Hollywood’s Tax Credit Push Runs Into A Post-midterm Wall

LOS ANGELES — The prospects of Congress passing a Hollywood tax incentive during the lame-duck session have dimmed significantly after the Democrats’ resounding midterm victories.

Congressional Republicans are still regrouping from their losses, raising questions about their appetite for legislating in the final weeks of the year — especially on a federal film and television production tax break that would benefit an industry the party has long viewed as an adversary.

Democrats, meanwhile, are preparing investigations into the Trump administration and have more incentive to punt key issues into next year, when they’ll have commanding majorities.

The expected year-end budget fight — including Democrats’ push to extend current funding into 2027 and a dispute over defense spending and the Iran war — could complicate efforts to attach a costly tax credit to a short-term bill.

“In terms of real change, I don’t see anything happening,” said Rep. Don Beyer (D-Va.), a senior member of the tax-writing House Ways and Means Committee.

While Beyer said he was inclined to back the production incentive, he added that chances were “pretty low” that any tax bill would get passed during the lame-duck session.

It’s a notable turn for a proposal that drew broad bipartisan support when introduced in September but now faces a tough path to passage.

Asked what the election results meant for the legislation and whether Republicans would still be willing to work on it during the lame-duck session, Democratic Rep. Laura Friedman, whose Los Angeles-area district includes several major Hollywood studios, told POLITICO, “I don’t know.”

“But this is a really important bipartisan effort,” said Friedman, a former movie producer who is among the legislative effort’s leaders. “It's a jobs bill. It's about a signature industry that's one of our top exports, and I'm hoping that we can still move it forward in the lame duck.”

The tax credit is a top priority for Hollywood, where boosters say it could one day be seen as a turning point for the industry: the start of a push to bring work back from the far-flung constellation of countries — Canada, Australia and the United Kingdom among them — that have increasingly drawn film and TV production away from the U.S.

The issue is felt acutely in Los Angeles, where years of so-called runaway production have decimated the local film and television workforce. But the tax credit effort also has prominent backers from traditionally Republican states, some of which have built sizable production ecosystems. Sen. Tim Scott (R-S.C.) introduced the Senate bill, while Rep. Nathaniel Moran (R-Texas) introduced its House counterpart. Another key supporter is Rep. Brian Jack (R-Ga.), a former White House political director during Trump’s first term who was elected chair of the National Republican Congressional Committee earlier this week.

Among the obstacles for the bill: Six House co-sponsors — Reps. Mike Carey (R-Ohio), Brian Fitzpatrick (R-Pa.), Thomas Kean Jr. (R-N.J.), Mike Lawler (R-N.Y.), Mariannette Miller-Meeks (R-Iowa) and Ann Wagner (R-Mo.) — lost their reelection bids, and it’s unclear whether they’ll want to make the legislation a priority in their final weeks in Congress.

Only Fitzpatrick’s office responded to a request for comment. His spokesperson, Casey-Lee Waldron, said in a statement that the outgoing lawmaker’s “support for this legislation remains unequivocal” and that he believes “there remains a meaningful opportunity to advance this legislation before adjournment.”

Fitzpatrick “intends to work alongside colleagues in both parties toward that end,” she said.

It could be easier for the film and TV incentive to become law this year if it’s packaged with some or all of lawmakers’ other tax priorities, which include a framework for cryptocurrency and broad legislation aimed at making taxpayers’ interactions with the IRS less stressful.

But so far, there have only been cursory discussions about a year-end tax deal.

“There’s a lot of asks right now,” said Sen. Steve Daines (R-Mont.), a cosponsor of the production credit legislation who is retiring at the end of the year.

Senate Republicans, in particular, have a long to-do list in the final weeks of their majorities, including approving dozens of President Donald Trump’s lifetime judicial nominees and examining whether they can cobble together a GOP-only fiscal package that would focus on defense spending.

On the other side of the Capitol, Rep. Jim Jordan’s rise to Republican leadership in the House points to a more combative GOP, with little incentive to give Democrats a win on a bill many in the party still see as a Democratic priority.

