State lawmakers poised to boost Hollywood tax breaks despite budget woes

Despite concerns about California’s looming budget deficit, the state appears likely to boost its film tax credit program to keep productions from fleeing to other regions.

Gov. Gavin Newsom and state legislative leaders have reached an agreement to increase the annual amount of money allocated to California’s film and television tax credit program to $750 million, giving hope to a beleaguered Hollywood.

The agreement more than doubles the amount currently allocated to the program and fulfills a pledge Newsom made last year to help Hollywood better compete with other states and countries that have lured productions away with generous tax incentives. The current cap for the program is $330 million.

Lawmakers are expected to vote on the budget bill Friday.

Hollywood studios, lobbyists, unions and workers have rallied around the production incentive issue, particularly as the state’s signature industry has been battered by the pandemic, the dual writers’ and actors’ strikes of 2023 and the recent Southern California fires.

In addition to the increased cap, a separate Assembly bill currently moving forward would expand the incentive program by increasing the tax credit up to 35% of qualified expenditures for movies and TV series shot in the greater Los Angeles area and up to 40% for productions shot outside the region.

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.

Boosting the tax credit to 35% brings California more in line with the caps set by other states that have successfully lured Hollywood productions in recent years. Georgia, for example, provides up to a 30% credit for productions.

The bill would also broaden the types of productions eligible to apply, including animated films, shorts and series and certain large-scale competition shows.

The proposal is among a series of policies Newsom and Democratic lawmakers are expected to advance in the coming days as part of the $321.1-billion budget. The state is facing an expected $12-billion budget deficit in the year ahead.

Lawmakers have been reluctant to make sweeping cuts, choosing a wait-and-see approach in light of the state’s financial uncertainty.