Newsom Proposes $1 Billion Film Tax Credit, Betting on a Fragile Hollywood Rebound

Gov. Gavin Newsom on Monday proposed raising California's capped film and television tax credit from $750 million to at least $1 billion a year, the third expansion of the program in three years and a bid to lock in a production rebound that state officials concede is still fragile. The announcement, made the day before California's 2026 midterm elections, calls on the Legislature to extend the incentive program through 2040, add a credit for above-the-line talent such as directors and actors for the first time, and set aside $100 million annually for independent films.

Under the proposal detailed in a joint release from the Governor's office and the California Film Commission, companies that commit to shooting at least two qualifying productions in the state would receive an additional 5 percent credit. Newsom's office said the expanded program would become the largest capped film and television tax credit of any state in the country, a framing several trade outlets picked up within hours of the announcement.

The current $750 million program is itself barely a year old. California raised the credit from $330 million after years of complaints from studios and crews that productions were leaving for Georgia, New York, the United Kingdom and Canada, where incentives are often larger or, in Georgia's case, uncapped entirely. In its first year, applications to the expanded program rose 82 percent, according to the state. Officials said supported productions generated $8.25 billion in direct spending, including $5.3 billion in qualified expenditures and $3.2 billion in qualified wages, and accounted for more than 43,000 cast and crew jobs and 261,000 background-performer days, along with more than 8,600 California filming days. Film shoot days in the state rose 52 percent year over year, officials said, and television shoot days rose more than 7 percent.

Since the broader incentive program began in 2009, the state says it has generated more than $35.4 billion in economic activity and supported upward of 248,000 cast and crew jobs. The administration contends that, per the governor's own accounting, every dollar awarded in credits returns $24.40 in economic output, $16.14 in state GDP and $8.60 in wages, though those multiplier estimates come from the administration rather than an independent audit.

A Rebound Still Under Threat

The timing reflects more than electoral optics. Earlier this year, a broader state budget provision capping most business tax credits at $5 million threatened to gut the film program's effective value, prompting a bipartisan group of state lawmakers to warn that the cap could drive productions back out of California just as the expanded credit began attracting them. The administration has since said it remains committed to the program, but the episode underscored how vulnerable the incentive remains to unrelated fiscal maneuvering in Sacramento.

Newsom is also pressing Congress to pass the Motion Picture, Television, and Entertainment Revitalization Act, a bipartisan bill that would create a 20 percent federal production credit stackable on top of state incentives. The Motion Picture Association and entertainment-industry unions have pressed Congress in a joint letter to pass the measure, which the trade press has reported has unusually broad industry and labor backing, before the current Congress adjourns for the year.

"At least $1 billion in tax credits means more investment flowing into our economy and more opportunity across the industry," Newsom said in announcing the proposal.

Who Stands to Gain

Below-the-line crew members, background performers and independent producers stand to benefit most directly from the new carve-outs, while the above-the-line credit marks a notable shift: for most of its history, the California program has excluded salaries for stars, directors and writers, unlike some rival states that already cover them. Crew unions, including the International Alliance of Theatrical Stage Employees, have lobbied for both the earlier expansions and this one, and Deadline noted that labor groups view the above-the-line add-on as recognition that bigger packages, not just bigger budgets, are what keep full productions, not just second-unit work, in Los Angeles. Dee Dee Myers, Newsom's senior economic adviser and director of the Governor's Office of Business and Economic Development, said the expansion would strengthen the state's creative industries and make California more competitive. California Film Commission Director Colleen Bell called the credit "one of the state's most important tools" for keeping production local, and Assemblymember Rick Chavez Zbur, a Los Angeles Democrat whose district includes much of Hollywood, said last year's expansion is "delivering results" that justify building on it further.

The administration also pointed to this year's Emmy Awards, where productions that received state tax credits, including HBO Max's "The Pitt," which won Outstanding Drama Series, collected 21 awards across six shows, which officials cited, as Variety also reported, as evidence the subsidy is helping keep prestige production in-state rather than merely subsidizing lower-budget work.

A Long Road to $1 Billion

None of it is law yet. The $1 billion figure is an opening request that must survive budget negotiations in a Legislature that, earlier this year, already balked at the fiscal exposure of the existing $750 million program, and any final number could emerge smaller or restructured. Newsom's own finance department will need to weigh the proposal against other spending priorities as the state crafts its 2027-28 budget, a process that typically stretches from January to June. The above-the-line credit and the extended sunset date would also require new statutory language, not just a budget line, meaning the proposal needs separate legislative sponsorship beyond the governor's endorsement.

For now, the proposal functions mainly as a marker: a signal to studios weighing where to greenlight their next slate, to crew unions watching Sacramento for the next budget fight, and to Washington, where Newsom is simultaneously arguing that federal lawmakers need to do their part so that, as he put it in the release, states "can't shoulder the cost alone." Whether California actually reaches $1 billion a year will depend on votes still months away, and on whether the political coalition that pushed through the last two expansions can hold together a third time.