Supporters of California’s film and television tax credit say the program would be in jeopardy if an initiative to do so makes it to the ballot and is passed in November – but that prospect is disputed by supporters of the measure.
The initiative, called the Taxpayer Protection And Government Accountability Act, would raise the bar for passing tax increases in California. The move has earned the state stern warnings from Governor Gavin Newsom, local governments and unions, among others, and has now been challenged in the state Supreme Court.
The initiative would require that state tax increases not only pass the current two-thirds majority in the House, but also be submitted to voters for approval by a simple majority.
The proposed initiative would also apply retroactively to January 1, 2022, meaning that any tax increase passed during that period would be invalid unless passed by a 2/3 majority in Parliament. And by the voters within 12 months.
The renewal of the state film and tax credit, SB 132, passed the House overwhelmingly last year, extending the program for another five years starting in 2025, with $330 million in incentives provided annually.
As lawmakers considered the extension, state counsel ruled that SB 132 required a two-thirds majority because it “would involve a change in state law 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 how the credits are awarded, some qualified studios will receive a smaller credit, resulting in an increase in their tax liability, according to a legal analysis from the governor’s office. Given this change, SB 132 would be affected by the ballot initiative and would then have to be approved by voters or it would be invalid, according to the governor’s legal analysis.
Producer Colleen Bell said in a statement: “The consequences of simply leaving this measure on the ballot would be extremely devastating for our state’s creative industries. Putting the film and television tax credit at risk – even for just one year – could send shockwaves through the industry. The risk of eliminating the tax credit altogether would be catastrophic. No one will benefit from the uncertainty this creates for California’s film and television industries.” Bell is the executive director of the California Film Commission, but did not speak on behalf of the group.
Supporters of the proposed popular initiative interpret its impact on film and television funding differently. They say opponents of the initiative are trying to foment “intimidation tactics” and misrepresent the impact on film and television credits.
The Taxpayer Protection And Government Accountability Act campaign insists that the measure “will not impact current or future film and television tax credits.” It argues that the existing film and television tax credit program is expiring and “will no longer be in effect,” and that the renewed program would be a different state law. “The new credit, regardless of the amount, will represent a tax cut, not a tax increase, and is therefore not affected by the measure,” the campaign says.
Rob Lapsley, campaign co-chair and president of the California Business Roundtable, said in a statement: “Unfortunately, today’s tactic is the latest in a long list of failed attempts to deceive voters about the impact of this measure. This fear-mongering will not work. TPA remains extremely popular with voters who demand more accountability from their elected officials.”
The secretary of state has until June 27 to finalize the nationwide election results, and in the past there has been quite a bit of wrangling as the November election outcome became clearer. There is still a chance that stakeholders could reach some sort of compromise, although no negotiations are taking place, according to a Business Roundtable official.