A lifeline for Hollywood jobs or a corporate giveaway? The film tax credit debate returns

Los Angeles Times

25-04-2025

It's showtime for Hollywood at the California Capitol.
The state's entertainment industry has spent months begging for help from Sacramento to stem the decline of film and TV production and save thousands of jobs.
This week, after months of speeches and promises from public officials, two bills meant to boost the beleaguered business cleared their first legislative hurdles.
The bills are intended to make California's film and TV production incentive more competitive with other states and countries by increasing the tax credit up to 35% of qualified expenditures and expanding the types of productions that would be eligible.
It's a potential lifeline for the entertainment industry, which has been battered in recent years by production slowdowns wrought by the pandemic, the dual writers' and actors' strikes in 2023, a pullback in spending by the studios, the recent Southern California wildfires and productions fleeing the Golden State.
'We don't want to become the car industry in Detroit or aerospace in California,' said Rebecca Rhine, president of the Entertainment Union Coalition and Western executive director of the Directors Guild of America. 'When our industry thrives, we think California thrives.'
The bills won unanimous votes out of the state Senate revenue and taxation committee and the Assembly arts and entertainment committee.
But despite Gov. Gavin Newsom's initial call last year to more than double the money allocated to the state's film and TV tax credit program, passage of the two bills is far from a done deal.
Critics have been skeptical of the film and TV tax credit program since it was introduced in 2009 under former Gov. Arnold Schwarzenegger. Some say the tax credits are corporate giveaways and don't deliver as much economic value as proponents claim.
'The economy does best when government doesn't pick winners and losers,' said Wayne Winegarden, senior fellow of business and economics at Pacific Research Institute, a California-based think tank that advocates for free markets. 'This is not the right way to get a pro-growth fiscal business environment that accelerates job growth.'
Additionally, California now faces a difficult economic outlook, as officials brace for potential cuts in federal funding, as well as tariff-related pressures on state revenues and stock market volatility that could reduce tax collections that fund state programs.
That all forces difficult questions for legislators about which priorities to fund.
In a recent post on X, Assemblymember Corey Jackson said Democratic voters in California 'should be outraged that we aren't spending more on housing, allowing seniors to fall into homelessness, and allowing so many children to live in poverty. For corporate and movie studio tax breaks.'
Reached by phone, Jackson said that while expanding film and TV tax credits is a worthy policy, state lawmakers must consider what they'd have to sacrifice for them, particularly as the state budget is under stress.
'If we were back in the period where we have more money than we can spend, this would be a no-brainer,' Jackson said. 'But it's time to bring people back to reality. This should not just be a slam-dunk to people.'
Hollywood workers argue that an expanded film and TV tax credit would generate economic returns beyond the industry, with ripple effects touching tourism as well as small businesses such as dry cleaners, florists and caterers that rely on entertainment spending. And after years of struggles, workers say the industry is at an inflection point.
That has led to a major lobbying effort on Hollywood's part.
More than 100,000 letters have been sent to individual state lawmakers in support of the bills, with an additional 22,000 letters sent to the Senate revenue and taxation committee.
Dozens of representatives from all of the major entertainment industry unions trekked to Sacramento to support the legislation, as did studio executives, their lobbyists and the Motion Picture Assn. trade group.
It's the kind of show of force State Sen. Ben Allen and Assemblymember Rick Chavez Zbur, two of the bills' co-sponsors, had called for when they spoke to a crowd last week at Burbank's Evergreen Studios recording facility and urged entertainment workers to contact their representatives.
'It's going to be a fight to get this done because of the headwinds,' Allen told the crowd, noting that there are many competing priorities at the state level. Just the mention of the legislation was enough to elicit applause and cheers from the audience.
Industry insiders and lawmakers, including at the Burbank town hall, have tried to fend off criticism that this is a gift to corporations.
They described them as jobs bills that will reward the productions that generate the most employment and will not allow companies to use the tax credits until after production has wrapped.
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. Raising the credit to 35% is significant, supporters say. Projects that shoot elsewhere in the state could get a credit of 40%.
The legislation also would expand the types of productions that would qualify, including animated films, shorts and series, along with large-scale competition shows. Independent productions will be allocated 10% of the total amount in the program, up from the current 8%.
'In some respects, the headwinds have actually strengthened the bill,' Allen told The Times. 'They've forced really careful, intense, thoughtful, targeted conversations and negotiations.'
Outside of Hollywood, the bills have the backing of the California Labor Federation, whose executive council unanimously voted to support the legislation in February, said President Lorena Gonzalez.
Though the organization is not always supportive of tax credits, the federation has always supported the film and TV program, she said.
'The fact is the unique situation with Hollywood being so unionized,' said Gonzalez. 'In order to preserve those good union jobs and the middle-class lives that are developed as a result, we'd like to keep those jobs here.'
The lobbying effort has led to unusual alliances, particularly in the wake of the strikes, with both studios and Hollywood unions rallying on the same side. Both groups, however, have worked together on previous film and TV tax credit proposals.
In a letter to the leaders of the Assembly committee on revenue and taxation, Motion Picture Assn. Chief Executive Charles H. Rivkin wrote that the changes to the film and TV tax credit program would 'help attract more productions and jobs in California.'
If the bill were enacted, he wrote, the studios will submit more applications to the California Film Commission, 'leading to locating more of their productions in California, which will create and retain good jobs for Californians.'
But even within Hollywood's overall push, there are differing priorities among stakeholders. During the Burbank town hall meeting, postproduction workers and music scoring professionals called for carve-outs, noting that other states and countries now offer specific rebates for this work.
That has led to a steep decline in production for these workers. The average number of booked recording days for a sampling of L.A.'s scoring stages is now 11 days for 2025 so far, a far cry from the average of 127 days for all of 2022 during the peak of the streaming boom, said Peter Rotter, founder of Encompass Music Partners, who helped organize the town hall.
Much scoring work has moved to Europe or even Nashville, while some postproduction work has been diverted to places like Canada and London.
'It's going to take a village,' Rotter told The Times. 'We have one shot at this right now.'