/>iIn a state where the sun always shines, California’s film tax credits seem to be the script for success. On July 10, 2023, Governor Newsom signed legislation to extend and expand California’s $330 million-a-year Film and TV Tax Credit Program 3.0 for an additional five years, meaning the original expiration date of June 30, 2025 has been extended through June 30, 2030.[1] Following this recent expansion, the program, now dubbed “Program 4.0,” has already enticed upcoming productions scouting other locations to reconsider. Colleen Bell, the Director of the California Film Commission, says that just during the first half of 2024, the state has already attracted 12 new and one relocating television series to California.[2] As evidence of that, we see Universal Content Productions LLC received one of the largest credits worth $12 million for the first season of “Suits: L.A.”, which helped ignite the shift from production in Canada to production in California.[3] This spinoff alone is expected to spend $50.7 million and create about 2,600 jobs in California.[4]
With this piece of legislation, it is evident California wants to remain at the forefront of the film and television industry. Since 2021 approximately 17 other states have followed suit and enacted measures to either implement new or expand existing film tax incentives.[5] This makes good business sense considering local productions have the power to entice economic development, educate workforce, attract tourism, and create jobs.[6] However, in order to combat the increasing competition from other states, the 5 year extension is not the only change for California’s Program 4.0. For instance, the tax credits are now refundable.[7] Also, there is a push to support individuals from underserved communities.[8] To qualify for the tax incentives, participating projects are now required to file a diversity, equity, inclusion, and accessibility (DEIA) best practice checklist and a DEIA workplan as well as demonstrate a good faith effort to hire individuals that are “broadly reflective” of California’s population.[9]
Given that the film and television industry in California provides over 700,000 jobs, pays almost $70 billion in wages for its residents,[10] and generates billions in production spending,[11] the rationale behind this signed legislation is clear. California does not appear to be slowing down or giving up its critical role in the film and tv industry any time soon. At the beginning of September 2024, the California Film Commission awarded $51.6 million in tax credits to 18 projects, including a feature about the singer Janis Joplin. Shailene Woodley, a producer and star in this feature, said, “Thank you to the California Film Commission’s Film & Television Tax Credit Program – myself and the other producers on this project believe California is the only place to film a slice of Janis’s life with authenticity and truth – and we are so grateful to have received the green light to do so!”[12]
Our firm has represented clients in some of the industry’s largest and most complex transactions in the entertainment industry and has worked on numerous deals utilizing tax incentives around the world. We are here to assist with any specific qualification or compliance questions you may have. We offer tailored advice to ensure your specific business needs are addressed.
FOOTNOTES
[1] The Basics 3.0 | California Film Commission and 4.0 Tax Credit Program Regulations (ca.gov)
[3] ‘Suits’ Spinoff, Janis Joplin Biopic Earn California Tax Credits (bloombergtax.com)
[4] ‘Suits’ Spinoff, Janis Joplin Biopic Earn California Tax Credits (bloombergtax.com)
[7] 4.0 Tax Credit Program Regulations (ca.gov)
[8] 4.0 Tax Credit Program Regulations (ca.gov)
[10] California Film Commission | State of California
[11] 4.0 Tax Credit Program Regulations (ca.gov)
[12] Indie films, other productions get new round of state incentives | Governor of California
