Gov. Gavin Newsom unveiled a proposal Sunday to more than double the annual amount of money allocated to California’s film and TV tax credit program as Hollywood struggles to compete with other production hubs dangling lofty incentives.
The governor declared his intent to expand the annual tax credit to $750 million, up from its current total of $330 million, which would make California the top state for capped film incentive programs, surpassing even New York. If approved by the Legislature, the increase could take effect as early as July 2025.
“California is the entertainment capital of the world, rooted in decades of creativity, innovation, and unparalleled talent,” 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.”
The announcement comes as Newsom and other elected officials have been under increasing pressure to act as Hollywood production struggles to rebound after the pandemic and last year’s dual strikes by writers and actors.
Productions have increasingly opted to film in other states due to higher tax incentives, putting a damper on California’s signature film and TV industry. Underscoring the state’s competitive disadvantage, about 71% of projects that were rejected by California’s film and TV tax credit program chose to film out of state, the governor’s office said.
California’s film and TV tax credit program was established in 2009 as a way to prevent film and TV production from fleeing to other states. Back then, the credit was restricted to $100 million per year.
Five years later, the roof was raised to $330 million a year, awarding studios tax credits of up to 25% to offset qualified production costs such as set construction, stunt equipment and wages for crew members. The credit can be applied to any tax liability companies have in California.
In 2023, Newsom extended that version of the program for another five years and added a “refundable” feature entitling studios to cash payments from the state when their credits exceed their tax bills.
Although Newsom’s Sunday proposal would represent a substantial increase in funding, it doesn’t remove other restrictions in the state’s incentive program, including a provision that excludes the salaries of actors and other above-the-line costs that are a big portion of film budgets. Georgia and other rivals do not have such restrictions.
But such a move is considered politically untenable in California, where the film incentive program has faced opposition from critics who argue that subsidizing entertainment comes at the expense of other worthy causes, such as education and healthcare.
Members of Los Angeles’ entertainment community have recently been urging the government to pump more funds into the film and TV tax credit program in order to curb so-called runaway production and stimulate jobs.
As previously reported by The Times, industry insiders and experts overwhelmingly agree that relatively weak incentives are the main reason California is losing significant ground to Georgia, New York, Canada, the United Kingdom and other filming hot spots around the world.
New York’s film and TV tax credit program, for example, is capped at $700 million; and Georgia — a popular production destination for Marvel and Netflix — doesn’t have a limit at all.
“I believe the best filmmakers in the world are right here in Los Angeles, but it’s being outsourced because of the tax credits,” Mike DeLorenzo, president of Santa Clarita Studios, told The Times last month.
The sluggish activity in Southern California has been fueled by other factors as well, notably an overall pullback in production that reached a peak during the so-called streaming wars and cost-cutting by the major media companies.
Earlier this month, Los Angeles film permit office FilmLA reported that production levels in the area fell by 5% in the third quarter of 2024 compared with the same stretch in 2023, when scripted production came to a near standstill because of the Hollywood strikes.
Times staff writer Stacy Perman contributed to this report.