California film industry tax credit disputes

Following the enactment of Senate Bill 122, which imposes a cap on annual tax credits to reduce budget strain, Hollywood unions began lobbying for exemptions. The Entertainment Union Coalition (EUC) warned that the new limits—capping credits at 70% of liability or $5 million—could drive high-budget productions away from California toward more competitive hubs like New York, Canada, or the United Kingdom.

In response to these concerns, California lawmakers introduced Assembly Bill 186. This budget trailer bill seeks to protect the film and television industry by exempting independent productions from the Senate Bill 122 caps. The proposed legislation also aims to increase flexibility for motion picture companies by allowing more time to utilize credits and providing larger, faster refunds for unused portions.

Legislative efforts to support the entertainment sector have expanded with the introduction of Assembly Bill 2319. Alongside AB 186, this measure aims to establish a $10 million fund dedicated to supporting postproduction work, including sound mixing and visual effects (VFX). These combined efforts are intended to ensure that industry jobs remain within the state.

As of late August 2026, these measures have reached the desk of Governor Gavin Newsom for review. AB 186 and AB 2319 remain central to the state’s legislative efforts to protect the film industry, with the latter specifically proposing a 35 percent tax credit for postproduction work to retain editing and VFX jobs within California. Recent reports confirm that AB 2319, which proposes this standalone tax credit for film and TV postproduction work to maintain competitiveness, is among the key industry-focused bills currently awaiting the Governor’s decision.