Timing of California's $750 Million Film Tax Credit Plan in Doubt as State Budget Cuts Weigh Down Process

Yahoo

05-06-2025

As a pair of bills to expand California's film tax credit passed their first floor votes in Sacramento this week, confidence is high that the much-touted $750 million benefit will soon be on the way for productions that will keep jobs for entertainment workers in Hollywood.
But there isn't a clear answer on what 'soon' means, as the co-authors of the California Film & TV Jobs Act are racing to get their bill past the remaining legislative hurdles and get funding approved. The budget process has been thrown into uncertainty by factors ranging from the Trump Administration's tariffs to Los Angeles wildfire recovery efforts that have left lawmakers unclear on whether the full amount — about double the current tax credit — will be funded.
State Assembly members Isaac Bryan and Rick Chavez Zbur, two co-authors of the Jobs Act, told TheWrap on Wednesday they are very confident that the bills that would expand the types of productions eligible for tax incentives and offer a 35% tax rate to Los Angeles-based productions will pass, along with the proposed increase of the program's cap from $330 million to $750 million.
'Our colleagues know we can't let this industry slip,' Bryan said, adding: '$750 million, while it's a lot of money and a desperately needed amount of money to keep the jobs that this industry is producing, is a small fraction of our overall budget.'
Language that called for that cap increase was removed from the two Jobs Act bills during budget committee hearings prior to their nearly unanimous floor vote passage this week. But the lawmakers said the language was ultimately unnecessary as the cap increase is still included in Gov. Gavin Newsom's revised budget proposal released last month.
Despite Bryan's remark, the local industry has already slipped significantly. Only about 20 percent of US movie and TV production is now made in California, a steep slide over the past 20 years, according to industry studies. FilmLA, which tracks production in Los Angeles, has said that 2024 was the worst year on record for local filming, with the first quarter of 2025 declining another 22% year over year.
The state's film commission says that between 2020 and 2024 California lost an estimated $1.6 billion in production spending due to limited tax credit funding.
But despite the urgency, apparently nothing in government is easy.
Newsom first threw his support behind the cap increase in October and has repeatedly expressed his support for it, including after President Trump knocked Hollywood for a loop last month floating the possibility of levying tariffs against productions shot outside of the U.S.
The question is when exactly that money earmarked for the tax incentive program will get final approval in Sacramento and give the California Film Commission the green light to begin the process of implementing the new program. That timetable is unclear because the tax credit legislation, while widely supported, is one of dozens of budget items that Sacramento has to get through, some of which are still the topic of protracted debate.
California is in a race against time as other states and overseas locations update their own programs to stay ahead in a global competition for production money.
Last week, Louisiana's legislature, months after lowering the cap of its program to $125 million, passed a bill that raised the base tax rate for productions that shoot there to 25%, with an additional 15% credit available towards labor costs if Louisiana residents are hired. Last month, New York raised its program cap to $800 million amidst increased competition for local productions from New Jersey.
Bryan explains that the main budget bill that state law requires the legislature to pass and for the governor to approve by June 15 is followed by a period in which the legislature handles 'trailer bills,' which work out the finer details on certain areas of state spending.'The first stab at the budget on the deadline is the bigger, overarching framework of how we're spending the biggest resources to uplift and protect Californians,' Bryan explained, adding that previous changes to the state production tax incentive got final approval through trailer bills passed after that main deadline.
The challenge for Bryan, Zbur and other legislators trying to keep Hollywood a major priority is that the trailer bill process is expected to be even more complicated than it usually is, and it's not clear at this time when exactly the trailer bill for the incentive program could come up for a vote.
That's because a lot of the guidance that lawmakers have on how much revenue and federal funding it will have for the year has been upended by uncertainty on Wall Street over Trump's tariffs – which affects state capital gains taxes – and suspension of property taxes in parts of Los Angeles affected by January's wildfires, among other factors.
Newsom's revised budget projected a $12 billion deficit, leading the governor to call for cuts in a wide range of areas outside of Hollywood, including changes to Medi-Cal that could result in millions of residents, including those who are undocumented, losing coverage.
As the larger budget debate plays out over the coming month, the Jobs Act co-authors say they are meeting with legislative leaders, including Assembly Speaker Robert Rivas and Senate President Pro Tem Mike McGuire, to discuss ways to expedite the bills as they head to opposite houses following their first floor votes. If the Jobs Act goes through the usual legislative process of waiting for committee and floor votes, it is likely they would not reach Newsom's desk for signature until the end of the legislative session in September, meaning that the expanded incentive program might not get into full swing until early 2026.
While the co-authors haven't settled on a course of action, one option would be to try to make the bills an 'urgency measure,' which would require a two-thirds majority vote to pass but would mean that the bills could take effect immediately once passed rather than on Jan. 1 of the following year. Given that both the Assembly and Senate bills only received one vote against on their first floor votes, the Jobs Act has the support to be enacted faster if this option is taken.
'Bottom line, we are working with the leadership to ensure that the incentive program changes are passed this summer, and come into effect this summer,' Zbur said.
The faster Sacramento gives the green light, the better. Once that happens, the California Film Commission still has months of work ironing out how the expanded program will be implemented, including how that $750 million is allocated to different parts of the entertainment industry ranging from feature films to prestige TV dramas and indie productions, as well as new categories like animated projects and half-hour live-action programs that would become eligible with the expansion.
For now, the next round of applications for the tax credit program, which opens later this month, will operate under the existing rules and with the current benefit of a 20% tax rate on eligible spending.
The post Timing of California's $750 Million Film Tax Credit Plan in Doubt as State Budget Cuts Weigh Down Process appeared first on TheWrap.