State film tax credit extension clears a hurdle but is scaled back

Lawmakers gave a preliminary thumbs up to a two-year extension of California’s film tax credit, a mixed result for Hollywood backers who had pressed for a five-year extension but were relieved to get more money given the state’s budget crunch.

By a 5-1 vote Thursday, the Senate Governance and Finance Committee supported a bill that would extend the tax credit, which was due to expire in July 2013, through 2015. The original bill would have provided funding through 2018.

California currently sets aside $100 million annually for dozens of film and television projects applying for credits that cover 20% to 25% of qualified production expenses. The program is limited compared with what many other states offer, in that it excludes movies with budgets of more than $75 million.

Supporters say the tax credit has since its 2009 debut kept productions in California that might have been filmed elsewhere, and is vital to keep California competitive when nearly 40 other states offer tax credits and rebates to filmmakers.

If approved by the Legislature, the bill would mean California will set aside $200 million over two years. The bill also recommends various measures to make the program more transparent to taxpayers, such as posting a list of companies that received tax credits and their qualified expenditures.

A coalition of entertainment industry unions and film industry officials had lobbied for a five-year extension and an additional $500 million in tax credits, noting that TV and movie producers need assurances that incentives will be available for the long term before they commit to filming their shows in California.

But that is a tough sell when the state is facing a severe budget crunch and other groups are competing for state funds.

“At a time when we’re having to cut education and higher education and a multitude of social services ... we find it disheartening we would have a conversation about tax credits,� Jennifer Baker, a legislative advocate for the California Teachers Assn., told lawmakers.

Despite the shorter funding commitment, representatives of SAG-AFTRA, the Directors Guild of America and the Motion Picture Assn. of America voiced their support for the bill, noting that last year legislators approved only a one-year extension.

“We’re not insensitive to what’s happening,� DGA lobbyist Gene Erbin said. “It’s a good outcome. It gives us a chance to continue the program with some continuity.�

The California film incentive has been drawing more scrutiny in Sacramento. Although several studies have said the tax credit boosts the economy and generates jobs, a recent analysis by the legislative analyst’s office concluded that the program results in a net loss for the state.

The bill will go before the Senate Appropriations Committee. The full Senate is expected to take up the measure in August.

A similar bill, winding its way through the Assembly, received a unanimous vote in May from the Revenue and Taxation Committee.

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