A Groundbreaking Effort to Fight Runaway Production

California’s first Film & Television Tax Credit Program launched in 2009, signaling the state’s interest in defending its leadership as the film and television production capital of the world.

Then, in 2014, a groundswell of bipartisan, grassroots support led to passage of the California Film and Television Job Retention and Promotion Act (AB 1839, Gatto/Bocanegra), and the enhancement and expansion of the state’s film credit.

Today, this targeted tax credit is putting thousands of Californians to work in communities across the state, generating billions of dollars in filmmaker spending within the state’s economy.

California’s Current Film & TV Incentive

The California Film and Television Job Retention and Promotion Act created a five-year film incentive program (Program 2.0) beginning in fiscal year 2015-16. The program is managed by the California Film Commission. Under the program, $330 million in tax credits is made available each year for the purposes of bringing film projects to California.

Aimed at retaining and attracting production jobs and economic activity across the state, California’s new incentive expands eligibility for a wide range of project types that were excluded from the first-generation program. Such projects include big-budget feature films, TV pilots, and 1-hr TV series for any distribution outlet.

Under Program 2.0, tax credits are allocated from four dedicated funding “buckets” that target different categories of production. Having set buckets for different types of production ensures that each category is always allocated a certain amount of annual funding.

To select which projects receive film tax credits, Program 2.0 replaces the lottery system used previously with a “jobs ratio” ranking. The new ranking system selects projects based primarily on wages paid to below-the-line workers. It also takes into account qualified non-labor spending (vendor payments, equipment, etc.) and other criteria that allow applicants to accrue “bonus points.”

In addition, “uplifts” (an additional 5% tax credit) are now available for projects that shoot outside the Los Angeles 30-mile zone, or have qualified expenditures for visual effects (minimum thresholds apply), or perform music scoring/track recording in California.

Economic Impact of California’s New Film Incentive (2015 – 2016)

Individuals Hired – First Two Program Years

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Eligibility and Funding

Program 2.0 allocates tax credits in four dedicated “buckets” for different categories of production, which have specific funding percentages of annual funding for each:

  • 40% ($132 million) – designated for New TV Series, TV Pilots, Movies-of-the-week, Mini-series and renewed series already in the Program
  • 35% ($115.5 million) – designated for Non-independent Feature Films

  • 20% ($66 million) – designated for Relocating TV Series
  • 5% ($16.5 million) – designated for Independent Projects

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The California Film Commission (CFC) is also authorized to allocate any unused funds from a specified category to another category with a higher demand.

To select which projects receive film tax credits, Program 2.0 replaces the lottery system used previously with a “jobs ratio” ranking. The new ranking system selects projects based primarily on wages paid to below-the-line workers. It also takes into account qualified non-labor spending (vendor payments, equipment, etc.) and other criteria that allow applicants to accrue “bonus points.” In addition, “uplifts” (an additional 5% tax credit) are now available for projects that shoot outside the Los Angeles 30-mile zone, or have qualified expenditures for visual effects (minimum thresholds apply), or perform music scoring/track recording in California.

KEY CHANGES FROM THE PRIOR PROGRAM

  • Increases tax credit program funding from $100 million to $330 million; extended for 5 years
  • Expands eligibility to big-budget feature films, 1-hr TV series (for any distribution outlet) and TV pilots
  • Eliminates budget caps for studio and independent films
  • Replaces lottery selection with a ranking system based on jobs and other criteria
  • Adds a 5% “Uplift” for productions that film outside the 30-Mile Zone, as well as for visual effects and music scoring/recording performed in-state.

ELIGIBLE FOR 20% NON-TRANSFERABLE TAX CREDIT

Plus 5% Uplift

  • Feature Films: $1 million minimum budget; credit allocation applies only to the first $100 million in qualified expenditures.
  • Movies-of-the-Week and Miniseries: $500,000 minimum budget
  • New television Series for any distribution outlet: $1 million minimum budget per episode (at least 40 minutes per episode, scripted only)
  • TV Pilots: $1 million minimum budget (at least 40 minutes)

ELIGIBLE FOR 25% TRANSFERABLE TAX CREDIT

Maximum credit is 25%, uplifts do not apply

  • Independent Projects: $1 million minimum budget; credits apply only to the first $10 million of qualified expenditures. (Only independent projects may sell their tax credits.)
  • Relocating TV Series, any episode length, that filmed its most recent season outside California: $1 million minimum budget. (Additional seasons are eligible for 20%.)

5% CREDIT UPLIFT

The uplifts below cannot be combined. The maximum credit a production can earn is 25%.

  • Filming outside the Los Angeles 30-mile zone + 5%
  • Music Scoring and music track recording expenditures + 5%
  • Visual Effects expenditures (minimum spend required) + 5%

California’s Original Film & TV Incentive

Original California Film Tax Credit: Total Projects (Years 1 – 7)

Feature Films 160
TV Movies 77
TV Series 63
Relocating TV Series 9
Mini-Series 2

California’s original Film & Television Tax Credit (Program 1.0), enacted in 2009, established a five-year, $500 million program ($100 million per fiscal year). The program is managed by the California Film Commission. The program was subsequently extended for an additional three years with $300 million in additional funding.

At the time the program was conceived, it was designed to make the best use of available funding by targeting those productions most likely to leave the state due to incentives offered by other states and countries. Such projects included TV series produced for basic cable, and low-to mid-budget feature films. However, feature films with budgets over $75 million were completely excluded from the program, as were non-relocating series produced for network television, premium cable channels and online digital services.

Under Program 1.0 rules, tax credit allocations were assigned via a lottery whenever more than one application was received on any given day. Because the CFC was flooded with hundreds of applications at the beginning of each application period, the lottery system helped ensure that tax credits were distributed as equitably and transparently as possible and preferable to a first-come first-serve system.

It was a unique solution to a uniquely California problem: California remains the first choice of the majority of producers and filmmakers, but every year California’s relatively modest tax credit program was immediately over-subscribed. For a variety of reasons, some projects initially selected to receive an allocation of California tax credits ultimately withdrew from the program. In such an event, those credits were reassigned to the project next in line on the waiting list.

Economic Impact of California’s Original Film Incentive (2009 – 2015)

Individuals Hired – Seven program years

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