The Motion Picture Association is gearing up to push for significant changes in the California film incentive, which would make it more generous to individual productions.
Gov. Gavin Newsom pledged in October to more than double the state’s annual support for Hollywood to $750 million. At the time, the governor did not propose other changes to the program.
On Wednesday, the MPA launched an effort, the California Production Coalition, to highlight deficiencies in the “outdated and underfunded” incentive program, and to galvanize support for modifications. Primary among the concerns is that other states are more generous on a per-project basis.
In California, the incentive is limited to 20% of below-the-line costs for most projects. Georgia and New York offer 30% and also cover big-ticket salaries for directors and actors. New York increased its incentive last year to $700 million annually while adding eligibility for “above-the-line” salaries up to $500,000 per person.
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California also caps eligibility at $100 million per project — meaning that larger projects cannot claim the full 20%.
“California’s historic leadership in motion picture production faces increasingly stiff competition from rival jurisdictions that offer larger and more flexible tax incentives,” the coalition said in a press release Wednesday.
While acknowledging the state’s advantages in terms of its film workforce, infrastructure, and locations, the coalition warned, “the highly valuable incentives offered by other localities – which can be more than triple the amount available to a production in California – are challenging the landscape and undermining the business case for shooting in the state.”
Newsom has said he will include the increase from $330 million to $750 million in his forthcoming budget. The Legislature is also expected to weigh in on other changes in how the program operates this spring.
In 2023, Newsom signed a law to make the tax credit “refundable” starting next year — meaning that studios can get cash back if they do not have sufficient state tax liability. The MPA lobbied heavily for that change, which benefits studios like Netflix that pay little or nothing in California taxes.
The change still comes with some strings attached, though. The state has said it will apply a 10% discount to any refund, and spread the payback period over five years. California credits are also not transferable, except for independent films, meaning that credit recipients cannot sell them to those who have tax liability.
Other states offer greater flexibility, allowing studios to treat the credits more like cash. The New York credit is fully refundable. In Georgia, credit recipients can easily sell any unused credits at a discount, making the program attractive to out-of-state producers. The Georgia program is also uncapped, and reached $1.3 billion at its peak in 2022.
In Louisiana, recipients can sell their credits back to the state at a 10% discount. Lawmakers floated the idea of eliminating refundability during a special session last month, but ultimately dropped it. The state did curtail its film incentive from $150 million annually to $125 million, as part of a broader reform to reduce personal and corporate income tax rates.
The MPA represents seven major studios: Disney, Netflix, Amazon, Universal, Paramount, Warner Bros., and Sony. The lobbying group is among 33 founding members of the California Production Coalition, which also includes studio facility owners like Hudson Pacific, the MBS Group, and Echelon Studios.
“The MPA and its members are proud to stand with California businesses to highlight how our creative community can grow its meaningful contributions and build a stronger foundation for film and television production in the state,” said Charles Rivkin, chairman and CEO of the MPA, in a statement.
The coalition also issued a poll of California voters, which found 73% support for Newsom’s proposal to increase the incentive. The poll also found majority support for increasing the categories of eligible productions to include game shows, talk shows and reality shows.
The premier of British Columbia announced an increase in production tax credits last week, which would increase the province’s annual outlay from $640 million to $843 million, according to a Ministry of Finance estimate.