Legislators Push for Film Credit Carve-out
More than three dozen California legislators are pressuring Governor Gavin Newsom to exempt the state’s film and television production incentive program from a new, restrictive corporate tax credit cap. The provision, buried within the $351.7 billion state budget signed in June, limits the maximum credit a company can claim annually to $5 million or 50% of its state tax liability—whichever is greater.
A Legislative Oversight
Lawmakers, led by Assemblyman Rick Chavez Zbur (D-Los Angeles), argue the cap was never intended to reach the California Film & Television Tax Credit Program. In a letter dated Friday, addressed to Governor Newsom, Senate President Pro Tempore Monique Limón, and Assembly Speaker Robert Rivas, the group urged an immediate legislative fix before year’s end.
They warned that failing to provide an exemption would “significantly kneecap” the industry. The letter argues that such a move essentially reneges on commitments made to studios and workers who rely on these incentives to keep productions within California borders.
Economic Stakes for Hollywood
The urgency stems from a volatile period for Southern California production. The industry is still reeling from the lingering effects of the COVID-19 pandemic and the 2023 dual strikes by the Writers Guild of America and SAG-AFTRA, all while facing mounting competition from international jurisdictions and other states.
Last year, the state expanded its incentive program to an annual cap of $750 million to lure productions back. According to the California Film Commission, the program was projected to generate $6.6 billion in direct in-state production spending and support more than 34,000 cast and crew jobs across 170 projects this year.
Distinguishing Job Creation from Corporate Perks
The 38 signatories emphasize a fundamental distinction: entertainment tax credits are earned through the creation of tangible, middle-class jobs, rather than functioning like standard research and development credits. Zbur, who co-authored the 2023 legislation that bolstered the program, noted that many members who voted for the budget did not realize the cap would impact film incentives.
Lawmakers fear that if the uncertainty persists, studios will move upcoming projects to more predictable tax environments. For the California entertainment workforce, the result would be significant job losses.
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