The Breakdown | Explaining Southern California's economy
Business & Economy

California film and TV tax credits: What happens to productions that don’t receive them?

A film crew shoots in front of the Hilton Hotel on Michigan Avenue on September 12, 2013 in Chicago, Illinois.
A film crew shoots in front of the Hilton Hotel on Michigan Avenue on September 12, 2013 in Chicago, Illinois.
Scott Olson/Getty Images

A report released Wednesday by the California Film Commission suggests that while the state's film and TV tax incentive has been very popular, its success is limited by its size.

For the last five years, California has been trying hard to keep film and TV production in the state because other states and countries have been luring production away with tax incentives. In 2009, the Golden State started a tax incentive program of its own that offers up to $100 million per year in credits to certain productions that agree to shoot in the state.

The film commission’s latest annual progress report runs the numbers on every year of the program. For example, 71 TV and film projects got the tax credit last year. The report estimates those productions spent $1.1 billion in the state and hired 7,500 crew members, nearly 4,000 actors, and 96,000 background actors.

The return on the state's investment appears to be good, but the film commission receives far more applications each year than $100 million can cover. The commission uses a lottery to select the winners of the tax credit. This year, 497 applications came in on the first day of the application period, and so far, only 26 projects are approved for getting the tax credit.

Amy Lemisch, the Executive Director of the Film Commission says her office gets repeated calls from producers saying they'd like to shoot their next project in California, but without the tax incentive, it doesn't make financial sense. 

"Sure, it's frustrating for them, but at the same time, we have to stay focused on the program that we've been given," Lemisch told KPCC. 

The report looks at what happens to films and TV shows that apply for the credit but don’t receive it. Most of those projects go to another state or country where they can get a tax credit, and they take tens of millions of production dollars with them:

...the state has lost 84 percent of production spending by projects that applied but were denied. The data suggests that this spending likely would have remained in-state if the program could accommodate all projects that apply. 

Set in LA, but the set's not in LA

Groundswell Productions, which is making a feature film called "Trumbo," applied for a credit this year. It's well beyond 200 on the waiting list, so in about two months, the production will start shooting in Louisiana.  

President of Production Janice Williams wouldn’t give the exact dollar figure on the film’s budget, but she estimates the film’s getting an additional $2 million to $3 million for shooting in Louisiana. That’s money they can’t afford to pass up.

"It’s the difference between it feeling like a very tiny independent film that has to be told with small numbers of people in small rooms, and being a bigger, more beautiful film with scenes with many extras and telling it in a way that makes it a film that is accessible to more people because it feels less like a tiny indie drama," Williams said. 

Adding insult to injury, “Trumbo” is about screenwriter Dalton Trumbo, who won two Academy Awards while being blacklisted during the 1940s and '50s.It's a film about Hollywood and it’s set in Hollywood, but it won't be shooting here.The irony isn't lost on Williams.

"We didn't apply for the California tax credit just because we were trying to find tax credits. We wanted to film here because this is where the film takes place," Williams said."I think it's ironic that 'Trumbo' tells the story of Hollywood turning in against itself in some ways and Hollywood rooting for itself in other ways."

Cable TV series balloon, but California's share deflates

The production of cable TV shows like “Graceland” is where the growth is, but that's exactly where California is losing ground, according to the report.

In 2005, the report says, there were 79 hour-long TV series in production – 65 percent were shot in California.By 2013, there were 137 hour long TV series, and California hosted less than a third of them.

Lemisch said most of the growth is in cable TV shows — especially basic cable — but California is losing the production to places like New York and Canada.

"The potential is there, but we're not getting our share of that growth," Lemisch said.  "We're going backwards, really." 

The report says the tax incentive has been able to lure some productions away from other places where they started production. The TV shows include "Important Things with Demetri Martin" (from New York), "Torchwood" (from the U.K.), "Body of Proof" (from Rhode Island), "Teen Wolf" and "Let’s Stay Together" (from Georgia).

This year, nine TV series already shooting in other states or countries applied for the tax credit, and only one of those, BET’s "Being Mary Jane," got the credit.That production is expected to come in from Atlanta.

Good investment or arms race to the bottom?

New York’s production tax incentive program has a pot of more than $400 million dollars a year, four times the size of California’s. And there’s a big push in Sacramento to get California's pot to compete with that.

Critics of tax incentives worry that if California tries to match New York or exceed it, it will advance an arms race to the bottom, where states keep draining resources to add more to the tax incentive pool.

Los Angeles Mayor Eric Garcetti, who characterized the city's loss of production as a "state of emergency," is among those who believe getting into the arena with New York is crucial.He maintains that California's program gives a smaller tax credit to each project, but producers still prefer it over those of other states.

"They know California crews and infrastructure are better," Garcetti said in a recent interview with KPCC. "For us, the issue isn’t so much that people are going to keep the pool going up. We looked at every single production that applied for the California tax credit, and if we had a number around where New York was, ninety-something percent of them would have gotten the funding and stayed here."

Dollar figures for what legislators want to add to California's tax incentive pool should begin to emerge next month, when the state Senate Appropriations Committee takes up a measure to expand the program. 

« Back to top

DOCUMENT: Read the full report