California Gov. Gavin Newsom on Friday signed into law a bill aimed at reducing Hollywood’s exposure to recent business tax credit caps legislation.
In a visit to Warner Bros. Studios the governor gave the green light to SB 186, which exempts independent productions from caps on the use of state tax credits that this year were not only extended, but also rendered permanent as of 2030.
SB 186 additionally offers new perks for productions that choose to monetize their tax credits instead of applying them to their annual tax bill: Productions can now monetize 95 percent of the credits instead of the previous 90 percent. Their payout timeline is also sped up to two years instead of the previous five.
It’s not a full exemption for Hollywood, but it’s a change that the industry pushed hard for. “Today’s action will maintain the state’s competitiveness so creators continue to make movies and shows in California — and keep bringing brilliant stories to life,” Motion Picture Association vp of state government affairs Arlen Valdivia said in a statement. “We thank Governor Newsom for his continued support for our industry’s health.”
In the view of California production advocates, the tax credit caps — which were signed into law as part of a state budget bill earlier this year — jeopardized California’s recently expanded film and television production tax credit program.
In 2025, Newsom signed into a law a $420 million annual expansion to the program in the face of film and TV projects fleeing to other states and countries with attractive tax credits. The beefed-up program in recent months has committed to supporting Paramount’s Clueless sequel series, DreamWorks’ Shrek prequel Donkey and Disney’s Hexed, among other titles.
Hollywood insiders claimed that state budget bill SB 122 could undo the goodwill created by that tax credit expansion. “Budget bill SB 122 puts our program at risk by retroactively changing the rules and threatening the recovery efforts of our already fragile industry throughout California,” said a letter sent by entertainment union members to legislators over the summer.
State legislators with ties to the industry scrambled to come to a solution and SB 186, carried by state Sen. Ben Allen, passed the legislature in late August.
Newsom signed SB 186 into law the same day that he also greenlit a standalone postproduction tax credit in the state. “California is the nation’s entertainment capital. It is the home of storytellers, dreamers, artists, entrepreneurs, and creators who define culture for the rest of the world,” Newsom said in a statement. “This legislation protects the extraordinary people who make this industry possible and makes it unmistakably clear: California is still the future of film and television. We have the talent. We have the infrastructure. We have the creative community. And we have an ecosystem that simply cannot be replicated anywhere else.”
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