California is considering a major change to its film and television tax credit program: allowing some “above-the-line” costs, including compensation for actors, directors and producers, to qualify for subsidies. Gov. Gavin Newsom’s proposal would also increase the program’s annual funding from $750 million to $1 billion, if approved.
Since launching the incentive in 2009, California has generally excluded salaries for people in front of the camera. Supporters of changing that policy say it puts the state at a disadvantage as other states and countries compete for productions. Assemblymember Rick Chavez Zbur, who has worked on the program, said California is “still not competitive.”
The proposal comes as filming activity in Los Angeles continues to fall. FilmLA reported that shoot days from June through September were nearly 5% lower than in the same period last year and 11% below the previous quarter. The total was 36% below the region’s five-year average.
The debate is illustrated by HBO Max’s “The Pitt,” which films at Warner Bros.’ lot in Burbank. California is projected to provide its production company, Parallax TV Productions, nearly $49 million in subsidies across the series so far. More than half of that amount is expected to relate to season three. The show’s existing credits could grow further if the proposed changes make additional talent pay eligible.
Zbur says discussions have recognized that public funds should not subsidize compensation for studio executives or star actors. He distinguishes those groups from other workers whose earnings, he says, may be modest. A cap on individual salaries is one possible way to draw that line, although the legislation has not yet been drafted.
Opponents of broader eligibility question whether the credits deliver enough benefit to California taxpayers. The Legislative Analyst’s Office said last year that the program increased production activity, but found weak evidence that it benefited the state’s overall economy. There are also concerns that subsidies for talent compensation could go to people who do not live in California. A Hawaii state report, for example, found that of $36.3 million in above-the-line wages paid by productions receiving credits in 2024, $11.7 million went to residents and $24.6 million to people from outside the state.
The proposal would face further scrutiny over productions that might have filmed in California anyway, including “The Pitt.” Critics could argue that credits for those projects subsidize costs without changing where a production is made. The plan also comes amid studio layoffs and broader concerns about affordability and state funding.
California’s approach contrasts with New York, which removed a $500,000 cap on above-the-line costs in an expansion of its program last year. Industry tracker ProdPro reported that New York production spending rose 87% in the quarter covered by its latest snapshot, compared with a 17% increase in California.
The proposal’s future may also depend on who succeeds Newsom. Democratic candidate Xavier Becerra has supported expanding credits based on evidence about where California is losing work, but has not addressed above-the-line costs. Republican Steve Hilton has called for uncapping the credit and making those expenses eligible. Any legislation would still need support in Sacramento, where lawmakers would weigh the proposal’s potential to bring productions back against its cost to taxpayers.
Sources: The Hollywood Reporter.