California lawmakers are set to approve a fix Monday that would shield independent film and television productions from a new statewide cap on corporate tax credits, a move aimed at calming fears within the entertainment industry that more productions could leave the state.
The measure, Assembly Bill 186, would preserve independent filmmakers’ access to California’s film tax credit program, which typically involves smaller budgets and fewer credits claimed compared to major studio projects. Supporters say the change is necessary to prevent unintended damage to a program that has become central to keeping production work in California.
The state’s film tax credit dates back to 2009, when it was created to help California compete against other states and countries offering steep incentives to lure film and TV productions away. Last year, as the industry struggled to recover from the pandemic, labor strikes and the fallout from Southern California wildfires, Gov. Gavin Newsom pushed lawmakers to double the size of the program, raising the annual cap to $750 million in available credits in hopes of keeping more entertainment jobs in the state.
AB 186 builds on that effort by giving production companies more flexibility in how they use their credits. Under the bill, companies would have additional time to apply unused credits toward future tax bills, and those who choose to cash out unused credits would receive larger refunds — delivered on a faster timeline.
But the expanded program soon ran into a conflict with another of Newsom’s priorities. In July, the governor signed a permanent statewide cap on corporate tax credits, limiting how much large companies can claim in a given year to either $5 million or 70% of their tax liability, whichever is greater. The cap was part of a broader push to address California’s tight budget and ensure large corporations and wealthy individuals contribute more.
The cap alarmed entertainment industry leaders, who warned it could undercut the very program designed to keep production in California. Bryan Lourd, CEO of Creative Artists Agency, sent a letter to state lawmakers earlier this month urging them to fully exempt film and television productions from the new restrictions.
“Without this fix, we risk destabilizing a program that is critical to keeping film and television production in California and the thousands of jobs it supports,” Lourd wrote.
While AB 186 doesn’t grant the blanket exemption the industry initially sought, lawmakers say it’s a meaningful step forward. Assemblymember Rick Zbur, a Los Angeles-area Democrat who helped author last year’s expansion of the film tax credit, said the bill will help stabilize the industry moving forward.
“[This will] 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,” Zbur said in a statement.
Among the bill’s provisions: some studios would be allowed to apply excess tax credits toward future tax years for up to 15 years, an increase from the current nine-year limit. Productions that already claimed credits under last year’s expanded program would also be eligible for refunds covering up to 95% of unused credits, up from 90%, with the state required to issue those refunds within two years rather than five.
If signed into law, the changes are expected to cost the state as much as $170 million annually in lost tax revenue, according to a legislative analysis of the proposal.
The bill drew support from a broad coalition during a Sunday budget hearing, including lobbyists representing major studios such as Skydance and Walt Disney, as well as entertainment labor unions including SAG-AFTRA.
Shane Gusman, a lobbyist for SAG-AFTRA and the Teamsters Union in California, acknowledged the deal fell short of what labor groups initially wanted but said it represents a workable compromise.
“It’s fair to say that the unions and others were arguing for a full exemption,” Gusman said Sunday. “But it’s one of those things we … got enough so that the program will continue to work.”
Original source: CalMatters
