Newsom Proposes Extension of Film Tax Credit

Gov. Gavin Newsom proposed to extend California’s film and television tax credit by five years to 2030 with $330 million in annual funding. Newsom also proposed to make the credit refundable in a limited manner, a move that would allow companies to claim tax credits in excess of their tax liability. Newsom proposed the extension in a trailer bill to the 2023-2024 budget.

The California Film Commission administers the current program, which provides tax credits for feature films, independent films, and new, relocating, or recurring television shows, pilots, or miniseries made in California. Funding for the program is limited to $330 million a year through 2025, and the funding is divided between the different production categories.

The credit was created in 2009 to encourage film productions to locate in California, as legislators were concerned that other states were making efforts to attract the industry. The legislature since extended and expanded the credit multiple times. Newsom views the credit as a way to make California a clear choice for film production over states that have recently passed restrictive abortion laws.

LAO Doubts Benefit to Economy but Recommends Refundability

The Legislative Analysists Office (LAO) stated in a report that, while the tax credit may be helping the California film industry grow, its impact on the overall state economy is unclear, as funds dedicated to the film tax credit could have been spent on other activities. The LAO advised that the decision to extend the credit should depend on how the legislature prioritizes maintaining California’s centrality in the film industry rather than on promoting overall economic growth.

The LAO also advised that the program should be fully refundable with some modifications to improve taxpayer equity in the program and to make it easier to administer. These modifications include specifying a schedule for the credit to be claimed over a period of years, reducing the annual allocation cap, and limiting other flexibilities in the use of the credit by production companies.