And then there’s the question of finding a vehicle for the legislation. Democrats want a straightforward short-term spending agreement to avoid a government shutdown next month. Such deals have historically been less likely to include unrelated legislative riders.

Either way, any spending fight between the two parties could further complicate matters, as could the cost of the film and TV incentive itself. It would create a transferable federal tax credit equal to 20% of U.S.-resident labor costs for productions with at least $1 million in qualifying expenditures and at least 75% of their principal photography days in the country. The incentive would also offer bonuses that could boost the size of a production’s credit.

Scott Karol, an adviser to actor Jon Voight — one of Trump’s special ambassadors to Hollywood and a major proponent of the incentive — told Deadline this week that “the biggest hurdle is finding something to attach it to. It’s not going to be a stand-alone bill. It has to be part of something else.”

“The question is with the Democrats having the House and the Senate whether they will want to have a significant tax extender bill,” Karol said.

Supporters of the legislation have yet to release an official estimate of how much the film credit would cost. But an analysis from the libertarian Cato Institute suggested the proposal could reduce federal revenue by $33 billion to $49 billion over a decade, a sum that could give lawmakers pause — particularly those who might want to offset a tax cut of that size.

Beyer said that Congress should find ways to make up for the revenue lost to any tax breaks. “They’re not free,” he said.

It wouldn’t doom the film credit if it’s pushed into the next Congress, when Democrats will have massive majorities. But Democratic leadership has indicated it wants to focus on bread-and-butter affordability issues next year, such as restoring enhanced health care subsidies and reversing GOP safety net cuts, so it’s not clear how much a Hollywood incentive would fit into that agenda.

Industry interests are pressing Congress to move quickly. “The sooner we pass this bipartisan legislation, which has the support of the major unions and the studios, the sooner we can reinvigorate the U.S. film industry,” said Makan Delrahim, chief legal officer of Skydance, the parent company of Paramount and Warner Bros., in a statement to POLITICO. “Passing this legislation before the end of the year … would send a strong signal to the American public that the country can come together for the good of hardworking Americans.”

Beyond Congress, Trump has supported the legislation — calling for its passage “immediately” in August. But the president appeared to be wavering before the election rout. Speaking at a rally in Florida on Oct. 30, he said he’d “probably” support the legislation, while criticizing those in Hollywood who had sought his help in securing its passage. The president took umbrage at unnamed entertainment figures who, he said, had previously called him an “asshole” and said “bad crap” about him but were now lobbying him on the issue.

“This is a funny thing: they’re all calling me, kissing my ass — they want tax credits for Hollywood because Hollywood’s dying. ... And I’ll probably do it,” the president said, drawing boos from the crowd. “Should I do it? Probably.”

Trump’s comments also put the spotlight on another leader of the production tax incentive push: Sen. Adam Schiff, a longtime Trump foe. Despite previously signaling he was comfortable with Schiff’s involvement in the effort, the president had a different message for his Florida audience.

“When he says ‘approve,’ then I don't think we can do it,” Trump said of Schiff and the film credit legislation during his Florida rally. “Now I'm getting Shifty Schiff, Shifty Adam Schiff, one of the more corrupt politicians of the country.”

Asked about the president’s comments, Schiff told POLITICO in a statement that “the bipartisan coalition for this bill continues to grow, because the jobs that it will create, and the economic lift it will provide, will benefit states across the country.”

“It will take both parties working together to get this across the finish line, and we are pushing hard to make this much-needed incentive a reality,” he said. “I believe we should strike while the iron is hot given the bipartisan support for this legislation, and we’ll continue exploring all avenues to make this happen during the lame-duck session.”

A person familiar with ongoing discussions in Congress who was granted anonymity to discuss internal strategy said that the bill’s backers plan to announce support from additional lawmakers next week.

Addressing Trump’s comments in Florida, Friedman said the president has “been very supportive of the film tax credit, and I've got to go believing that that's still the case. …There's a lot of momentum, and there's a lot of jobs at stake.”

White House spokesperson Matthew Middleton reiterated in a statement to POLITICO the president’s “support for saving America’s film industry.”

“This administration wants to Make Hollywood Great Again,” he said, “and will continue to explore all possible policy options to ensure Hollywood remains a powerful source of American culture.”