Tax Credit Bill Passes Legislature, Aims to Make Hollywood Reflect California’s Diversity

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A bill that for the first time establishes a goal to make Hollywood’s workforce more reflective of California’s diversity passed the state Legislature on Thursday and is expected to be signed by the governor.

The bill also includes a dramatic expansion of the state’s film and TV tax credit, including a new program to encourage the construction of new soundstages. In total, the bill awards an extra $330 million in credits, on top of the $330 million the state already provides to the industry each year.

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The most significant change, however, may be the provision requiring productions that receive the soundstage credit to have a workforce that is “broadly reflective of California’s population, in terms of race and gender.” That goal has never been part of the state’s film credit program before.

“If you want a state credit, your productions are going to have to start reflecting the state’s priorities,” said Assemblywoman Autumn Burke, D-Inglewood, in an interview. “The state’s priorities are that we are a diverse community.”

The measure passed the Assembly on a 62-0 vote. The state Senate passed the bill 37-0.

The bill leaves it to the California Film Commission and the Governor’s Office of Business and Economic Development to establish guidelines that will spell out what “broadly reflective of California’s population” means. The state is 39% Latino, 37% white, 16% Asian American and 6.5% Black, according to the latest Census estimates.

The film workforce is majority white, according to figures compiled by the California Film Commission. It is also 75% male, while the state’s population is, obviously, about 50% male.

The diversity requirement applies only to the soundstage credit, which accounts for $150 million of the new tax expenditure. It does not apply to the baseline $330 million annual film and TV credit, nor to the $180 million boost to that program which is also part of the bill.

However, the current version of the film and TV credit — dubbed Program 3.0 — is set to expire in 2025. Some lawmakers are interested in applying the diversity provision to the entire program when it comes up for renewal.

“We hope this can be the model used in two years, for 4.0,” said Assemblywoman Wendy Carrillo, D-Los Angeles.

In leveraging the tax credit to try to encourage diversity, the state is following the examples of Illinois and New Jersey, which have each established diversity provisions in their programs. In the past, California lawmakers have avoided doing that, citing constitutional impediments. The state’s diversity efforts have instead been focused on data collection and job training programs.

Assuming the bill becomes law, applicants for the soundstage credit will have to submit a diversity workplan for approval by the California Film Commission to qualify. That workplan must contain the goal of reflecting the state’s population. After the credit is awarded and the project is completed, productions will have to show the film commission that they followed through on the plan.

Productions that can show they met their goal — or made a good faith effort — will be granted a 4% bonus on the credit. The commission is supposed to evaluate whether the diversity goal was met both for above-the-line and the below-the-line workforce, with 2% awarded for reaching each goal.

“None of this has ever been done before,” Carrillo said. “This is a critical new step in ensuring there are opportunities for disadvantaged communities to enter the workforce.”

The measure also includes new diversity data collection requirements.

The soundstage provision was promoted by the State Building and Construction Trades Council, as well as a coalition of Hollywood unions. Though the Los Angeles area already has the largest soundstage capacity in the world, at 5.2 million square feet, there is some concern that the global competitors are gaining.

The soundstage credit will be awarded on a first-come, first-served basis to productions that shoot at least 50% of their schedule on a new soundstage. The soundstage must obtain its building permit after the law is signed in order for the production to be eligible. The credit is capped at $12 million per feature or per a season of a TV series, based on a percentage of qualified spending. The $150 million is expected to be exhausted within a few years.

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