Image: Senator Allen speaks to a crowd on a film set while celebrating the signing of AB 1138.
California lawmakers are moving to protect the state’s film and television industry after they say a new corporate tax law unintentionally put the state’s recently expanded production tax credit program at risk.
Sen. Ben Allen and Assemblymember Rick Chavez Zbur, both of whom represent Santa Monica, saw AB/SB 186 introduced this week, a budget trailer bill designed to mitigate the impact of Senate Bill 122 and preserve California’s ability to compete for film and television productions.
The proposal comes less than a year after Allen and Zbur helped secure a major expansion of California’s Film and Television Tax Credit Program. That effort appears to be paying off: during the program’s first year, 170 projects selected California for production, generating an estimated $6.6 billion in economic activity and supporting nearly 35,000 cast and crew jobs.
But SB 122, which was enacted in June as part of a broader effort to ensure corporations pay their fair share of state taxes, imposed a new limit on the use of tax credits. According to Allen and Zbur, that additional restriction threatens to undermine the commitments California made to productions that had already been awarded credits.
“This has been an important priority for me and many of my colleagues, and I appreciate the work of the Governor, legislative leadership, and Sen. Ben Allen to address our concerns,” Zbur said.
A New Tax Credit Program Starts to Show Results
Last year, Newsom signed the California Film & Television Jobs Act, legislation authored by Allen and Zbur to overhaul the state’s film and television tax credit program and address what officials have long called “runaway production.”
The legislation increased the program’s annual cap to $750 million, increased the available credit and expanded the types of projects eligible for the program. It also gave productions more flexibility in using the tax credits.
The first year of the expanded program, running from July 1, 2025 through June 30, 2026. According to Allen and Zbur, 170 film and television projects were awarded credits to produce in California, representing an estimated $6.6 billion in economic activity and nearly 35,000 cast and crew jobs.
This year’s SB 122 created an additional limitation on businesses’ ability to use state tax credits. That created a particular problem for the Film and Television Program because the program was already capped and its funding had already been allocated to productions.
Allen and Zbur argue that the new restrictions could leave productions with less financial support than they were promised when they agreed to film in California.
What AB/SB 186 Would Change
The new legislation is designed to address those problems without abandoning the broader tax changes contained in SB 122.
AB/SB 186 would make three major changes to the Film and Television Program.
First, it would exempt independent productions from the new caps created by SB 122.
Second, it would change how refunds are handled under the state’s current 4.0 program. The discount applied to refunds would fall from 10% to 5%, while the payout period would be shortened from five years to two.
Finally, the legislation would protect unused tax credits earned under the older 2.0 and 3.0 programs from expiring prematurely when a company has a project that has been awarded credits under the current 4.0 program.
Allen said California risks losing the momentum generated by last year’s expansion if lawmakers don’t act quickly.
“Last year, we took action to get families back to work and jumpstart the State’s film and television industry,” Allen said. “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.”
For Zbur, the bill is an attempt to provide the industry with some stability after last year’s major overhaul.
“We are already seeing the benefits of the modernized and expanded Film and Television Jobs Program we enacted last year, with 170 projects choosing California and nearly 35,000 cast and crew jobs supported in its first year,” Zbur said.
He acknowledged that the legislation won’t solve every problem facing the industry, which competes with other states and countries for productions that can move relatively easily when incentives change.
But, he said, AB/SB 186 would “provide greater stability and certainty for productions and workers, mitigate the impacts of the business tax credit limitation, and help us continue competing for jobs and investment.”
For Allen, the immediate question is whether California can maintain the momentum created by last year’s investment.
“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,” he said.
The legislation is now part of the final negotiations over the state budget. With the deadline approaching at the end of the month, Allen and Zbur are asking lawmakers to act before the new restrictions undermine the production commitments California made just a year ago.
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