330 million annual limit is reached quickly and that productions have learned to look elsewhere.

California’s budget has been significantly stretched, with state finance officials projecting a shortfall next year. But Mr. Newsom’s proposal is likely to receive significant backing from organized labor, a powerful state lobby, and from the governor’s fellow Democrats, who hold a supermajority of legislative seats. Legislators easily passed a five-year extension of the existing film tax credit program last year.

Mayor Karen Bass of Los Angeles, who championed the tax credit program in 2009, when she was speaker of the California Assembly, said that expanding the incentive had been at the top of the priority list for entertainment industry leaders. Los Angeles, she said, “still has not recovered from the strike.”

Colleen Bell, executive director of the California Film Commission, said she had experienced a wave of relief when she heard of the governor’s proposal.

“We’re losing our market share and there’s no reason,” she said in an interview. “Production companies are just seeking these tax credits. It’s not enough anymore just to be the state with the best crews and the best weather and the best locations.”

It is unclear how far tax incentives will go to address show business worries in California. Lost production has been only one disruption among many, including the aftermath of crippling shutdowns during the coronavirus pandemic and the threat of job losses because of technological changes such as artificial intelligence.

Data released last week by FilmLA, the official film office of the City and County of Los Angeles, indicated that the 5,048 “shoot days” recorded in the Los Angeles area in the three-month period that ended on Sept. 30 lagged even the 5,311 figure from the same period in 2023, when a screenwriters strike contributed to a shutdown of many television and film productions.

Government officials say that tax incentives for film and television productions trickle down to local economies. Creating movie magic requires electricians, hair stylists and other types of skilled workers. Money is also spent on hotels, dry cleaning and dining out.

Economists have largely voiced skepticism, warning that states receive a poor return on such investments. Studies have shown that tax revenue generated by film incentive programs amounts to a quarter, or even a dime, of every dollar invested, and in some cases each job created can cost taxpayers more than $100,000.

A 2023 report from the New York State of Department of Taxation and Finance found that the return on its incentive program, which has an annual cap of $700 million, was between 15 cents and 31 cents on the dollar. “The film production credit is at best a break-even proposition and more likely a net cost” to the state, the report said.

Joseph Chianese, a senior vice president and production incentives practice leader at Entertainment Partners, a Hollywood management firm, said in a statement that California’s existing $330 million annual cap could put it at a competitive disadvantage when other states and countries have higher limits.

“Producers prioritize stability in incentives, especially in terms of legislative consistency, transparent processes and reliable funding,” he said.

“Nonetheless,” he added, “California remains a vital hub with unmatched crew expertise, infrastructure and leadership in industry technology development, which remains an attractive option for many producers.”