Newsom Seeks $1 Billion Annual Cap for California Film Tax Credit

Governor Gavin Newsom is proposing to raise California's annual film and television tax credit from $750 million to at least $1 billion. The plan, detailed in a press release on Monday, would make California's incentive the largest capped program in the country if approved.

The proposal would also extend the tax credit through 2040. Currently, the program runs through 2030. A key change would allow credits to cover above-the-line talent costs, such as actors' salaries, which are not eligible under the existing rules. Newsom stated, “We’re the capital of entertainment and we’re going to keep it here.”

California expanded the program last year, increasing the annual cap from $330 million to $750 million. In that first year, the governor's office reported that the credit generated over $8 billion in direct production spending. The expansion also led to the creation of more than 43,000 jobs and a 52% year-over-year increase in film shoot days.

Despite these gains, local production in the Los Angeles area has faced headwinds. FilmLA, the nonprofit that manages film permits for the region, reported that shoot days between July and September were down 4.8% compared to the same period last year. That figure is nearly 29% below the five-year average for that timeframe.

Competitors in other states and countries often offer uncapped incentives that include actor salaries. To address these limitations, the new plan includes a 5% credit boost for companies that commit to shooting two different productions in California. Independent productions would also see their eligible funding increase from $26 million to $100 million.

The state move aligns with federal efforts to support the industry. In September, congressional leaders introduced the Motion Picture, Television and Entertainment Revitalization Act. That bill would establish a 20% federal tax credit on U.S. labor for eligible film and TV productions, including post-production and visual effects work.

Assemblymember Rick Chavez Zbur, D-Hollywood, supported the Newsom proposal. He said, “This is about protecting the future of an industry that has helped define California for generations.” Zbur added that the measure would ensure the next generation of creative workers and small business owners can raise their families in the state.