California lawmakers have raised alarms over a tax credit cap included in Governor Gavin Newsom’s final state budget, warning that it could undermine the state’s efforts to retain film and television production jobs. In a letter dated July 10 and obtained by FOX Business, 39 legislators urged Newsom and other lawmakers to exempt the Film & Television Jobs Program from the cap, arguing that the change could 'significantly kneecap' the program, which was expanded just last year [1].
The $351.7 billion budget extends California’s temporary $5 million business tax credit cap for three years, through 2029. Beginning in 2030, companies will be limited to claiming $5 million or 70% of their state tax liability in a given year, whichever is greater [1]. Critics contend that this cap could prevent studios from fully utilizing credits earned for filming in California, effectively reducing the value of incentives designed to keep productions in the state [1]. Lawmakers described the move as 'retroactively changing the rules,' warning that it could result in significant job losses and economic setbacks for the entertainment industry [1].
The letter highlighted 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 [1]. Lawmakers emphasized the historical significance of California as the home of film and television production and cautioned that the Legislature’s response to the issue would determine whether this remains true in the future [1].
Assemblyman Rick Chavez Zbur stated that lawmakers believed the film program had been exempted from the cap and expressed concern that the changes, initially thought to be minor, are actually significant and could lead to major job losses if not addressed [1]. Newsom spokesperson Marissa Saldivar described the tax credit limit as part of a 'broader fiscal proposal' [1]. The industry has already faced challenges recovering from the pandemic, the 2023 Hollywood strikes, and productions relocating to other states and overseas [1].
CONCLUSION
California’s new tax credit cap has sparked strong opposition from lawmakers, who warn it could reverse recent gains in film and television job retention and economic activity. The outcome of legislative efforts to address the cap will be critical for the future of Hollywood’s presence in the state and its broader economic impact.