Hollywood Unions Warn of Production Collapse: What the New Tax Credit Means for Freelancers

Seed story: "Hollywood Unions Warn U.S. Film & TV Production Is On The Brink In Latest Economic Report" (Deadline) · search original Written from facts verified across 3 news report(s) — original explainer, not a copy or translation. Sources listed at the end.

With a coalition of seven major Hollywood unions warning that the U.S. share of studio spending on film and TV has plummeted from 74% to 42% since 1999, independent creators and freelancers face a shrinking domestic market that demands immediate diversification of income streams. As Congress debates a proposed 20% federal tax credit that could rise to 30% for independent productions, the timing of legislative action—reportedly not until after the November midterm election—highlights the urgency for freelancers to adjust contracts and secure stable revenue sources before potential policy shifts reshape the industry landscape.

The Data Behind the Decline

A coalition of seven major Hollywood unions, including IATSE, the Directors Guild of America, and SAG-AFTRA, commissioned a report from EY Quantitative Economics and Statistics to quantify the industry’s contraction. The findings reveal a stark decline in domestic production activity over the last two decades, signaling a fundamental shift in where major studios allocate their budgets.

Key metrics from the report include:

The U.S. share of major-studio spending on film productions dropped from 74% in 1999 to just 42% in 2024.
The U.S. share of spending on television episodes fell from 94% in 1999 to 64% in 2024.

These figures highlight a significant reduction in domestic work volume. For freelancers and union members, this decline suggests that traditional studio-based roles are becoming less prevalent, forcing creators to compete for a shrinking pool of domestic projects while studios increasingly look abroad for production opportunities.

The Proposed Federal Solution

To counter the erosion of domestic production, a bipartisan group of congressional leaders introduced the Motion Picture, Television and Entertainment Revitalization Act. This legislation aims to restore competitiveness by establishing a 20% federal tax credit for eligible film and TV projects. The credit specifically targets U.S. labor expenses, ensuring that funds support both production crews and above-the-line costs like actor and writer salaries.

The bill includes mechanisms to incentivize specific types of filmmaking through potential uplifts. The tax credit can increase to 30% if productions meet certain criteria, such as:

Being an independent production
Filming in rural qualified opportunity zones
Operating in designated disaster areas

For creators, this structure signals a potential shift in where and how work is generated. While the bill is not expected to reach a vote until after the November midterm election, the prospect of higher credits for independent or rural work could reshape contract negotiations and location preferences in the near future.

Why the Structural Shift Matters

The Globalization of Production

The core instability stems from a fundamental shift in where major studios allocate their budgets. According to the EY report commissioned by a coalition of seven unions, including IATSE and SAG-AFTRA, the U.S. share of major-studio spending on film productions has plummeted from 74% in 1999 to just 42% in 2024. Television has seen a similar, though less drastic, decline, dropping from 94% to 64% over the same period. This trend indicates that domestic crews are increasingly competing against lower-cost international alternatives for the same projects.

For freelancers, this outsourcing creates a volatile market where local demand is no longer guaranteed. The proposed federal tax credit aims to reverse this by covering U.S. labor expenses, specifically:

Production crew wages
Above-the-line costs like actor and writer salaries
Independent productions, which may receive higher credit uplifts

By incentivizing domestic spending, the legislation seeks to stabilize the supply chain. However, until the bill passes—likely after the November midterms—creators face continued uncertainty regarding whether their local contracts will remain viable against global competition.

Implications for Independent Creators

For independent creators, the proposed legislation offers a critical lifeline. While the base 20% federal tax credit applies broadly, the bill includes specific uplifts that can raise the incentive to 30% for independent productions. This structural distinction directly impacts the financial viability of smaller, non-studio projects that often struggle to compete with major studio budgets.

Key provisions affecting independent work include:

Coverage of U.S. labor expenses, including production crews.
Inclusion of above-the-line costs like actor and writer salaries.
Bonuses for filming in rural qualified opportunity zones or disaster areas.

These details matter for your contracts and rights. If a production qualifies for the higher 30% rate, it may have more budget flexibility for freelance rates. However, since Congress is not expected to vote until after the November midterms, creators should remain cautious. Ensure your agreements clearly define payment terms, as the final implementation of these independent production bonuses remains uncertain.

Adjusting Contracts for Uncertainty

With the federal tax credit vote delayed until after the November midterms, production pipelines remain volatile. Creators should avoid rigid, long-term commitments that assume stable funding. Instead, prioritize flexibility to protect cash flow if a project stalls due to legislative uncertainty or shifting studio budgets.

Key contract modifications to consider:

Milestone-based payments: Tie compensation to specific deliverables rather than calendar dates to ensure payment even if schedules slip.
Shorter termination windows: Negotiate shorter notice periods for cancellation to limit unpaid labor during sudden shutdowns.
Kill fees: Include guaranteed minimum payments if a project is terminated after principal photography begins.

These terms mitigate risk while the industry awaits the potential 20% federal credit.

Diversifying Income Streams

While legislative action on the federal tax credit remains distant, freelancers can stabilize cash flow by targeting adjacent creative sectors. Since the proposed bill specifically covers labor expenses for eligible productions, securing work in these areas may offer more immediate stability than waiting for Hollywood’s recovery.

Consider these actionable steps to broaden your revenue base:

Pursue international remote gigs: Leverage digital collaboration tools to work with global studios, bypassing local production halts.
Target independent productions: The bill’s potential 30% uplift for independent projects signals a future focus on smaller, agile teams.
Explore rural or disaster zones: Filming in qualified opportunity zones or disaster areas may qualify for higher incentives, creating niche opportunities.
Diversify into non-entertainment media: Apply your skills to corporate training, e-learning, or documentary projects that operate outside the volatile studio system.

By diversifying now, you protect your income against the uncertainty of the November midterm election timeline.

FAQ

What is the proposed federal tax credit for Hollywood productions?

The Motion Picture, Television and Entertainment Revitalization Act proposes a 20% federal tax credit for eligible film and TV productions, which can increase to 30% with specific uplifts. This credit would cover U.S. labor expenses, including production crews and above-the-line costs like actor and writer salaries.

How has U.S. film and TV production spending changed since 1999?

According to a report commissioned by seven Hollywood unions, the U.S. share of major-studio spending on film productions declined from 74% in 1999 to 42% in 2024. Similarly, the U.S. share of spending on television episodes fell from 94% in 1999 to 64% in 2024.

When will Congress vote on the new film and TV tax incentive bill?

Congress is not expected to vote on the federal film and TV tax incentive measure until after the November midterm election. The bill is currently sponsored by Representatives Nathaniel Moran, Linda Sánchez, Brian Jack, and Laura Friedman, as well as Senators Tim Scott and Adam Schiff.