California is Proposing to Raise the Stakes on Film and TV Tax Credits Again

California already runs one of the largest film and television incentive programs in the country, and Governor Gavin Newsom wants to make it bigger. He has proposed raising the annual budget for the state’s Film and Television Tax Credit Program from $750 million to at least $1 billion. His office says that would give California the largest capped program of its kind in any U.S. state. The timing stands out. The plan was announced the day before the midterm elections, and Newsom leaves office on January 4, 2027, so carrying it through will fall to whoever comes next.  

The idea behind the program is fairly simple. A production that qualifies earns a credit against its California taxes, worth a share of what it spends in the state on crews, equipment, locations and similar costs. Since 2025, the credit has also been refundable, which means a company with little or no state tax bill can take the value back in cash instead. 

The new proposal does more than add money. It would extend the credit to the pay of actors, directors and other top creative roles, known in the industry as above-the-line talent. It would set aside $100 million a year for independent productions, which is $26 million more than they receive now. Companies that commit to more than one production in California would get a 5% bonus on their credits. The program would also run through 2040, giving studios planning a series over several seasons more certainty about future support. 

This is the third major change in roughly two years. In October 2024, Newsom proposed more than doubling the program from $330 million to $750 million a year, and lawmakers approved it in 2025. A companion bill, AB 1138, opened the credit to more kinds of projects, such as half-hour shows and animation. Then this year, a broader budget measure limited how much any company could claim in business tax credits each year, which threatened to shrink the film credit’s value. Lawmakers answered with AB 186, which Newsom signed on September 19th. It exempts independent productions from that limit and speeds up cash refunds. He also signed AB 2319, the state’s first standalone credit for post-production work such as editing, sound and visual effects, even when a project was filmed somewhere else. 

So, has the bigger program worked? The governor’s office points to $8.24 billion in direct production spending since last year’s expansion, including $3.2 billion in wages for more than 43,000 cast and crew jobs. The wider picture is less tidy. FilmLA, which tracks permits in the Los Angeles area, reported that shooting days in the third quarter fell 4.8% compared with a year earlier. Skeptics have also questioned the return for taxpayers. In 2025, the Legislative Analyst’s Office, the Legislature’s nonpartisan fiscal adviser, suggested the expansion made sense mainly if lawmakers saw keeping the state’s share of the film industry as a top priority in its own right. 

For now, this is a proposal rather than a bill, and it will need a sponsor, votes in both houses of the Legislature and a place in a future state budget. Assemblymember Rick Chavez Zbur, who helped write last year’s expansion, has already spoken in favor of it. Newsom also tied the plan to Washington. He is urging Congress to pass the Motion Picture, Television and Entertainment Revitalization Act, a bipartisan bill introduced earlier this year that would create a 20% federal credit companies could combine with state incentives. His argument is that states cannot carry the full cost of competing with other countries on their own. 

The real test is whether an extra $250 million or more can change a trend that last year’s much larger increase has not yet reversed. Supporters see the added money, the longer timeline and the bonus for repeat productions as the missing pieces. Critics see a state paying more each year to hold on to work it once took for granted. The next governor and a new Legislature will decide which view wins out, and the decision will shape where a large share of American film and television gets made over the next decade.