California Film Incentives Program Sees Half of Projects Seek “Force Majeure” Extension Due to Writers Guild Strike

California Film Incentives Program Sees Half of Projects Seek “Force Majeure” Extension Due to Writers Guild Strike

The California Film Commission, which administers the tax credits program, has revealed that half of the 46 projects currently in the California film incentives program have submitted “force majeure” requests seeking waivers to extend their mandated start-date requirements due to the ongoing Writers Guild strike. The number of approved film and TV projects seeking force majeure delays is expected to grow as the strike, now in its 25th day, continues.

Force Majeure Requests

The state statute that authorized the tax credit program defines force majeure as “an event or series of events, which are not under the control of the qualified tax-payer, including death, disability, disfigurement or breach by the motion picture director or principal cast member, an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane or other natural disaster, labor disruption, terrorist activities or government sanction.” The 23 projects that have requested force majeure extensions includes ongoing TV series in various stages of production and pre-production. The primary deadline they’re seeking to extend is the 180-day start-date requirement, which begins tolling on the date of the issuance of a Credit Allocation Letter. The mandates require that productions must begin principal photography within 180 days of receiving the Credit Allocation Letter. Approved projects with a qualified expenditure budget of $100 million or more have 240 days to begin filming. Projects also must complete production within 30 months.

Once a force majeure submission is deemed valid, the California Film Commission effectively will stop the clock on the timeline requirements and resume them when productions can recommence filming operations.

Impact of Covid-19

The move by production companies seeking force majeure protections during the WGA strike is similar to the one in the early days of the Covid pandemic, when the vast majority of projects that were eligible for the state’s tax credits requested force majeure extensions. The film commission noted that on March 27, 2020, it published a production alert that “established Covid-19’s impact on film production as a force majeure event. This enabled productions to apply and receive waivers for all the time-sensitive parameters in the tax credit program, thus alleviating the fear that projects would lose their reservation of tax credits if they could not begin or finish their projects as per program requirements.”

Industry Impact

According to the film commission, film and TV production supports well over 700,000 jobs and nearly $70 billion in wages for California workers. California offers $420 million a year in film incentives, but that’s not nearly enough to support all of the films and TV shows that want to shoot here.

Writers Guild Strike

The WGA strike began May 2 after negotiations with the Alliance of Motion Picture and Television Producers failed to reach an acceptable deal. The guild’s core issues include significant increases in compensation, minimum staffing, duration of employment, the establishment of viewer-based streaming residuals and curbs on the use of artificial intelligence to create scripts. As the strike continues, the number of projects seeking force majeure extensions is expected to rise.

The California film incentives program has seen an increase in force majeure requests from half of the 46 projects currently in the program due to the ongoing Writers Guild strike. The state statute that authorized the tax credit program defines force majeure as an event that is not under the control of the qualified taxpayer. The Covid-19 pandemic had a similar impact on the film industry, with many projects requesting force majeure extensions. As the strike continues, the number of projects seeking force majeure extensions is expected to rise, impacting the film and TV production and the jobs it supports.

Entertainment

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