California Governor Gavin Newsom proposed expanding the state’s film and television tax credit program to at least $1 billion annually, up from the current $750 million cap, to combat a 3.7 percent drop in third-quarter production levels reported by FilmLA and counter aggressive incentives offered by rival states and foreign hubs.
The Bottom Line
- Governor Newsom proposed raising California’s annual film and TV tax credit from $750 million to at least $1 billion on the eve of the 2026 midterm elections.
- The expansion includes eligibility for above-the-line talent spending, a $100 million annual allocation for independent films, and a 5% bonus for companies committing to at least two productions in the state.
- Despite the state’s previous bump to $750 million last year, production jobs have continued to contract while competing locations like New York, New Jersey, and Georgia, alongside foreign destinations like the United Kingdom and Hungary, attract projects.
Raising the Annual Cap to One Billion Dollars
Governor Newsom announced the push to elevate the annual tax credit funding past the $1 billion mark, building on last year’s legislative shift that raised the cap from $330 million to $750 million. The announcement landed just before the 2026 midterm elections, leaving the actual implementation of the proposal to Newsom’s successor as his gubernatorial term expires on January 4.
I'm proposing to expand the @FilmCalifornia Tax Credit to at least $1 BILLION annually to make California's Film & TV Credit the LARGEST capped program in America.Building on my previous expansions' success, we'll bring in more productions, more jobs, and more opportunity.
The state’s push comes as production levels continue to slide. Data from FilmLA indicated a 3.7 percent contraction in production during the third quarter, even with the enhanced credits currently on the books. Major studios and streamers based in Los Angeles face mounting pressure as competing production hubs offer richer incentives.
Expanding Eligibility to Above-the-Line Talent and Indies
The newly proposed framework introduces significant structural changes to how the credits are applied. The expansion covers above-the-line talent expenses—such as actors’ salaries—subject to specific funding caps. Independent film funding would rise to $100 million annually, marking a $26 million increase over the existing program parameters.
Productions that commit to filming at least two distinct qualifying projects in California will receive a 5-percent boost in tax credits. The sunset date for the program would be extended through 2040, a notable jump from the previous 2030 expiration date that provides studios with longer-term financial predictability.
| Program Metric | Previous Structure | Proposed Expansion |
|---|---|---|
| Annual Tax Credit Cap | $750 Million | At least $1 Billion |
| Credit Sunset Date | 2030 | 2040 |
| Above-the-Line Eligibility | Excluded | Included (Subject to Caps) |
Global Competition and Calls for Federal Action
California faces intense international and domestic competition for entertainment jobs. Regions including New York, New Jersey, and Georgia, alongside foreign destinations like the United Kingdom and Hungary, have successfully drawn away major studio projects with competitive tax structures. While the $750 million incentive launched last year drove an initial surge in applications and generated $8.24 billion in direct production spending—including 43,000 cast and crew jobs—subsequent production metrics trended downward.
Because state budgets face limitations, Newsom reiterated his call for national legislation. As reported, the governor urged Congress to pass the Motion Picture, Television, and Entertainment Revitalization Act (MPTERA) by the end of 2026 to establish a 20 percent base federal tax credit that can stack on top of state-level programs.
“California created the modern entertainment industry; we’re the capital of entertainment and we’re going to keep it here,” Newsom said in a statement. “At least $1 billion in tax credits means more investment flowing into our economy and more opportunity across the industry.”
California Gov. Gavin Newsom, on the eve of the 2026 midterm elections, is calling for another major expansion of the state's Film and TV Tax Credit Program.Newsom is proposing an increase from $750 million in annual tax credits to at least $1 billion.https://t.co/yhDrWvcHbz
