Entertainment unions and industry groups are urging California lawmakers to exempt film and television productions from a new tax-credit limitation, warning that the change could undermine efforts to bring production and jobs back to the state.
California’s battle to rebuild its film and television production industry has entered another critical phase, with Hollywood unions pushing lawmakers to protect the state’s expanded production incentive program from a new tax-credit cap.
The issue centers on Senate Bill 122, signed into law by Gov. Gavin Newsom on June 29 as part of California’s budget package. The law generally limits the amount of certain tax credits a business can receive each year to 70% of its tax liability or $5 million, whichever is greater. The provision was primarily designed to address concerns surrounding businesses using research-and-development credits to substantially reduce their tax obligations.
Entertainment labor organizations now argue that applying the same limitation to film and television productions could make California’s production incentive less valuable and potentially undermine the state’s efforts to compete with other major production centers.
Hollywood Wants a Film and Television Exemption
The Entertainment Union Coalition is advocating for an exemption that would allow qualified film and television productions to continue monetizing California production credits under the existing system.
The coalition represents major entertainment labor organizations, including SAG-AFTRA, IATSE, the Directors Guild of America, the Writers Guild of America West, Teamsters Local 399 and other unions representing production workers.
The coalition previously organized around expanding California’s film incentive program and has argued that production incentives are directly connected to preserving entertainment jobs in the state.
According to reporting on the current legislative fight, union members have sent more than 350,000 letters to California lawmakers urging action on the issue.
Why the Tax-Credit Cap Matters to Producers
The concern isn’t necessarily that productions will lose the tax credits they have been awarded.
Instead, the issue is how quickly and efficiently those credits can be monetized.
Film productions can generate substantial tax credits based on qualifying California expenditures, including eligible wages and production costs. A large feature film or television series can therefore accumulate credits worth millions of dollars.
If the credits cannot be fully utilized or transferred within a reasonable timeframe, their value to producers can effectively be reduced.
That could become particularly problematic for independent productions that depend on selling or transferring tax credits as part of their financing strategy.
The Entertainment Union Coalition has warned that the new limitation could make it more difficult for independent productions to sell credits to buyers or use them to obtain financing.
For an independent producer trying to close a financing package, that distinction can be critical.
California Recently Expanded Its Film Incentive Program
The timing is particularly important because California dramatically expanded its film and television incentive program last year.
The state’s annual production-incentive allocation was increased from approximately $330 million to $750 million, creating significantly more capacity for productions seeking to qualify for California’s program.
California’s official approved-project data shows the scale of the program.
Among recent awards are major projects from companies including Paramount, Warner Bros., Disney, DreamWorks, HBO and CBS, along with numerous independent productions. The approved projects list shows substantial qualified expenditures and tax-credit allocations across feature films, television series and animation.
For example, Paramount’s Ascent received a $21 million allocation in July 2026 against more than $69 million in qualified California expenditures, according to the California Film Commission’s published project list.
That illustrates why the mechanics of monetizing the credits matter to productions of very different sizes.
California Is Trying to Reverse Production Flight
The incentive expansion was designed in part to address a problem that has become increasingly important to Hollywood:
California has been losing production to other states and countries offering competitive financial incentives.
Georgia, New York, Illinois, New Mexico, Canada and the United Kingdom have all developed significant production ecosystems by combining incentives with crew bases, infrastructure and other production advantages.
California still has enormous advantages, including its established entertainment workforce, studios, vendors, post-production companies and concentration of creative talent.
But the financial equation has changed.
Producers can now compare multiple locations before deciding where to spend millions of dollars.
That means an incentive program has to be competitive not only on paper but also in terms of how easily producers can actually realize its financial benefits.
Independent Producers Could Face Particular Challenges
The issue may be especially significant for independent filmmakers.
Unlike major studios, independent producers often have less flexibility when assembling financing.
A production budget might depend on a combination of private equity, presales, gap financing, incentives and other sources.
A transferable tax credit can become an important part of that financing structure.
If investors or lenders discount the value of an incentive because of uncertainty surrounding when it can be monetized, a production could face a larger financing gap.
That could influence whether a project is greenlit in California at all.
For smaller productions, the difference between shooting in California and taking advantage of another state’s incentive can be substantial.
