Gavin Newsom’s $420 million expansion of California’s film and television tax credit, signed in 2025, is colliding with a budget trailer bill that limits how quickly studios can actually use the awards. The measure, SB 122, became law on June 29 and imposes an annual ceiling on business tax credits that now catches the entertainment incentives inside its net.

The cap mechanics

SB 122 extends a temporary restriction that prevents any taxpayer from applying more than $5 million in credits against a single year’s liability. Starting in 2030, a permanent formula takes hold: a company may claim the greater of $5 million or 70 percent of its total tax obligation. For a studio that earns tens of millions in credits during one award cycle, the practical effect is a multi-year wait to realize the full value.

Studio exposure

Paramount received $37.7 million in the latest allocation from the California Film Commission, covering projects including the Viola Davis thriller *Ascent* and a *Clueless* sequel series. Disney was awarded $45 million for an untitled detective series. Under the current cap, each company can recover only a fraction of those amounts per tax year, stretching the payback period across several filing seasons.

Legislative scramble

Assemblymember Rick Chavez Zbur and Senator Ben Allen, who both shepherded the 2025 expansion, are drafting a fix. “I am confident that we all can work together to make some changes to SB 122 that continues to allow the film tax credit program to achieve its goals, which is to preserve and grow the film and television industry in California,” Zbur said. He acknowledged the bill’s passage was muddled: “When we were voting on SB 122, I think there was confusion about the details of it. I think members believed that the film and TV tax credit was exempt from the program… the exemption that was in the bill was an exemption only to the refundability aspects of the program, which basically meant that the program was not exempt in the end.”

Production outlook

Since the $750 million annual program took effect, Los Angeles has not yet seen a meaningful rebound in production activity. Advocates point to nine series recently granted $145.5 million in credits as a leading indicator of recovery, provided the cap does not blunt the incentive’s appeal. Union members have sent roughly 350,000 messages to legislators demanding an industry carve-out before the session ends.