Last week, in the shadow of the historic TCL Chinese Theatre in Hollywood, Gov. Jerry Brown signed legislation to increase California’s film tax credits to $330 million per year. California, which has seen many film productions depart for other states with more generous benefits, hopes that the credits will herald a new era in Hollywood. But while California fights to keep the film industry local, many other states are seeing their film tax credits end up on the cutting room floor.
In addition to increasing the cap on film credits from $100 million to $330 million in FY2016-17, AB1839 makes numerous changes including expanding eligibility to films with larger budgets and more television shows, such as those on streaming platforms like Netflix. The bill also eliminates the lottery system for credits that was previously in place and replaces it with a ranking system that takes into account, among other factors, how many jobs the production will create.
However, the debate over the effectiveness of film credits rages on in state legislatures, and many states are repealing their programs. North Carolina is the latest state to decide to not renew its film credits, replacing the credits with a much smaller grant program. In addition to North Carolina, at least seven other states have cancelled their film tax credit programs and several others have reduced their credits, according to Governing. Even Canadian provinces have been scaling back their film credits.
Nevada recently put together a $1.25 billion incentive package for Tesla Motors to build a gigafactory and that money has to come from somewhere. With the passage of SB1, Nevada decreased their film tax credits from $80 million to $10 million to help pay for the Tesla deal. The film tax credits were enacted in 2013 after a well-publicized campaign that included testimony from Nicolas Cage.
Even Louisiana, which had more productions in 2013 than any other state, may have doubts about the effectiveness of film credits. The Louisiana Film Entertainment Association recently commissioned a study from HR&A Advisors Inc. to determine the economic impact of film credits in Louisiana.
As more states turn away from film credits, California’s legislation sends a strong message to the film industry: the state that nurtured the industry for nearly 100 years still wants them there.
Continue the discussion on LinkedIn: Should California have increased their film tax credit?
For more information about California’s tax incentives, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.
By: Rishi Agrawal
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