Lawmakers Are Considering a Possible Fix
California lawmakers are now considering ways to address the potential impact of SB 122 on film and television.
One option under discussion is a specific exemption for independent productions, allowing producers to continue transferring credits to buyers as part of their financing arrangements.
The broader question is whether major studio productions should receive the same treatment.
Industry groups including the Entertainment Union Coalition and the Motion Picture Association have argued for a broader production exemption, saying the expanded incentive program will not accomplish its intended job-creation goals if productions cannot fully realize the credits.
Opponents of a broad exemption face a different concern: other industries could seek similar carve-outs from the new tax-credit limitations.
That creates a political challenge for Sacramento as lawmakers attempt to balance California’s entertainment economy with broader state budget concerns.
Another California Incentive Proposal Could Help Post-Production
The tax-credit debate isn’t the only production-related legislation being considered in California.
Assembly Bill 2319 would create a refundable tax credit of between 35% and 50% for qualifying post-production activity conducted in California, including projects whose principal photography takes place outside the state.
The proposal is designed to bring post-production spending—and the associated jobs—back to California even when a project shoots elsewhere.
The bill had passed the Assembly and was expected to face a Senate floor vote during the final week of the legislative session, with a proposal for as much as $100 million in additional funding.
For California’s production industry, the two efforts address different pieces of the same problem: keeping entertainment-related spending inside the state.
California’s Film Incentive Has Already Attracted Major Productions
Despite the uncertainty surrounding SB 122, California’s expanded incentive program is already attracting significant projects.
The California Film Commission’s approved-project database includes productions ranging from low-budget independent films to major studio features and television series.
Recent approved projects include:
- Independent feature films
- Major studio features
- New scripted television series
- Returning television series
- Animated features
- Studio productions
- Soundstage-based productions
That diversity is important because California’s production strategy isn’t solely focused on attracting billion-dollar franchises.
The state is also attempting to maintain a broad production ecosystem that provides work for crews, vendors, facilities and independent producers.
The Larger Battle for Production Jobs
For Hollywood unions, the tax-credit fight is ultimately about employment.
When a production leaves California, the impact can extend beyond the performers and crew members directly employed by the project.
Production spending supports transportation companies, caterers, equipment rental houses, construction crews, location services, hotels, restaurants, post-production facilities and countless other businesses.
A sustained decline in production can therefore have a cascading effect across the state’s entertainment economy.
That is why unions have become increasingly active in California’s incentive debate.
The Producers Guild and entertainment unions previously coordinated efforts to expand the state’s incentive program, with a coalition representing approximately 165,000 members participating in the “Keep California Rolling” campaign.
The Deadline Is Approaching
California’s legislative session is moving toward its August 31 deadline, making the coming days particularly important for the film industry.
Lawmakers and industry representatives are discussing possible language that could mitigate the impact of SB 122 on productions.
For producers currently budgeting projects in California, the outcome could affect how they evaluate the state’s incentive program.
The key question is not simply whether California offers a substantial tax credit.
It is whether producers can reliably capture the full economic value of that credit when financing and completing a production.
What This Means for Producers
California remains one of the world’s most important production markets, but producers now have more choices than ever.
When comparing locations, production companies increasingly consider:
Tax incentives + crew availability + stages + locations + infrastructure + financing + speed of monetization = actual production economics.
That final component—monetization—is particularly important for independent producers.
A nominally larger incentive isn’t necessarily better if the production has difficulty realizing its value.
California’s challenge is therefore twofold: offer a competitive incentive and make the incentive financially practical for productions to use.
A Critical Moment for California Film Production
The current fight over SB 122 comes at a pivotal moment for California’s entertainment industry.
The state has committed substantially more money to its production incentive program, major studios are continuing to apply for credits, and entertainment unions are pushing aggressively to preserve production jobs.
But California is competing against jurisdictions around the world that are equally determined to attract those productions.
Whether the state’s expanded incentive program succeeds may ultimately depend on more than the size of the annual allocation.
It could come down to whether producers believe California is the most financially reliable place to make their next movie or television series.
For Hollywood, the clock is ticking—and the outcome of California’s tax-credit debate could have a significant impact on where future productions choose to shoot.
Film-Friendly.com will continue tracking California film incentives, production legislation, tax-credit developments and opportunities for producers and production professionals.
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