Expand and modernize California's Film & Television Tax Credit Program

Keeping film and television production in California is essential to its identity and economy. Production also provides jobs for thousands of California artists and creatives. SB 630 and AB 1138 update state regulations in concert with the Governor’s proposed increase to the state’s entertainment tax incentives cap.

Together, the bills raise the base tax credit rate‍ and remove the $100M production budget cap to retain or attract big budget projects. And the bills expand eligibility for the tax credit to include more types of productions, such as smaller-scale indie films, documentaries and niche streaming series. Television series that provide stable, recurring employment for cast and crew could receive additional tax credit boosts with each season.

Text: SB 630 (Allen)

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a motion picture credit (motion picture credit 4.0) to be allocated by the commission on or after July 1, 2025, in an amount equal to 20% or 25% of qualified expenditures for the production of a qualified motion picture in this state, and limits the aggregate amount of the credit that may be allocated for a fiscal year to $330,000,000, as specified. Existing law defines a “qualified motion picture” for purposes of these tax credits to include a motion picture that is produced for distribution to the general public that includes, among other productions, a feature with a specified minimum production budget, an independent film, a new television series produced in California, as specified, or a television series that relocated to California. Existing law allows a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit under the motion picture credit 4.0 exceeds the qualified taxpayer’s tax liability for the taxable year, and allows the excess to be carried over, as specified.

Existing law also allows a credit for taxable years beginning on or after January 1, 2022, and before January 1, 2032, in an amount equal to 20% or 25%, or as modified, of qualified expenditures paid or incurred during the taxable year by a qualified motion picture produced in this state at a certified studio construction project.

This bill, with respect to Motion Picture Credit 4.0, for taxable years beginning on or after January 1, 2025, would revise the definition of qualified motion picture to include series with episodes averaging 20 minutes or more, animation films, series, and shorts, and large-scale competition shows, as specified. The bill would increase the credit amount allowed for a qualified motion picture, including to 35% for amounts paid or incurred inside the Los Angeles zone. The bill would additionally increase the amount of qualified expenditures the California Film Commission is allowed to consider when determining the credit amount allocated to a qualified motion picture, and would allow an additional credit percentage of up to 5% percent for qualified expenditures in an economic opportunity zone. The bill would increase the aggregate amount of credits that may be allocated in a fiscal year to $750,000,000, and would revise the allocations for independent films within that amount. The bill would additionally correct erroneous cross-references in those provisions. By requiring additional moneys to be paid from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.

This bill, with respect to the certified studio construction project credit, for taxable years beginning on or after January 1, 2025, would revise the definition of qualified motion picture, the credit amount allowed for a qualified motion picture, including to 35% for amounts paid or incurred inside the Los Angeles zone, and the total credit amount allowed to be allocated to a television series, as specified, in conformity with the Motion Picture Credit 4.0, as described above. The bill would also end the requirement that a certified studio construction project is produced by a qualified taxpayer that either owns more than 50% of the soundstage or soundstages on which the production is filmed or entered into a contract or lease of 10 years or more.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.

Text: AB 1138 (Zbur, Bryan)

AB 1138, as amended, Zbur. Income and corporate taxes: tax credits: motion pictures.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a motion picture credit (motion picture credit 4.0) to be allocated by the commission on or after July 1, 2025, and before July 1, 2030. in an amount equal to 20% or 25% of qualified expenditures for the production of a qualified motion picture in this state, and limits the aggregate amount of the credit that may be allocated for a fiscal year to $330,000,000, as specified. Existing law defines a “qualified motion picture” for purposes of these tax credits to include a motion picture that is produced for distribution to the general public that includes, among other productions, a feature with a specified minimum production budget, an independent film, a new television series produced in California, as specified, or a television series that relocated to California. Existing law allows a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit under the motion picture credit 4.0 exceeds the qualified taxpayer’s tax liability for the taxable year, and allows the excess to be carried over, as specified.

Existing law also allows a credit for taxable years beginning on or after January 1, 2022, and before January 1, 2032, in an amount equal to 20% or 25%, or as modified, of qualified expenditures paid or incurred during the taxable year by a qualified motion picture produced in this state at a certified studio construction project.

This bill, with respect to Motion Picture Credit 4.0, for taxable years beginning on or after January 1, 2025, would revise the definition of qualified motion picture to include series with episodes averaging 20 minutes or more, animation films, series, and shorts, and large-scale competition shows, as specified. The bill would increase the credit amount allowed for a qualified motion picture, including to 35% for amounts paid or incurred inside the Los Angeles zone. The bill would additionally increase the amount of qualified expenditures the California Film Commission is allowed to consider when determining the credit amount allocated to a qualified motion picture, and would allow an additional credit percentage of up to 5% percent for qualified expenditures in an economic opportunity zone. The bill would increase the aggregate amount of credits that may be allocated in a fiscal year to $750,000,000, and would revise the allocations for independent films within that amount. The bill would additionally correct erroneous cross-references in those provisions. By requiring additional moneys to be paid from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.

This bill, with respect to the certified studio construction project credit, for taxable years beginning on or after January 1, 2025, would revise the definition of qualified motion picture, the credit amount allowed for a qualified motion picture, including to 35% for amounts paid or incurred inside the Los Angeles zone, and the total credit amount allowed to be allocated to a television series, as specified, in conformity with the Motion Picture Credit 4.0, as described above. The bill would also end the requirement that a certified studio construction project is produced by a qualified taxpayer that either owns more than 50% of the soundstage or soundstages on which the production is filmed or entered into a contract or lease of 10 years or more.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.