California governor proposes more than doubling the state’s film and TV tax incentives

(CNN) — California Gov. Gavin Newsom on Sunday announced a proposal to more than double the state’s film and tax incentives, which he says will create more competition among other states and countries offering similar perks to the entertainment industry.

The new proposal will expand the annual tax credit pool to $750 million, compared to its current total of $330 million, Newsom said during a news conference at a Hollywood studio, where he was joined by Los Angeles Mayor Karen Bass and members of entertainment unions such as the Directors Guild of America and International Alliance of Theatrical Stage Employees.

The refundable credits program would surpass New York’s current film incentive, the governor said.

“This is about jobs, this is about investment and it’s about recognizing that the world we invented is now competing against us. Thirty-eight states. It’s not just New York, it’s not just Georgia,” Newsom said. “This is about investing in the future of this industry, the future of the state, the values we hold dear, investing in our creativity, this great cultural export, and investing in the men and women you see behind me.”

The Golden State is home to the largest share of the film and TV economy in the country. Film and TV production in California supports more than 700,000 jobs and nearly $70 billion in wages for in-state workers, according to Newsom’s office.

In 2023, legislation extended the state’s tax incentive program for productions for five years. It came as competition for film and TV production from other states and countries was on the rise. States like New York and Georgia are gaining share of the TV and film market, thanks to their own tax incentive programs, according to a 2021 report from FilmLA, a nonprofit organization helping creators with production planning and film permitting.

The proposed expansion comes as the industry continues to struggle post-Covid pandemic and in the wake of labor strikes. Newsom indicated the industry is on “life support,” and “needs a jolt,” with more needed to address the issue.

The planned incentives will be part of Newsom’s January budget, and the state is in a position to afford the proposal, the governor assured.

“We have to do everything we can to strengthen and protect one of the foundational pillars of our economy in Los Angeles,” Bass said, who was a member of the California State Assembly when legislators first got tax credits in the budget.

“Increasing the film tax credit is critical to keeping Hollywood in California because of the enormous benefits this industry provides for our workers and small businesses,” said Assemblyman Rick Chavez Zbur, a Democrat representing the Hollywood area, who signaled support for the proposal.

Industry workers on Sunday also highlighted the psychological effects of leaving home to work in other states.

“Many directors are being forced to leave California and often the country for work. To repeatedly make the hard choice between work and home is psychologically painful and damaging to marriages, families and communities. I know because I traveled the entire 16 years of my twins’ lives,” said Millicent Shelton, a California-based director and member of the Director’s Guild. “Governor Newsom has taken bold and decisive action, stepping forward on behalf of the creators, crafts people, actors and small business owners who depend upon this industry for their livelihood.”

Last year’s refundable tax credits were previously criticized by Chris Hoene, the executive director of the California Budget and Policy Center, who called the policy a “giveaway that doesn’t have any positive outcomes.”

“Refundable tax credits were designed to help low-income households … so to take that refundability structure and apply it to a business tax credit, you would think there are some film companies that struggle to make ends meet and don’t make enough money to owe any taxes, but that’s not how it works,” he previously told CNN.

But Newsom said his proposal expands beyond helping people who are in the spotlight and in front of the cameras.

“Sometimes people think this is just about all these superstars and somehow subsidizing these folks that are well-heeled or well off. Quite the contrary. This is about working folks, this is about building a sense of community,” Newsom said. “It’s about the small businesses, businesses that benefit from this kind of investment and this kind of activity.”

CNN’s Samantha Delouya contributed to this report.

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