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California lawmakers are warning that a tax credit cap in Gov. Gavin Newsom’s final state budget could derail the state’s push to keep Hollywood jobs in the state.
In a July 10 letter obtained by FOX Business, 39 California legislators urged Newsom and other lawmakers to exempt the state’s Film & Television Jobs Program — aimed at keeping productions in the Golden State — from the cap. They warned the change could “significantly kneecap” the program, which was expanded just last year.
“We understand the budget agreement is in place, but this problem must be fixed before the end of this session,” lawmakers wrote.
The warning came shortly after Newsom approved his final state budget as California governor, a $351.7 billion spending plan that tightens limits on business tax credits.
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The budget extends California’s current temporary $5 million business tax credit cap for three years, through 2029. Starting in 2030, companies will be limited to claiming $5 million or 70% of their state tax liability in a given year — whichever is greater.
Critics say the cap could hit California’s film and TV incentives, leaving studios unable to fully use credits they earned for shooting in the state. Lawmakers said the move would amount to “retroactively changing the rules.”
“As a result, many production companies will lose the full value of tax credits they earned in exchange for creating middle-class entertainment industry jobs with health care and retirement with dignity as well as the other economic benefits the industry brings to the state,” the letter states.
The lawmakers also noted that California’s updated film program has kept 133 productions in the state from August 2025 through April 2026, generating $5.5 billion in economic activity, 38,050 cast and crew jobs and 247,934 days of work for background actors.
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“For 100 years, California was the home of film and television production. That is the past. What the Legislature does to address the problem created in SB 122 determines if that remains true into the future,” the letter states.
Southern California’s film and TV industry has struggled to recover from the pandemic, 2023 Hollywood strikes and productions leaving for other states and overseas, the Los Angeles Times reported.
Assemblyman Rick Chavez Zbur, D-Los Angeles, told the Los Angeles Times that lawmakers believed the film program had been carved out of the cap.
“I don’t think that anyone understood what this cap was, what it did and that it effectively kneecapped and reverses the progress that we made last year,” Zbur told the outlet. “We need to have people understand that these changes, which I think people believed were minor, are really significant and will result in significant job loss if we don’t fix them.”
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Newsom spokesperson Marissa Saldivar told the Los Angeles Times the tax credit limit is part of a “broader fiscal proposal” to keep the state making “strategic investments” while maintaining long-term stability.
“We remain confident in the strength of the recently expanded Film and Television Tax Credit Program and will continue to work with industry and legislative partners to ensure the program is competitive,” Saldivar said.
Newsom and Zbur could not immediately be reached by FOX Business for comment.
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