EXCLUSIVE: With a very hard out of less than two weeks, state legislators in Sacramento are either going to be Scrooge or Santa with California’s film and TV tax incentives for the near-moribund L.A. industry.
It’s a mixed result right now with a lot of good intentions, a lot of cooks in the kitchen and the legislative session ending on August 31. In the past few hours alone, with studios and indies panicked about effectively losing lucrative annual $750 million industry incentives by 2030, a mission to fix the mega-measure that’s already signed into law and caps out business and corporate tax credits over $5 million went from launch to being stuck on the legislative tarmac.
A deal was in place Thursday morning that would have carved out an exception for independent productions and some studio/streamer productions. In fact, with an anticipated backlash from Silcon Valley, the deal looked so done the MPA late last night circulated a talking points one-pager on it to stakeholders and media outlets. However, as the final language was being put in place by Assemblymember Rick Chavez Zbur’s office today, legislative leadership told the Hollywood Democrat they were now taking a “different approach,” I hear.
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A move that pulled the plug, hard.
There are no definitive details on what that new approach is, or whether it could end us as a fast-tracked trailer bill, a policy carve-out or something else. But sources tell me there were “indications” from Gov. Gavin Newsom’s “team” that Zbur’s proposal wasn’t what they had in mind.
Officially, probable 2028 POTUS candidate Newsom’s office did not have anything to say about any deal or the end of any deal on SB 122. Insiders privately are referring to the effort to fix the harms of SB 122 as a “work in progress.”
As elections for City Hall and a new governor heat up, that process may not land so well in SoCal.
Wildfire-ravaged City of Angels also has seen production flight from the home of Hollywood and around 50,000 film and TV jobs lost in the past four years. Even without projected big cutbacks from a merged Paramount and Warner Bros Discovery or a red state relocation by David Ellison if California Attorney General Rob Bonta and others don’t back down on their antitrust lawsuit, that blast radius has wiped out vendors and delivered a blow to the tax base.
Amidst all that, Zbur, whose District 51 spans all the way from Glendale to Santa Monica, says he is keeping up the fight against SB 122 with that August 31 drop-dead date front and center.
“We’re working very hard with the governor, legislative leadership and our partners in the Senate, and I’m optimistic that we are very close to reaching a solution that helps address the impact of SB 122 on California’s Film and Television Jobs Program,” the two-term member told Deadline today.
While staying mum about what went down earlier today and acknowledging the harsh calendar, Zbur — a lawyer in a past life — offered optimism that the legislative tax credits snafu could be fixed in the next week.
“Our priority throughout these negotiations has been protecting the thousands of workers and small businesses that depend on this iconic industry and preserving the progress we’ve made to bring production and good-paying jobs back to California,” he said. “There are still details being worked through, but I’m encouraged by where the conversations are and hopeful we can reach an agreement very soon.”
Besides the limits of SB 122, which was enacted in June but has seen pushback from the likes of Tinseltown unions and CAA boss Bryan Lourd, there’s also the long-desired effort to enact a wide-ranging post-production tax credits program.
Offering a 35% incentive aimed at stiffening up jobs here and enticing post-production to relocate to the Golden State, AB 2319 is racing toward a vote in the state Senate by next week once the bill is in final shape.
All of which means what ends up on outgoing Gov. Newsom’s desk to be signed or vetoed by September 30 could prove an inflection or infection point for the entertainment sector.
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“The next seven days are critical,” declared Assemblyman Nick Schultz, who is one of the primary pols behind the post-production tax credits legislation along with Sen. Ben Allen.
RELATED: Editors Guild Offers Praise & Warning For California Post-Production Incentives Initiative
“We’re literally in the period of speak now and forever hold your peace,” added the Democratic rep of studio-heavy District 44. “There’s no more time to wait. Now is the time for Hollywood to activate and be as loud as they possibly can to get this thing passed.”
If everything goes to schedule, under the rules of the California Legislature, once final amendments are added to the bill, it has to sit “in print” for 72 hours. Then the legislation can head to a Senate floor vote – where it certainly has the votes, I hear.
Earlier this year, state representatives talked about the post-production credit reaching up to $100 million in allocated incentives across VFX, scoring, mixing and more. That sky-high number is now more realistically envisioned at around $35 million for the first year.
Yet, as close as the post-production credit might be to being added to the incentives program administered by the California Film Commission, the reality is there is still no actual funding in place for it.
The borderline-baroque $352 billion state budget is so tightly wound with its zero-deficit demands that money for such a new credit is nowhere to be seen, no matter how hard Hollywood has advocated for it and, truth be told, desperately needs it to turn the job losses around.
RELATED: List Of Hollywood & Media Layoffs From Paramount To Warner Bros Discovery To CNN & More
“We are gratified that the Senate Appropriations Committee overwhelmingly voted in favor of a standalone post-production tax credit, and we are pushing hard for its broad bipartisan support in the Senate floor vote,” Editors Guild Local 700 president F. Hudson Miller states. “We need to make sure that AB 2319 is passed, and also that it is fully funded.”
Like a true seasoned politician, the union leader went on to say: “Additionally, we are calling on lawmakers to defend the Film and TV Tax Credit Program 4.0, which would be devastated by the recently imposed caps on tax credits. All three moves are vital and essential to keeping film and TV jobs, and their positive economic effect, from leaving California.”
“Certainly, we would rather be in the spot where we have some funding and we’re going back to secure the rest of it,” Asm Schultz admits of the finances of the post-production flex. “But versus like having absolutely nothing and having to go back fresh next year asking for some initial funding, we’re going to be going through this process of advocating and hopefully negotiating with the governor’s office between January and June of next year.”
Present deadlines in hand, a lot of this will end up with the next governor.
To that, Deadline reached out to both the campaigns of Steve Hilton and Xavier Becerra for comment. On both the efforts to undo the tax credits cap and the ambitions for a post-comprehensive production credit. Neither the Republican and ex-Fox News host nor the Democrat and ex-Biden cabinet secretary replied.
We will update if and when we do hear from them.
