California lawmakers pass bill to protect $750m film tax credit

MUMBAI: Hollywood’s California comeback has cleared another hurdle. State lawmakers have moved to prevent new tax-credit restrictions from taking the shine off the Golden State’s $750 million film and television incentive programme.

The California state legislature passed SB 186 on Monday night, a measure aimed at limiting the impact of business tax credit caps introduced through the state’s 2026 budget legislation. The bill, sponsored by state Senator Ben Allen, now goes to Governor Gavin Newsom, who must decide whether to sign or veto it by the end of September.

The legislation comes in response to SB 122, the budget bill that made annual caps on the use of certain business tax credits permanent. Hollywood production advocates had warned that the restrictions could weaken California’s competitiveness just months after the state significantly expanded its film and television incentives.

SB 186 would exempt independent productions from the annual caps on business tax credits.

It also improves the terms for productions that choose to monetise their credits rather than use their full value against tax liabilities. Under the proposed legislation, productions would be able to monetise 95 per cent of their credits, up from 90 per cent previously.

The bill would also shorten the timeline for collecting the money. Productions could receive the monetised credits within two years, compared with the previous five-year period.

For an industry already accustomed to long production schedules, California lawmakers appear keen to ensure the wait for tax incentives does not become a sequel of its own.

The latest legislation follows a major expansion of California’s film and television incentive programme in 2025, when Newsom signed legislation increasing annual funding from $330 million to $750 million.

That expansion followed an intensive lobbying campaign by Hollywood and entertainment unions, but the industry’s gains came under fresh pressure when the 2026 state budget introduced the tax-credit caps.

Production advocates argued that the change could discourage studios and independent filmmakers from choosing California, potentially undermining the benefits of last year’s expansion.

The Entertainment Union Coalition (EUC) said 450,000 union members wrote to legislators during the campaign against the restrictions. The coalition represents 167,000 members across California, according to its president Rebecca Rhine.

Rhine welcomed SB 186’s passage, saying the legislation would prevent SB 122 from undermining the competitiveness of the California Film and Television Jobs Program.

The Motion Picture Association also backed the legislation. Its chairman and CEO Charlie Rivkin said lawmakers had taken steps to help California remain an attractive production destination.

The measure is effectively a legislative repair job rather than a wholesale rewrite of the state’s tax policy. Its focus is on removing the unintended impact of SB 122 on the film and television programme while preserving the expanded $750 million-a-year incentive framework.

The next move now rests with Newsom. If signed, SB 186 would give independent productions greater flexibility in accessing tax credits and could help ease concerns that California’s latest incentive rules might push productions towards competing states.

For Hollywood, the message is fairly simple: after spending years lobbying California to put more money on the table, the industry is now trying to make sure the fine print does not take it back.