California’s efforts to jumpstart the entertainment economy are showing early signs of success, as the California Film Commission saw a 400% spike in applications for tax credits in July.
The state expanded its film and TV incentive from $330 million annually to $750 million in June in hopes of counteracting an industrywide downturn. The commission opened a new “application window” for TV series on July 7-9, the first under new regulations that make the credit more attractive to productions.
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“It’s clear the recent expansion and program enhancements are drawing strong attention from across the industry,” said a spokesperson for the commission.
The new program is more generous, offering a credit worth 35%-40% of qualified production costs, up from 20%-25% under the old system. The cap on qualified expenses has also been raised from $100 million per project to $120 million. Larger projects could get as much as $48 million in credits, nearly double the maximum under the previous program.
Eligibility has also been expanded. The old rules allowed non-relocating TV series to qualify only if each episode was at least 40 minutes long excluding commercials. That threshold has now been lowered to 20 minutes, meaning that sitcoms and other half-hour shows will qualify.
The new law also allows animated shows and “large-scale” competition shows to qualify, but the commission will not begin taking applications for them until 2026.
The commission will now give out $412.5 million per year to TV shows, $262.5 million to studio films, and $75 million to independent films.
Credits are allocated based on a “jobs ratio” metric, with priority going to productions that pay the most wages relative to the subsidy. The commission previously estimated that the expansion would lead to a 40-50% increase in jobs supported by the credit, or about 4,400-5,500 jobs per year.
Another significant change is that the tax credit is now “refundable,” meaning that companies can get cash back if they do not have state tax liability. Under the old rules, companies that do not pay state taxes could end up with unusable tax credits, limiting the value of the incentive.
Refundability, which was approved in 2023, makes the program more competitive with other states, almost all of which provide some way for companies to monetize credits if they do not pay state taxes. Companies that get cash back will only be able to claim 90% of the face value of the credit, and it will be spread over five years.
Another window for feature films is set to open on Aug. 25-27.
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