Santa Monica's two state legislators introduced an emergency bill to shield California's film tax credit program from a new corporate tax law. The program supports an estimated $6.6 billion in production activity and nearly 35,000 jobs.
State Sen. Ben Allen and Assemblymember Rick Chavez Zbur brought forward AB/SB 186, a budget trailer bill aimed at undoing unintended damage caused by Senate Bill 122. Gov. Gavin Newsom signed SB 122 into law on June 29 as part of the state budget, capping business tax credits at $5 million or 70% of total liability per year, whichever is greater. The cap was part of a broader effort to increase corporate tax collections, but it also hit the film incentive program that Allen and Zbur had expanded just a year earlier.
The bill was printed Saturday, Aug. 29, ahead of the Monday, Aug. 31, deadline to submit new legislation before the final day of the Sacramento legislative session, The Wrap reported. It was expected to pass that day, though no vote result had been confirmed as of Tuesday, Sept. 1.
What went wrong
Zbur told The Hollywood Reporter that lawmakers believed the film tax credit was exempt from SB 122 when they voted on it.
It was not.
"The exemption that was in the bill was an exemption only to the refundability aspects of the program, which basically meant that the program was not exempt in the end," Zbur said.
The consequences are concrete. Paramount received $37.7 million in California tax credits in the latest incentive round, including for a Viola Davis thriller and a Clueless sequel series. Under SB 122, the studio could recoup only $5 million per year. Disney received $45 million to shoot an untitled detective series and faces similar limits.
What the bill would fix
AB/SB 186 targets three problems, according to Santa Monica Next:
Independent productions would be fully exempt from SB 122's annual cap. Major studio productions would not receive the same blanket exemption. The Wrap reported that insiders feared a full exemption for all productions would prompt other industries to demand their own carve-outs.
Faster refunds for all productions. The bill would cut the discount applied to credit refunds from 10% to 5% and shorten the payout period from five years to two.
Protection for older credits. Unused tax credits earned under the earlier 2.0 and 3.0 versions of the program would be shielded from expiring prematurely when a company also holds credits under the current 4.0 program. The carry-forward window would expand to 15 years.
Stakes for Santa Monica
Allen and Zbur both represent Santa Monica and co-authored the California Film & Television Jobs Act that Newsom signed last year. That law more than doubled the program's annual cap from $330 million to $750 million and broadened the types of eligible projects.
In its first year, July 1, 2025, through June 30, 2026, the expanded program awarded credits to 170 projects. Those productions represent an estimated $6.6 billion in economic activity and nearly 35,000 cast and crew jobs statewide.
Allen said California risks losing the momentum generated by last year's expansion if lawmakers fail to act. He called the bill "a path forward that will retain California's status as the global hub of entertainment."
The bill has drawn support from the Motion Picture Association (MPA), the Entertainment Union Coalition and the Producers Guild of America. A letter-writing campaign by entertainment union members had sent roughly 350,000 letters to legislators as of Aug. 14, according to The Hollywood Reporter.
Los Angeles Mayor Karen Bass also backed the effort, writing on X on Aug. 29 that she would "always fight to keep productions and good-paying union jobs right here at home."
Whether the bill passed the Legislature on Aug. 31 had not been confirmed as of Tuesday, Sept. 1. If approved, it would next go to Newsom's desk for a signature.
