California Governor Gavin Newsom is advocating for a significant enhancement to the state’s film and TV tax credit program, aiming to raise funding from $750 million to at least $1 billion annually. This proposal, unveiled on the eve of the 2026 midterm elections, seeks to bolster what is already the largest capped film and TV tax credit in the United States.
Proposed Changes to the Tax Credit Program
The newly proposed expansion includes various initiatives designed to strengthen the incentive structure. Key features of the proposal are:
- Increase in annual tax credit funding to over $1 billion
- Expansion of tax credit eligibility to include above-the-line spending, though this will be “subject to appropriate funding caps”
- Extension of the tax credit sunset period from five to ten years, allowing for more predictability and long-term investment in production
- Introduction of a 5% boost in tax credits for companies that commit to at least two distinct qualifying productions in California
- Increase in funding for independent films to $100 million annually, a rise of $26 million from the existing program
Next Steps and Political Context
Newsom, whose term concludes on January 4, has left the next steps regarding these proposed changes to his successor. Democratic nominee Xavier Becerra has signaled support for enhancing the tax credit but has yet to clarify the specifics of his plans. Industry stakeholders, meanwhile, have expressed a desire for an unlimited tax credit but lack confirmation from Becerra on such a commitment.
Discussions in the Assembly committee have included potential measures such as eliminating the current $750 million cap, broadening eligibility, and extending the tax credit’s expiration date. Testimonies from union leaders and representatives from the Motion Picture Association emphasized the need for California to enhance its incentive program in order to remain competitive with other states.
Federal Legislation and Economic Impact
In addition to state-level changes, Newsom has also urged Congress to pass the federal Motion Picture, Television, and Entertainment Revitalization Act (MPTERA) by the end of 2026. This bipartisan legislation would establish a 20% base tax credit for qualifying film, television, and VFX projects produced domestically.
Despite a recent decrease in production levels, Newsom’s office reported that the current $750 million tax credit program has generated $8.24 billion in direct production spending, including $5.3 billion in qualified expenditures and $3.2 billion in qualified wages, supporting over 43,000 jobs in the industry.
Conclusion: Commitment to California’s Entertainment Industry
In announcing the proposed expansion, Newsom emphasized California’s pivotal role in the modern entertainment industry, declaring, “California created the modern entertainment industry; we’re the capital of entertainment and we’re going to keep it here. At least $1 billion in tax credits means more investment flowing into our economy and more opportunity across the industry.” He added that federal support is crucial: “But states can’t shoulder the cost alone, which is why I am calling on Congress to back up an expanded tax credit by passing national film and TV tax credit legislation already on the table.”
