Newsom Proposes Raising California's Film and TV Tax Credit to $1 Billion a Year

California Gov. Gavin Newsom on Monday, Nov. 2, proposed expanding the state's Film and Television Tax Credit Program from $750 million to at least $1 billion a year, a plan his office said would make it the largest capped film and TV tax credit in the United States. The proposal, announced the day before Californians vote for his successor, would also extend the program through 2040, make actors' and other above-the-line salaries eligible for credits and set aside $100 million a year for independent productions, according to a statement from the governor's office.

"California created the modern entertainment industry; we're the capital of entertainment and we're going to keep it here," Newsom said in the statement. "At least $1 billion in tax credits means more investment flowing into our economy and more opportunity across the industry."

What the proposal would change

According to the governor's office, the plan would make above-the-line compensation for leading talent such as actors, directors and producers a qualified expenditure, subject to appropriate funding caps, and extend the program's sunset from five to 10 years. Companies that commit to at least two distinct qualifying productions in California would receive a 5% boost in tax credits, and annual funding for independent film would rise to $100 million, up $26 million from the current program.

The inclusion of above-the-line costs would make California's program more competitive with those of states such as Georgia and New York, which allow tax credits to offset the cost of actors' salaries, the Los Angeles Times reported. Bloomberg Tax reported that Georgia offers uncapped credits of up to 30%, while New York provides $800 million annually in film tax incentives.

The proposal requires approval by the state Legislature. Newsom's term expires on Jan. 4, so carrying it through will fall to his successor, Variety reported. Democratic nominee Xavier Becerra has promised to enhance the existing credit but has not committed to the unlimited credit many industry stakeholders want, Variety said. Deadline reported that both Becerra and his Republican rival, Steve Hilton, laid out their own proposals for the program during the campaign, and that Assemblymember Rick Chavez Zbur, who represents Hollywood, is backing Newsom's plan.

Results the state is citing

The new proposal follows last year's expansion, which raised the annual credit from $330 million to $750 million, a $3.75 billion investment over five years through 2030. The governor's office said the expanded program has produced $8.25 billion in direct production spending to date, with applications up 82%, film shoot days up 52% year over year and more than 43,000 cast and crew jobs created.

"The California Film and TV Tax Credit has become one of our most important tools to increase production in California, support crews and strengthen the creative economy that makes this state the entertainment capital of the world," California Film Commission Director Colleen Bell said in the statement. Zbur said the earlier expansion "is delivering results, bringing back tens of thousands of jobs in its first year."

Other data show local production still declining. 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 figures cited by the Los Angeles Times.

Unions and producers respond

Hollywood labor groups welcomed the plan while pressing the next governor to commit to it, Deadline reported. The Entertainment Union Coalition, which includes SAG-AFTRA, IATSE, the DGA, the WGA West, the Teamsters, AFM and LiUNA, said in a statement: "We thank the Governor for his commitment to our members and this industry." The coalition added that it was "looking forward to working with the next Governor and the Legislature on a proportionate response that takes into account the size of the workforce and infrastructure in California."

"The Producers Guild of America strongly supports Gov. Newsom's call for expanding, enhancing and extending California's film and TV tax credit," a PGA spokesperson told Deadline. Lindsay Dougherty of Teamsters Local 399 argued that the program needs to be uncapped. "Our industry cannot survive on expressions of support alone. We need action, investment, and a real commitment to keeping these jobs in California," she said in a statement to Deadline.

Steve Kang, president and chief film liaison for the Los Angeles Board of Public Works, told the Los Angeles Times: "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." Cale Thomas of the grassroots coalition Stay in L.A. said, "We just need to make it cheaper and easier to shoot here." Scott Budnick, a producer of "The Hangover" franchise who lobbied for last year's expansion, praised the proposal but called for removing the cap. "It makes every piece of the credit 10 times harder," he told the Times.

Federal incentive and recent state measures

Newsom also renewed his call for Congress to pass the Motion Picture, Television, and Entertainment Revitalization Act by the end of the year. The bill, introduced in September, would establish a 20% federal tax credit for qualifying film, television and visual effects work produced in the U.S., and the governor's office said it could stack with state programs. "But states can't shoulder the cost alone, which is why I am calling on Congress to back up an expanded tax credit by passing national film and TV tax credit legislation already on the table," Newsom said.

In September, Newsom signed California's first standalone postproduction tax credit, a $10 million program offering a 35% to 50% credit on qualified postproduction work done in the state, the Los Angeles Times reported.