Boosters Warn California’s Film & TV Tax Credit Put At Risk By Proposed Statewide Ballot Initiative; Measure’s Backers Say “Scare Tactics” At Play

Boosters of California’s film and TV tax credit say that the program would be at risk if a proposed initiative makes it to the ballot and passes in November — albeit that prospect is being challenged by the measure’s backers.

The initiative, the Taxpayer Protection and Government Accountability Act, would raise the threshold for passing tax increases in California, a move that has brought stern warnings from Gov. Gavin Newsom, local governments and unions, among others, as well as a challenge before the state Supreme Court.

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The initiative would require state tax increases to pass not just the current two-thirds threshold in the legislature, but sent to voters for approval by a simple majority.

The proposed initiative also would be retroactive to January 1, 2022, meaning that any tax increase passed in that time frame since then would become void if not passed by a two-thirds legislative majority and by the voters within 12 months.

The renewal of the state film and tax credit, SB 132, passed the legislature overwhelmingly last year. It extended the program for five more years starting in 2025, with $330 million allocated in incentives annually.

As lawmakers were considering the renewal, the state Legislative Counsel determined that SB 132 would need a two-thirds vote because it “would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution.”

Because of changes in the way that credits were allocated, some qualifying studios will be receiving a lower credit, resulting in an increase in their tax liability, according to a legal analysis obtained from the Governor’s office. Given that change, SB 132 would “very likely” be impacted by the ballot initiative and would then need approval from voters or become void, according to the analysis.

Producer Colleen Bell said in a statement that “the consequences of just allowing this measure to stay on the ballot are extremely dire for our state’s creative economy. Putting the film and tax credit in jeopardy — even for a year — could send shockwaves through the industry. The risk of the tax credit going away altogether would be catastrophic. No one will be served by the uncertainty this will cause for the film and TV industry in California.” Bell is the executive director of the California Film Commission, but was not speaking on behalf of the group.

Studios have yet to weigh in. A spokesperson for the Motion Picture Association said they have no comment.

Backers of the proposed ballot initiative have a different interpretation of its impact on the film and TV incentive. They say that opponents of the initiative are trying “scare tactics” and misrepresenting the impact it would have on the film and TV credit.

The Taxpayer Protection and Government Accountability Act campaign insists that the measure “does nothing to affect the current or future Film and Television Tax Credits.” They argue that the existing film and TV credit program sunsets and “will no longer be in effect,” and the renewed program would be a different state law. “The new credit, regardless of the amount, will constitute a tax reduction, not a tax increase, and is therefore unaffected” by the measure, the campaign said.

Rob Lapsley, co-chair of the campaign and president of the California Business Roundtable, said in a statement, “Unfortunately, today’s tactics are the latest in a long list of failed attempts to mislead voters about the impacts of this measure. These scare tactics won’t work. TPA continues to be extremely popular with voters, who are demanding more accountability from their elected officials.”

The Secretary of State has until June 27 to finalize the statewide ballot, and in the past there has been a fair degree of jockeying as the November election picture becomes clearer. There is still the possibility that the interests can reach some kind of a compromise, although no negotiations are taking place, according to a representative of the Business Roundtable.

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