The California Legislature has approved a budget fix for the entertainment industry that allows studios to cash in their tax credits faster.
Both the Assembly and state Senate passed the bill, SB 186, before the end-of-session deadline of midnight on Monday.
The measure seeks to address concerns raised by Hollywood stakeholders after the Legislature imposed a $5 million annual cap on corporate tax credits in June. The Motion Picture Association and the Entertainment Union Coalition argued that the cap would undercut the state’s $750 million incentive for film and TV production.
In response, legislative leaders and the governor’s office agreed to let studios to redeem tax credits for cash in two years instead of five. The deal falls short of a full carveout for the film industry, though it does fully exempt credits for independent films from the cap. It also extends the expiration date for old, non-refundable tax credits from nine years to up to 15 years.
Gov. Gavin Newsom is expected to sign the measure.
The deal represents a somewhat unsatisfying compromise for studios and unions that pushed for the expansion of the state’s incentive program last year, and wanted those credits to be completely exempt from the cap. But state leaders were not willing to go along with a full carveout, which would have prompted similar demands from the tech industry.
Charles Rivkin, the CEO of the MPA, said in a statement Tuesday that the agreement will “maintain the program’s competitiveness so creators continue to make movies and shows in California.”
Hollywood unions rallied their members to send about 450,000 letters to lawmakers in support of a fix to the budget cap, the EUC said in a statement. The coalition thanked the authors, Assemblyman Rick Chavez Zbur and Sen. Ben Allen, and Newsom, for supporting the agreement, but also suggested that more remains to be done, saying it “will continue to champion” the incentive in the future.
On Sunday, the Legislature also approved a separate tax incentive targeted at the post-production industry, which now awaits the governor’s signature. The Motion Picture Editors Guild has campaigned for the measure, along with a coalition of post-production facilities and VFX studios.
The Senate passed the measure, AB 2319, on a vote of 33-5. The Assembly, which had previously passed an earlier version, concurred with the Senate’s amendments, 72-2.
Newsom has not taken a position on the measure, and has until Sept. 30 to sign it. The author, Assemblyman Nick Schultz, said in a statement on Monday that if the bill becomes law, the Legislature has agreed to allocate $10 million to the program. Supporters had pushed for $100 million.