The California legislature has passed a new bill designed to mitigate the effects of a new business tax credit cap on the state’s production incentive program, which underwent a significant expansion last year in an effort to halt the decline in entertainment jobs in Los Angeles and beyond.
The bill, AB/SB 186, was one of dozens if not hundreds voted on by lawmakers on the final day of the 2026 legislative session in Sacramento. It now heads to Gov. Gavin Newsom’s desk for signature.
AB/SB 186 was the result of a two-month blitz of negotiations between entertainment stakeholders and Sacramento lawmakers after the passage this past June of SB 122, which caps the amount of tax credits any business can receive at $5 million or 70% of total liability per year, whichever is greater. The bill was passed as a way to raise revenue from corporate taxes by closing loopholes.
With the $5 million annual cap in place, industry advocates like the Entertainment Union Coalition and the Motion Picture Association warned that it would take longer for major studio productions to receive the tax credits they earned while making it more difficult for independent productions to sell the credits to potential financiers. The EUC sought a full exemption for productions from SB 122, but insiders with knowledge of talks say that legislative leaders balked out of concern that it would lead to other industries asking for carveouts of their own.
Instead, AB/SB 186 offers exemptions for independent productions, while major studio productions will be able to take advantage of accelerated payouts for productions that opt to take a cash refund instead of credits towards their tax liability. Previously, productions could take 90% of the value of their credits paid out over five years. That will be changes to 95% paid over two years.
The bill also expands the carry forward provisions of tax credits earned under earlier versions of the program from 10 to 15 years, meaning that studios still receiving credits for productions completed several years ago can still receive the full value of their credits as long as the studios continue to shoot California productions approved for tax credits under the current program.
In a statement, the EUC thanked Asm. Rick Zbur and State Sen. Ben Allen, who were co-authors of the production incentive program expansion and led talks on AB/SB 186.
“Most importantly we want to recognize the major role our members played in today’s success as advocates for their industry in California. They sent an unprecedented 450,000 letters to the California legislature, making clear the negative impact that SB 122 would have on their livelihoods, their families, and their communities. Once again, it was our members’ voices that most effectively communicated the real-world implications of disrupting our program’s nascent effort to keep California rolling,” the EUC said in a statement.
“Looking ahead, the EUC, alongside other industry stakeholders, will continue to champion our California’s Film and Television Jobs Program and the importance of keeping this iconic California industry that is the envy of the world in the state that gave birth to it over 100 years ago. When our industry thrives, California thrives.”
“Incentives bring production. Productions bring jobs, and jobs deliver invaluable economic impact on local communities. With today’s action led by Senator Ben Allen and Assemblymember Rick Chavez Zbur, the California Legislature has taken steps to help the Golden State remain an attractive and competitive destination for production,” added the Motion Picture Association in its own statement.
“This new resolution to SB122’s previously unintended restrictions to the CA Film & TV Jobs program will maintain the program’s competitiveness so creators continue to make movies and shows in California – and keep bringing brilliant stories to life. We thank Governor Newsom for his continued support for our industry’s health and future and look forward to him signing this important legislation into law.”
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