The California production community can breathe a sigh of relief: State lawmakers have officially introduced a bill meant to allow studios a few key exemptions from a recently enacted restriction on corporate tax credits.
AB136, introduced Friday evening, addresses concerns raised from stakeholders including the Motion Picture Association about the threat of undermining the efforts to expand California’s Film & TV Tax Credit pool to $750 million.
Lawmakers have to consider legislation for 72 hours before voting. With that in mind, a vote on AB136 is likely to come Monday evening, hours before the midnight end to the legislative session.
The state budget, passed this summer, seeks to stabilize revenue by preventing corporations from offsetting more than $5 million in tax liability annually for the next three years. Several advocacy groups pushed for a complete exemption, but the solution introduced by lawmakers on Friday evening does fall short of that.
Instead, only independent productions will be completely exempt from the $5 million cap. The legislation also addresses concerns about the payback period for studios that have elected to refund credits for cash. Current law allows studios to get cash instead of claiming the credit against tax liability for a 10% discount on the total with a payback period of five years. The fix accelerates that to two years with just a 5% discount.
The new legislation will also extend the expiration date of the non-refundable tax credits that were issued prior to 2025.
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