California's Film Tax Incentive Overhaul Isn't Just About Money – It's About Extinction

Yahoo

12-03-2025

In a parking lot on Victory Boulevard in North Hollywood, a nuclear wasteland has been created. Wrecked RVs, rusting cars and half-dead palm trees line the sand, all surrounding a twisted version of Nevada's most famous neon sign.
This is the set of Amazon's upcoming second season of 'Fallout,' the Emmy-nominated hit adaptation of the Bethesda video game series. Fans of the show are eagerly waiting to see how Graham Wagner and Geneva Robertson-Dworet's show adapts the 2010 video game 'Fallout: New Vegas,' which transforms Sin City into an apocalyptic citadel.
When those episodes air, they will see a New Vegas that was brought to life in California, a creation of local Hollywood magic that is becoming increasingly rare and which 'Fallout' producer Jonathan Nolan warns will go extinct if the California Film and TV Tax Credit Program doesn't get a sufficient overhaul in the next few months.
'I've been talking to other producers about what it would take to get them to come back to California. Some told me that they haven't even run the numbers to shoot in California in 20 years,' Nolan told TheWrap. 'We are losing our crew base fast. Studios are investing more and more elsewhere. If things don't change right now, we will lose an industry that has been part of California for a century, and all the jobs that came with it.'
Help is on the way as two bills in the state legislature have been introduced to make those changes and whose details will likely be revealed next week. Producers and union officials who spoke to TheWrap agree that the dramatic raise to $750 million, up from $330 million, backed by Gov. Gavin Newsom is only the first step, and that more must be done to preserve a critical but endangered part of the state's economy.
Industry stakeholders say California must do more than simply boost the tax credit incentive. It also needs to simplify how productions apply for them, and producers say current rules are too inflexible compared to the top international competitors for Hollywood productions.
According to the latest quarterly production report from FilmLA, total shoot days recorded in Los Angeles County in 2024 came in at 23,480, a 36% drop from the 36,540 shoot days recorded in 2019 and the lowest annual total recorded by the organization outside of the pandemic year of 2020.
A significant portion of that drop is attributed to production categories that are not currently eligible for state incentives such as reality TV, which only logged 3,905 shoot days in L.A. County in 2024. That's 43% below the five-year average.
Thanks to the success of 'Fallout' Season 1, which was filmed primarily in New York in 2022 and drew in a reported 65 million viewers in its first 16 days of streaming on Prime Video, Nolan was able to convince Amazon to move production of its second season to California, utilizing veteran crew members and shooting locations that were used on Nolan's breakout HBO series 'Westworld.'
It was an instance of a top name in the industry using their clout to bring a major production to the Golden State, similar to how Disney mainstay Jon Favreau convinced that studio to shoot the 2019 'Star Wars' series 'The Mandalorian' and its upcoming feature film installment on a 'volume' soundstage in Manhattan Beach rather than at Pinewood Studios in London, where the majority of 'Star Wars' shows and films have been shot.
As a production relocating to California, 'Fallout' received a 25% tax rebate on all eligible spending, and the efficient work of the show's production team also helped keep costs down. By moving to California, 'Fallout' brought more than 1,000 crew worker jobs and 149 above-the-line roles for actors, directors and writers to a local industry hammered by the pandemic, the 2023 strikes, and this past January's wildfires.
But Nolan said that it was still more expensive to shoot Season 2 in California than it was to shoot Season 1 in New York, and that deeply concerns him for the sake of other producers who share in his desire to shoot in California and bring jobs back to a hemorrhaging local industry but don't have the resources and influence to convince studios and financiers to incur the higher costs.
'I'm grateful to our studio for supporting us, but producers like us who are saying, 'We can film this here in LA,' are running out of oxygen,' Nolan said. 'So many people in entertainment live here and want to film here, and we just need the state of California to take away the reasons the studios use to make us shoot elsewhere.'
With studios already heavily investing in production in other states and countries, California will need to make big changes to their incentives to draw jobs and productions back. But that is what several L.A.-based state legislators are trying to do as they begin a months-long campaign to overhaul the tax incentive program, and they have an entire industry backing them up.
Last week, the Entertainment Union Coalition, which represents all of the Hollywood labor groups including the California IATSE Council, Hollywood Teamsters, SAG-AFTRA and DGA, among others, brought a group of 100 entertainment workers from their member unions to Sacramento to lobby for Assembly Bill 1138 and Senate Bill 630, a pair of bills designed to make significant changes to the eligibility rules and implementation of the production tax incentive beyond the proposed raise in the program's cap from $330 million to $750 million.
