New California Film and TV Tax Credit to Boost Hollywood Studios

Film and TV productions have slowly dripped out of Los Angeles in recent years to other markets offering generous incentive programs, but California Gov. Gavin Newsom has a plan to re-energize the state’s entertainment industry and the expansive studios throughout Hollywood and Southern California. 

Newsom on Sunday announced a proposal to significantly boost California’s Film & Television Tax Credit Program allocation to $750 million per year, well over double the current annual cap of $330 million. Newsom was joined in the announcement by L.A. Mayor Karen Bass, other elected officials and union leaders. 

“We needed to make a statement and we needed to do something that was meaningful, not just intentional,” Newsom said on Sunday. “This is about jobs, this is about investment, and it’s about recognizing that the [entertainment industry] we invented is now competing against us.”

If approved, the expansion would be the highest of any state with a capped tax incentive program, according to the Newsom’s office. New York is currently sitting in that position with an annual cap of $700 million, while states such as Illinois and Georgia, which have been popular alternatives for productions the past decade, don’t have a cap at all. 

Entertainment industry insiders have for years pushed for an expanded tax credit program in California, as projects that would have normally filmed in California were incentivized to move elsewhere, especially as the COVID-19 pandemic and later the Hollywood labor strikes ground productions to a halt. An estimated 71 percent of projects recently unable to secure tax credits in California opted to film elsewhere, according to Newsom’s office. 

“Before, those states [such as Georgia] didn’t have [production] infrastructure; a number of those other states do have infrastructure now, which really adds the pressure on us to make sure that we can bring the productions back,” L.A. Mayor Karen Bass said during a press conference with Newsom on Sunday. 

Hackman Capital Partners, the largest independent studio owner in the world and host to Newsom’s Sunday announcement at its Raleigh Studios campus, praised the proposal as a “dramatic” evolution of the state’s film tax credit system.

“This is an important step to help keep production in Hollywood and support the thousands of Angelenos and ancillary businesses who rely on the entertainment industry,” Zach Sokoloff, senior vice president at Hackman, said. 

California’s film and television tax credit program was introduced in 2009, having an initial annual cap of $100 million. The cap was raised to $330 million five years later in 2014. Since then, the program has helped generate $26 billion in economic activity, supporting some 197,000 jobs in the state, per Newsom’s office. Newsom signed a bill last year extending the program through fiscal year 2030-2031. A new version of the bill would also make the credits refundable for the first time beginning on July 1, 2025. 

Production activity in L.A. fell by 5 percent in the third quarter of this year compared to the third quarter of 2023, according to the most recent quarterly report from Los Angeles film permitting office and nonprofit organization FilmLA. Activity in the quarter, which was also the weakest quarter so far this year, was down 36 percent compared to the five-year average, according to the organization. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.