California Lawmakers Officially Carve Out Compromises For Film Industry On Corporate Tax Credit Cap

The California Legislature passed a bill Monday night, as the legislative session neared its midnight deadline, to allow film and television studios a few key exemptions from a recently enacted statewide restriction on corporate tax credits. The fix was introduced on Friday evening and, given that California legislators have to consider legislation for 72 hours before voting, both the state assembly and the senate were able to pass SB/AB 186 in the eleventh hour. The state budget, passed this summer, seeks to stabilize revenue by preventing corporations from offsetting more than $5 million in tax liability annually for the next three years. Several advocacy groups pushed for a complete exemption, but the solution passed by lawmakers on Monday evening does fall short of that. Instead, only independent productions will be completely exempt from the $5 million cap. The legislation also addresses concerns about the payback period for studios that have elected to refund credits for cash. Current law allows studios to get cash instead of claiming the credit against tax liability for a 10% discount on the total with a payback period of five years. The fix accelerates that to two years with just a 5% discount. Watch on Deadline The new legislation will also extend the expiration date of the non-refundable tax credits that were issued prior to 2025. In addition to addressing the corporate tax credit cap, lawmakers had also turned attention toward carving out a post-production incentive despite a very tight budget year. That bill passed the senate last week and is now on Gov. Gavin Newsom’s desk. Deadline understands that lawmakers will still need to earmark some funding for it, though lawmakers have expressed willingness to find at least $10 million for it, should Newsom give it the green light. The moves in California coincide with a renewed focus from the White House on Hollywood. On Monday, President Donald Trump threw support behind a federal film tax incentive, writing on Truth Social: “Hollywood is a Complete and Total Disaster!” Unsurprisingly, stakeholders across the state praised POTUS’ support for the incentive, especially since many have been trying for over a year to redirect Trump’s attention from his previously threatened 100% tariff on films made internationally. Still, the President has not given any details on how much the incentive would be or how they will be applied.