Gavin Newsom proposes major change to California’s film and television tax credits in new state budget proposal

An expected deficit of $22.5 billion has prompted California Governor Gavin Newsom to tighten his belts and cut programs, but the financial sun still shines brightly on the state’s more than $400 million film- and television tax credits.

The recently re-elected Democrat unveiled a $297 billion state budget plan for 2023-2024 on Tuesday, reaffirming his desire to extend the annual big and small screen initiative into the next decade and making some significant changes to the program .

“The budget provides for the extension of the $330 million per year film and television tax credit program administered by the California Film Commission for five years beginning in 2025-26 (Program 4.0) and is expected to make it repayable to the new Program 4.0 do. ,” the proposal reads. by Newsom this morning in the opening round of getting to a state budget.

Keep in mind that this could all change once negotiations begin and a final and actual budget is reached by the June 15 deadline. By that date, a revised budget proposal is expected in May, once the governor and state officials have worked through some give-and-take.

The California Film and Television Tax Credit program, which has existed on a smaller scale since 2009, was first introduced in its current career-oriented form in 2014.

Newsom has frequently revised the program and increased it to $420 million over two years in 2021, in part to mitigate the economic effects of the pandemic and to attract more poignant shows. With a long history in the industry but a much smaller production bank compared to California, New York State also offers $420 million in film and television tax credits. While British Columbia has had a lavish program that has drawn American productions to Vancouver and the surrounding region for decades, in the US, booming Georgia, which borrowed $1.2 billion in 2021, is No. 1 in the credits.

In this increasingly competitive market, the introduction of a reimbursable element in the latest version of the program puts California in a comparable position to other profitable domestic and Canadian jurisdictions. “Repayment of the loan will benefit a wider range of productions and ensure that the competition program maximizes the economic benefit to the state,” says the latest budget proposal. “Loan beneficiaries with insufficient tax liability can claim a tax refund at a reduced value for several years to reduce the loss of revenue to the state. Credits on the tax liability retain their full value.”

Hollywood darling Newsom, along with several Sacramento lawmakers, previously proposed extending the program for another five years. However, that idea fell by the wayside last year when more diversity changes to the tax credit system were sought.

Now everything is clearly back on the table. Not surprisingly, Colleen Bell, Newsom’s appointed director of the California Film Commission, says that’s a good thing.

“The five-year extension and the ability to make tax credits recoverable will give industry decision makers more options and the security they need to make long-term investments here in the Golden State,” she said after the budget proposal was released. “This will lead to more production-related jobs, spending and opportunities.”

“The refund will allow California to compete more effectively with jurisdictions around the world that offer this option as part of their tax credit,” Nancy Rae Stone, co-director of the Film & TV Tax Credit Program, told Deadline. “It opens the door for production companies that want to film their projects here but don’t have enough tax debt to take advantage of a non-refundable tax credit.”

As with current film and television shows, the next application period for the big screen is January 30 to February 1. For the small screen, applications for the return and relocation of television series March 6-8 and new programs March 13-15 will be submitted digitally. Successful film applicants will be announced on 6 March and successful TV applicants on 17 April.