Along with testifying to committee members in the State Assembly, union members knocked on the doors of legislators' offices, looking to speak directly to them about why urgent change is needed.
'What people truly need to rebuild are jobs that provide stability, security and a future,' Malakhi Simmons, vice president of lighting technician union IATSE Local 728, told the CA Assembly Budget Committee. 'Many members haven't worked in two years. Families are losing health benefits, depleting savings and tapping into retirement accounts. Seasoned professionals are retiring early, while others are leaving the industry, or the state, entirely.'
While the EUC turns its lobbying efforts to the Motion Picture Association this week to get them on board with the campaign, Susan Sprung, CEO of the Producers Guild of America, told TheWrap that her organization has also been in deep talks with lawmakers and stakeholders about what changes to the program need to be made to make California competitive as a production hub again. At a time when the future of Hollywood is in so much doubt, she sees a lot of reasons to believe that help is on the way.
'From all the conversations we have had at PGA, every union, every studio, every official all has the same interest at heart, and that is to figure out how to make effective changes so that shooting can come back to California,' she said.
Above all else, Sprung believes that what the next version of the incentive program must provide to win over producers, financiers and studios is 'certainty.' In his Oscar-nominated performance in 'Conclave,' Ralph Fiennes spoke of certainty as 'the sin I have come to fear above all others.' For producers, certainty is something that they need out of tax incentives, and which California's program does not provide as it is currently designed.
'The question that needs to be answered is: 'How do we come up with a method to preserve this tax incentive as a jobs program but also change it in a way so that producers can get a quicker response on the status of the incentive for their production and have a more secure idea of what the finances will look like if they shoot in California,' Sprung said.
Alex Gartner, veteran producer and former MGM executive whose recent credits include 'Uncharted' and 'The Killer,' noted that productions approved for California tax credits have six months to get cameras rolling once they are notified of their approval.
Extensions on that deadline are available, but the possibility of losing that tax credit if pre-production can't be completed by that deadline or other unforeseen delays like cast scheduling issues is a big reason why California has lost favor compared to the likes of Georgia, Canada or the U.K.
'Getting a movie sold and prepped in that six-month period is extremely aggressive, especially if you are an independent production that hasn't been able to shop the movie until they knew if they received the incentive,' Gartner said. 'Other states and countries don't have a cutoff date. If a production is delayed, they may go to the bottom of a queue to receive the incentive, but they don't ever risk losing it completely.'
Other common producer concerns about the tax incentive program identified by Nolan and Gartner and raised by the PGA in meetings with lawmakers include increasing the number of application periods beyond the two that are held each year — Nolan would prefer for the program to be open year-round — and increasing the rebate percentages to be competitive with other states like Georgia and New York.
But the one issue that perhaps studios have the greatest common cause with unions is flexibility around how the incentives are doled out to different types of productions. Rebecca Rhine, Western executive director of the Directors Guild of America and president of the EUC, explained that the current program currently divides tax credits into different 'buckets' for feature films, independent productions and other types of productions currently eligible for the program.
While more details on the changes AB 1138 and SB 630 will bring to the incentive program are still to be added by its authors, it is expected by industry insiders that more types of productions such as reality TV will be added to the eligibility list. The EUC hopes that the next version of the program will have a mechanism in which tax credits can be reallocated to a different bucket if demand is high for a specific kind of production to be shot in California.
'The biggest strength of California's tax incentives are that they are designed as a jobs program. We have told lawmakers that it is essential that the program follows where jobs in entertainment are going so that our union members can get the most from it,' Rhine said.
With California's budgetary process for the coming fiscal year set to begin in May, development on AB 1138 and SB 630 is expected to ramp up in the coming weeks. According to individuals with knowledge of the legislative process, authors of the bill must finalize language for the bills with the State Assembly and Senate's rules committee by this Monday.
Shortly after that, details on the proposed changes to the tax incentive program will be released as the bills are referred to the revenue and tax committees, along with the Assembly Arts & Entertainment Committee. Amendments and language changes to the bill will likely follow, but the bills must be passed out of committee by May 2 to advance to a floor vote.
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