Newsom Signs Extension of Film Tax Credit
Gov. Gavin Newsom signed into law SB 132, which extends California’s film and television tax credit by five years to 2030 with $330 million in annual funding. Newsom proposed the extension in a trailer bill to the 2023-2024 budget.
The California Film Commission administers the California Motion Picture and Television Tax Credit program, which provides tax credits for feature films, independent films, and new, relocating, or recurring television shows, pilots, or miniseries made in California.
The law creates a California Motion Picture and Television Tax Credit Program 4.0 for five years starting in 2025-2026. The credit of 20% or 25% is available for tax years beginning on or after January 1, 2025 and can be allocated on or after July 1, 2025, and before July 1, 2030. The law also removes the tentative minimum tax limitation and allows the taxpayer to elect to make the credit refundable at a discounted amount. Newsom had proposed to make the credit refundable. Productions will have to meet new safety rules and new diversity requirements in order to receive a portion of the tax credits.
The law also revises the current Motion Picture and Television Tax Credit. This includes reducing the amount of qualified wages that are reduced to $5 million from $7.5 million and limiting the amount of credit that may be allocated to a television series to $750,000 per episode.
The credit was created in 2009 to encourage film productions to locate in California, as legislators were concerned that other states were making efforts to attract the industry. The legislature since extended and expanded the credit multiple times. Newsom views the credit as a way to make California a clear choice for film production over states that have recently passed restrictive abortion laws.
The Legislative Analysists Office (LAO) stated in a report that, while the tax credit may be helping the California film industry grow, its impact on the overall state economy is unclear, as funds dedicated to the film tax credit could have been spent on other activities. The LAO advised that the decision to extend the credit should depend on how the legislature prioritizes maintaining California’s centrality in the film industry rather than on promoting overall economic growth.