SACRAMENTO — California legislators on Friday moved to blunt the impact of a budget provision they and Hollywood warn could undercut a celebrated expansion of the state film and television tax-credit program.
What lawmakers introduced and why
Assemblymember Rick Chavez Zbur and Sen. Ben Allen introduced AB/SB 186, a pair of companion bills intended to preserve momentum from a 2025 increase that raised the state's production tax-credit pool to $750 million in 2025. The legislation would carve out relief for independent projects and expand the ability of productions to monetize their tax credits more quickly and at a higher percentage.
The move follows concerns that language tucked into the state budget bill signed June 29 — known as SB 122 — implemented permanent caps on the use of business tax credits that could hinder the film and television program, particularly for productions that claim credits above $5 million in a year.
"Last year, we took action to get families back to work and jumpstart the State's film and television industry," Sen. Ben Allen said in a statement. "However, we're at risk of losing this momentum, and all the jobs we've created over the last year, if we don't act by the end of the month. I'm grateful for the support from Governor Newsom, Assemblymember Zbur and the legislative leadership to help us find a path forward that will retain California's status as the global hub of entertainment."
Key provisions of AB/SB 186
According to supporters, the proposal does not exempt major productions from the caps imposed by the budget package. Instead, it aims to give producers better options when they choose to monetize tax credits — a mechanism that lets productions convert credits into cash rather than apply them only against a tax liability.
- Exempt independent projects from the new business tax-credit caps.
- Allow productions that receive state tax credits to monetize a larger share of their refunds — increasing monetization from 90% to 95%.
- Shorten the time it takes for producers to collect monetized credits from five years to two years.
Background: how caps entered the picture
Last year’s lobbying push by studios and production companies was credited with securing the program’s increase to $750 million, more than doubling the funding available for California productions. But SB 122, the budget bill enacted in June, extended — and eventually made permanent by 2030 — a ceiling on using credits over $5 million a year. The ceiling limits credits to the greater of $5 million or 70% of a taxpayer's liability, a change industry representatives say could reduce the practical value of the program for high-cost productions.
| Element | Before SB 122 / 2025 | Change in SB 122 |
|---|---|---|
| Program funding (2025) | — | $750 million annual pool |
| Cap on credits over $5M | Temporary caps | Extended; made permanent in 2030 |
| Ceiling formula | Varied | Greater of $5M or 70% of liability |
Industry reaction and stakes
Producer groups and other entertainment stakeholders have warned that the budget language could erode the competitive advantage California gained with the 2025 funding increase. The film and television tax-credit program is widely viewed as a jobs program as much as an incentive: supporters say it helps keep production work and the ancillary services that support it — from set construction to catering — inside the state.
Supporters say AB/SB 186 attempts to strike a balance: it would not exempt large productions from the caps, but would make monetization more attractive and quicker to access, and would protect independent filmmakers from the tighter limits.
Next steps and timeline
Legislative leaders and the governor signaled support for seeking a resolution before the end of the month, according to statements from proponents. If the bills advance, they must move through committee and floor votes in both houses and reach the governor before the legislative calendar for special or end-of-session actions closes.
For California’s entertainment industry, the outcome will determine how the boosted pool of tax credits translates into immediate cash and whether smaller, independent projects will continue to qualify without being hamstrung by the new caps.
As lawmakers weigh the proposal, producers and municipal governments that rely on production spending will be watching closely. The tax-credit program has become a focal point in state economic policy debates about how to retain jobs and business activity in the face of competition from other states and countries.
Kevin Nakamura is the state correspondent for WE NEWS.
