EXCLUSIVE: A decade after the last major overhaul of California film and television tax credits program, governor. Gavin Newsom today we will unveil a massive increase in incentives to restart work and production in Hollywood country.

In an announcement this afternoon at Raleigh Studios, the governor will reveal that he aims to increase state tax credits from their current level of $330 million per year to approximately $750 million per year, I learned.

The staggering increase will not happen immediately and is subject to approval by the Democratic-majority legislature as part of the Golden State’s 2025-2026 budget. However, in this election year of closing ticket races, Sunday’s announcement aims to boost local confidence in an industry and workforce that has seen production in Los Angeles and across the state decline significantly and jobs have dried up over the past year, according to sources. say.

To that end, Governor Newsom will be joined at today’s press conference by the Mayor of Los Angeles. Karen Bass and a Praetorian Guard of work managers, junior workers, state officials and industry advisors. Mayor Bass has been a strong supporter of increasing state tax credits to offset the “downturn.” as the mayor told Deadline in Augustof production in the city. With Los Angeles production down double digits in 2023, Bass also floated the idea of ​​a local tax credit.

Regardless if this idea ever became a reality, it was clear even before last year’s labor unrest that something needed to change with the state’s tax credit program

“The program is oversubscribed and outdated,” an insider exclaims of California’s current big and small screen program, which offers 20-25 percent tax credits for studio/streamer films, independent films, new television series and relocation shows. “A lot of productions don’t even apply because there’s very little chance they’ll be successful. And the industry, teams, and methods of delivering content have changed dramatically over the past 10 years, so what the state offers falls short of basic needs and barely competes with that of Atlanta or Canada .

Besides boosting the bottom line, today’s increase proclamation by Governor Newsom will not change anything else. California Film Commission administered program, I am told. No new categories, no new percentages, nada.

In fact, leaving everything as is except the money, the expectation from Sacramento and its studios, streamers, guilds, and civic allies is that the revitalized program will be seen as more accessible than ever to potential applicants seeking credits tax and the ability to plan ahead. with projects. Newsom, who is term-limited, will likely face little difficulty passing the increase as part of next year’s budget deal. Politicians had to cut a lot of progressive and porky programs this year to reduce the state’s estimated $46.8 billion deficit, but film and television tax credits were left untouched.

Part of the reason is that the program has proven to be a revenue generator for the state as a whole.

Even though the media industry was starting to slow down, a 2022 report from the Los Angeles Economic Development Corporation claims that “for every dollar of tax credit allocated, the state benefited from at least $24.40 in economic output, $16.14 in gross domestic product, $8.60 in wages and $1.07 in national and local tax revenues.”

Those are the kind of numbers you can expect Governor Newsom to bring up later today.

Additionally, in addition to doubling California’s credits, which were established in their current form in 2014, this increase will make the Golden State the most capped source of production tax incentives in the country – at least on paper. Currently, with a $280 million expansion last year, New York State offers about $700 million in capped incentives. However, this number is augmented by a patchwork of other compensations and exemptions available for productions in various specific Empire State jurisdictions.

While states like New Jersey, Nevada and Utah have been put more tax credit money on the table, Louisiana and Georgia remain among California’s main rivals. Coming out of the production shutdown during the WGA and SAG-AFTRA strikes 2023 And Industry-wide layoffs and cost-cutting measuresthe Peach State, like California, has yet to fully rebound. That said, even though California produces more overall than anywhere else, Georgia, and particularly Atlanta, still attracts more big-budget productions on average than anywhere else in the United States.

It doesn’t hurt that costs in Georgia are generally much lower than those on the West Coast and the state has an uncapped incentive program ranging from about $900 million to $1.2 billion. dollars per year. Films or television shows filmed in the Southern state receive a basic 20% transferable tax credit. As the accounting executives at Disney, Netflix, and everyone else in town will no doubt tell you, productions also easily receive a 10% “raise” from Georgia Entertainment promotion if they include the state logo in their credits for five seconds or, according to the Georgia Department of Economic Development, an “alternative marketing promotion”.

This new increase recommended on Sunday by Governor Newsom will certainly shake up the status quo of the tax credit.

This partly takes the risk that other states, Canadian provinces and European nations more competitive than ever will now increase its supply as well. The other side of the coin, as almost happened in Georgia on several occasionsis that some states could reduce their cap and incentives to avoid blowing their budgets and remain competitive. Admittedly, it’s hard to imagine New York improving its ranking to California’s best after doing so just a year ago.

Previously a paltry $100 million effort determined by the lottery, The California program was overhauled and signed into law by Jerry Brown, a candidate for re-election in 2014.. With a focus on job creation, the program also placed emphasis on television shows from Vancouver, New York and Atlanta, while finally allowing big-budget films to be eligible. Moving away from the ghost town that the pandemic has turned Los Angeles into, Governor Newsom and the Legislature have strengthened the incentive program in 2021. at $420 million over two years and added additional credits for building more soundstages.

In this context and with few new productions to fill these new sound stages, the latest renewal of the tax credit and state cinema, SB 132, overwhelmingly passed by the legislature last year. The renewal extended the so-called 4.0 program by five years from 2025, with the $330 million allocated in annual incentives now refundable in the event of tax liability. Yet even with this long-term peace of mind, things grew even bleaker for Hollywood and instability loomed over the 700,000 jobs the state says benefit from the industry.

One of the biggest complaints from TV productions in particular about the amount of money going to small screen projects is that more and more of it is actually unavailable. Indeed, the vast majority of successful veteran applicants are grandfathered year after year as long as they remain on-air or online, leading to application periods in which only a few new shows see credits.

Looking at the program books, $132 million is available each year to applicants for new television series, miniseries, recurring series and pilots in the cookie jar of film and television tax incentives, as well as an additional $56.1 million for television series relocation. On the film side, the breakdown is $115.5 million per year on average for feature films, plus $10.56 million for independent films with budgets over $10 million and $15.84 million. for independent films with a budget of less than $10 million.

With this, and with the current doubling of the current Film and Television Tax Credit program, the latest application period for the television categories closed on October 23, with an approval date of November 25 . On the cinema side, the next cycle of applications will take place from January 25 to 27, 2025, with successful candidates to be notified on March 3, 2025.