California lawmakers seek film tax credit exemption from $5 million corporate cap

More than three dozen California state legislators sent a letter dated July 11 to Gov. Gavin Newsom, Senate President Pro Tempore Monique Limón and Assembly Speaker Robert Rivas requesting an exemption for the film and TV tax credit program from a new corporate tax credit cap.

The letter states the cap will kneecap California and create significant uncertainty for production companies in terms of when, how and even if they will be able to monetize earned tax credits.

It adds that tax credits earned for creating jobs in motion picture and television production are not the same as tax credits provided for research and development, and that the legislation creates short-term budget savings by reneging on commitments made to the entertainment industry and the working families who depend upon it.

Gov. Gavin Newsom signed a $351.7 billion state budget that includes new limitations on corporate tax credits.

The budget extends an existing $5 million state tax credit limitation for three additional years from 2027 to 2029. Starting in 2030, the maximum tax credit companies can claim in a given year will be permanently capped at $5 million or 70 percent of a company’s state tax liability, whichever is greater. California’s expanded film and TV tax credit program has an annual cap of $750 million.

The California Film Commission stated the program is set to deliver $6.6 billion in direct production spending in-state this year and support more than 34,000 cast and crew jobs across 170 film and TV shows. Gov. Gavin Newsom announced this week that the program will deliver a record $6.6 billion in economic impact.