Both houses of the California legislature showed support Thursday for extending tax credits for film productions in the state, offering about $330 million annually to studios who film here — with a pending stipulation that filmmakers show real increases in diversity hiring for these projects.
The extension, part of a $311.2 billion draft state budget, would keep the California Film and Television Tax Credit Program through 2030. Legislators still are hashing out details for a final budget, which then will require approval from Gov. Gavin Newsom.
The budget calls for using reserves to balance a projected $22.5 billion deficit in the coming year, while retaining funding for “core value” programs in California. Fortunately for filmmakers, most lawmakers seem to view film projects as a core value program in the state and supported the tax break.
Assembly Budget Committee Chairman Phil Ting, a Democrat representing western San Francisco, wrote the provisions that will require studios to hire more minorities for film projects if they want to receive the tax credit.
Ting told TheWrap earlier this year that he is disappointed that the industry has not made more progress in diversity, a stipulation in the last tax credit bill, which Ting supported. That’s why he wrote the diversity stipulation to the bill that requires producers to increase minority hiring or lose the tax credit.
“We would hope that as the city and the region got more diverse, that we would have greater diversity with Hollywood. But unfortunately, it just hasn’t kept pace,” Ting told TheWrap. “They don’t reflect the community that they reside in.”
In recent years, caucasians filled 43 percent of jobs in film projects participating in the tax credit program, according to the California Film Commission. Latinos made up the next highest ethnic group, at 18 percent. Rounding out the employment on these projects were those who declined to state their ethnicity, 14 percent; other/mixed at 11 percent; African Americans at 7 percent; Asian-Pacific at 4 percent, Asian subcontinent at 2 percent, and Native Americans at 1 percent. The same projects reported staffing at 69 percent male.
While the numbers are complicated and open to debate, the film industry argument for the tax subsidies is that keeping productions here helps fuel the California economy. Since 2009, 624 approved projects in theTax Credit Program have or are expected to generate more than $21 billion in California expenditures, according to the California Film Commission, which is part of Newsom’s administration.
These projects received an estimated $2.7 billion in tax credits; the productions’ qualified expenditures were approximately $14 billion, including $7 billion in qualified wages. These projects hired or will hire more than 69,000 cast, 103,000 crew and 1,555,000 background players measured in person-days.
Assembly member Laura Friedman, a Democrat and former film producer representing the Burbank area, told TheWrap previously that the tax credits are essential for California to compete with 40 other states and 50 countries to attract or retain film productions. While working in the industry, Friedman said she saw film projects leave the Los Angeles area to take advantage of tax credits in other states, such as Georgia, North Carolina and New York, where film tax credit programs are refundable and therefore allow studios that don’t have tax liability in those states to benefit from them.
“It is a real competition for us to retain these important film projects for California,” Friedman told TheWrap. “We are now competing against other states, and countries, that have much more mature production space and crews than they used to have.”
The program extension was approved with the following stipulations to increase workforce diversity:
- Applies diversity workplans created in the Soundstage tax credit to Motion Picture Credit 4.0 with modifications
- Expands the Career Pathways Training program to provide more opportunities for Californians to enter the CA Film & Television union workforce
- Increases staffing at the California Film Commission to include three positions to address diversity, equity, inclusion, and workforce
- Expands the CFC board to include the chief equity officer at Government Operations Agency and executive director of the Workforce Development Board
- Adds set safety provisions as a pilot to Program 4.0 along with a refundability mechanism
- Adopts technical changes through placeholder trailer bill language for the Soundstage
- Approves resources for refundable credits consistent only with the CA Film & Television tax credit program package
- Adopts resources for the Administration of the CA Film & Television tax credit
High-profile films that have received tax incentives over the years from the program include the Marvel blockbuster “Captain Marvel,” Quentin Tarantino’s 1960s period piece “Once Upon a Time… in Hollywood,” and Jordan Peele’s Santa Clarita-based horror film “Nope.”
A March 2022 study by the Los Angeles Economic Development Corporation reported that each dollar allocated by California’s Film and TV Tax Credit Program generated at least $24.40 in output, $16.14 in gross domestic product, and $8.60 in wages. Academics have disputed such calculations, saying the economic benefits of tax credits are often overstated.
The tax credit program applies to filming anywhere in California, including a growing number of projects outside the traditional Los Angeles 30-Mile Studio Zone.
To date, more than 60 feature films and television series spent close to $208 million outside the zone under the first three versions of the tax credit. These expenditures included at least $72 million for local wages, $42 million in local purchases and rentals, $18 million for local hotels and $16 million for location and permit fees.
