Hollywood unions seek exemption from California tax credit cap

Hollywood unions are lobbying for an exemption from a new California law that imposes a cap on annual tax credits. Governor Gavin Newsom recently signed Senate Bill 122 as part of a state budget package, which limits the amount a business can receive in tax credits to 70% of its liability or $5 million, whichever is greater.

The legislation aims to reduce budget strain by preventing companies, particularly in the tech sector, from using research and development credits to entirely eliminate their tax liabilities. However, the Entertainment Union Coalition (EUC) warns that this cap could discourage high-budget film and television productions from filming in California.

The EUC argues that the cap makes it difficult for studios to fully monetize credits compared to other production hubs like New York, Illinois, Canada, and the United Kingdom. This comes despite a previous legislative move to expand California’s production incentive program from $330 million to $750 million.