An act to amend Sections 17053.98, 17053.98.1, 23698, and 23698.1 of, and to add Section 23696 to, the Revenue and Taxation Code, relating to taxation, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.
AB 1138 expands and revises California’s motion picture and television tax credit programs. It increases the base credit rates for the main film tax credit and the certified studio credit for projects allocated on or after July 1, 2025, generally from 20%/25% to 35%/40%, raises per-project qualified expenditure caps, and expands the types of productions that can qualify. The bill adds live-action and animated series averaging at least 20 minutes per episode, animated films, and large-scale competition shows to the eligible production categories for the newer credit structure, and it updates rules for recurring television series, including a new reapplication requirement if a series goes too long without requesting an allocation.
The bill also makes several structural changes to how the credits are administered. It raises the annual statewide allocation cap for the newer program from $330 million to $750 million, revises category allocations, and allows the California Film Commission to reallocate unused or previously unclaimed credits. It expands eligibility for single-member LLCs treated as disregarded entities, allowing them to assign credits to affiliated corporations and, for certain credits, to be treated as qualified taxpayers. It also creates a new refundable credit election for the newer program, allowing eligible taxpayers to receive a refund of a portion of excess credit over a five-year refundable period, paid from the Tax Relief and Refund Account.
AB 1138 also strengthens and broadens the program’s workforce and diversity requirements. It adds veteran status and ZIP Code data to diversity workplans and final diversity assessments, requires more detailed reporting to the Legislature and public, and expands the Career Pathways Training Program. The bill directs the California Film Commission to approve more nonprofit training partners, create an application process for them, and develop incentives for productions that hire trainees from the program. It also authorizes additional credit increases for productions that employ Career Pathways trainees.
The bill’s impact on state law is significant because it amends multiple Revenue and Taxation Code sections governing both personal income tax and corporation tax film credits, adds a new section addressing credit assignment for disregarded LLCs, and makes the changes effective immediately as an urgency statute. It also requires additional payments from the Tax Relief and Refund Account, which is why the bill is treated as an appropriation. In practical terms, it expands the pool of eligible productions, increases the amount of credits available, and creates new compliance, reporting, and workforce-training obligations for applicants and the Film Commission.
The overall sentiment in the legislative record appears strongly favorable, with the bill advancing through committees and floor votes by large margins and only a small number of no votes. The main points of contention are not spelled out in the available transcripts, but the structure of the bill suggests likely debate over the size of the expanded tax expenditure, the refundable-credit feature, and the added administrative and reporting requirements. Support appears to have centered on keeping California competitive with other states and countries for film and television production while tying the incentives to workforce development and diversity goals.
AB 1138 substantially revises California’s film and television tax credit statutes by increasing credit percentages, raising annual and per-project caps, broadening eligible production types, and adding a refundable-credit option for the newer program. It also expands eligibility for disregarded single-member LLCs, changes recurring-series allocation rules, and adds a new section allowing certain credits generated by disregarded LLCs to be assigned to affiliated corporations. The bill increases reporting, diversity, and workforce-training requirements for applicants and directs the California Film Commission to administer expanded Career Pathways Program provisions. Because it requires additional payments from the Tax Relief and Refund Account and takes effect immediately, it has direct fiscal and administrative effects on state tax law and film-credit administration.
The bill appears to have enjoyed broad support throughout the legislative process. Committee votes were unanimous or near-unanimous, and floor votes were overwhelmingly in favor, with only a handful of no votes at the Assembly and Senate stages. The available record suggests a general consensus that the bill would help California remain competitive in attracting film and television production while also promoting workforce development and diversity. No committee transcript excerpts were provided, so the record does not show detailed public debate, but the voting pattern indicates strong overall approval.
The principal areas of likely contention are the bill’s fiscal cost, the increase in the annual credit cap, and the move to a refundable credit structure, all of which expand the state’s exposure. Another possible point of debate is the breadth of the newly eligible productions and the more generous treatment of recurring television series, which may be viewed as favoring larger or established productions. Some stakeholders may also have concerns about the added compliance burden from diversity reporting, ZIP Code and veteran-status data collection, and the new Career Pathways Program requirements. The available voting history shows little formal opposition, but the bill’s size and scope suggest those were the main policy issues at stake.