California's Big Bet: $750M Incentive Aims to Keep Hollywood Productions at Home

Joseph Chianese

California’s increased funding, larger base credit and shift to refundability will translate into real financial benefits for productions. Are the 2025 changes going to be enough?

As global production competition grows, U.S. states are ramping up their efforts to keep film and TV projects from relocating overseas, and California has made moves to reinstate itself as a major contender in the Hollywood arms race.

The Golden State took a historic step forward on June 27, 2025, when Governor Gavin Newsom signed Assembly Bill 132, which expanded the Film & Television Tax Credit Program (also known as Program 4.0) to $750 million annually for five years. This new legislation went into effect July 1, 2025. Assembly Bill 1138 – the companion Bill to 132 – which also included significant improvements to the California Film & TV Tax Credit Program, passed shortly thereafter, and was signed into law by Newsom on July 3, 2025.

Under the California 4.0 incentive program, qualified productions can now receive a 35-40% refundable incentive back between 2025-2030. In addition, eligibility is broadened to cover projects such as animated films and series, large-scale competition shows, and TV shows with episodes of less than 30 minutes. Applicants are also eligible to elect to treat the California Tax Credit as a Refundable Tax Credit.

While the expanded incentives in California offer a promising path to reclaiming productions lost to international competitors, like Canada and the UK, and to states like New Jersey and Georgia, key gaps remain. Most notably, gaps remain in the exclusion of above-the-line (ATL) costs and standalone incentives for VFX or post-production services if the project is not filmed entirely in California.

According to the California Film Commission, Program 4.0 is estimated to increase jobs by 40-50% (resulting in an estimated increase of around 4,400-5,500 new industry jobs). Although a hopeful number, some disagree that the 17,000 jobs lost since 2022 are recoverable or that the program is enough to bring California’s film business back to what it once was a decade ago.

Still, California is back in the running in a three-way race with New York and New Jersey to reclaim production in the U.S. That is, after Georgia, which still takes the lead, offering an unlimited cap for tax incentives including ATL costs.

The question remains: Is the considerable expansion of the incentive enough to make a difference, or is the damage already done?

What exactly is included in California’s new incentive program?

While California’s Incentive Program 4.0 provides double the amount of funding compared to its predecessor programs, it’s not a free-for-all. The new incentive scheme comes with parameters to ensure that every project receiving funds provides the most economic value for the State of California.

• Narrow application windows are structured for each type of project. The first application window, for new, relocating, pilot, limited or recurring television series, ran from July 7 – 9, 2025.
• Once an application is submitted for a project during that timeframe, the applicant must complete a “jobs ratio test” to show how many jobs that project is estimated to provide. The projects that demonstrate they are going to create or maintain the highest percentage of jobs in the State are more likely to be selected.
• The program also holds applicants accountable for realistic forecasting, which means that applicants will be penalized if they grossly over-estimate on job creation and then fail to meet those estimates.

Learn more about the application windows and the process for applying at the California Film Commission application calendar.

Along with additional application windows (now limited to 3 days instead of 5 days) and the additional reporting requirements, California’s Program 4.0 is a major step up from the State’s 3.0 program. In the face of mounting competition, California made significant updates to its tax credit offerings, betting that the risk will return a handsome reward.

Here’s how the revamped Program 4.0 stacks up:

1. Expanded Funding Cap

The State’s film tax credit program will see its cap increase by over 125%, soaring from $330 million to $750 million. This injection of funding ensures that more productions can take advantage of the program without worrying about funding.

2. Increased Tax Credit Rates (35%-40%)

Qualified productions may now receive a base 35% refundable tax credit over the course of five years (up from the previous base of 20% to 25%). Additional increases of 2-5% for hiring from targeted job programs, relocating a project back to California, or filming outside the 30-mile radius of the Los Angeles studio zone are also available.

For example, TV series with a minimum of $1M per episode and having filmed 75% of their show outside California and then relocate back to California during their first year of receiving a California film tax credit are eligible for a total 40% credit.

3. Broader Eligibility

The new 4.0 program allows more types of productions to qualify for the tax credits with a California spend of $1M or more, including:

• a. Animation series and films, which have been excluded in the past
• b. Multi-camera sitcoms
• c. Large-scale competition shows, such as reality or game shows with production budgets over $1 million
• d. TV shows less than 30 minutes

Note: Reality, documentary programming, game, talk shows, as well as above-the-line labor expenditures are still excluded.

4. Diversity and Inclusion Bonuses

A focus on diversity and inclusion is also built into the new California 4.0 incentive, with an additional credit of up to 2% for qualified productions that participate in the Career Pathways program and that employ 1-4 trainees from historically underserved communities.

These trainees must be hired in addition to, and not in place of, experienced union crew, safeguarding union jobs. Productions are also now required to report on the zip codes and veteran status of their workforce, in addition to existing requirements for race, ethnicity, and gender, to promote demographic and geographic inclusion.

5. Above-the-Line (ATL) Costs Remain Excluded

Despite advocacy from groups like the California Production Coalition, ATL expenses, such as salaries for lead actors, directors, and producers, remain excluded from qualified expenditures. This limitation could weaken California’s appeal for high-budget or star-driven projects that may opt for the New York or Georgia incentive program instead, both of which cover ATL costs within their film credit programs.

6. Music-Scoring and Post-Production Not Included

Standalone music scoring, VFX and post-production services are also still not recognized as eligible for expenses. The focus remains primarily on principal production activity. So, productions that film in places like Canada or Georgia and that decide to complete their VFX or post-production in California are not eligible for Program 4.0 incentives.

7. Refundability

All applications on or after July 1, 2025, have the option to elect “refundability” for taxpayers with no California income tax or sales tax liability.  This change was primarily introduced through Senate Bill 132 (Ch. 56, Stat. 2023) and was further reinforced by companion legislation like AB 1138.

Note, if a project chooses “refundability,” it will receive only 90%, paid out over 5 years.

Applicants who choose not to elect refundability can still use the California credit to offset their California income tax or sales tax liability. Independent producers (not publicly traded nor are owned by more than 25% by a publicly traded company) are still eligible to sell California tax credit to other corporate or individual California taxpayers.

Staying competitive in a changing production landscape

The push to enhance California’s incentives comes at a crucial time. As we saw in 2024, production filming fell by 40% compared to 2022, while countries like the UK and Canada saw steady growth in production spending. The global landscape for filming continues to shift, with filmmakers seeking out the most financially advantageous incentive programs.

California’s competitive push is essential for the State to remain a viable filming location, especially as other states like New York, New Jersey, and Georgia continue to revamp their incentive programs to attract large-scale productions.

The appeal of international locations also continues to grow. Canada saw production spending rise to $5.41 billion in 2024, while the UK hit $5.91 billion. These increases came as U.S. production shrank overall and destabilized California’s longtime dominance in the global film industry.

This $750 million expansion has now broadened the scope of California’s incentives aim to stop this outflow of projects and reassert the State’s leadership in entertainment production.

See the latest incentive program changes in our recent article Production Incentives News to Know: July 2025.

Investments in filming infrastructure and workforce development

Complementing the incentive expansion are major investments in infrastructure and talent development that could further strengthen California’s appeal, including the following:

Studio Expansion and Facility Development

Several new studio projects are underway:

• Hollywood Park Studios in Inglewood is being developed as a state-of-the-art facility in time for the 2028 Olympic and Paralympic Games.
• The Television City redevelopment in the Fairfax District is a $1.25 billion project that will include 15 sound stages and 1.3 million square feet of creative office space.
• Sunset Glenoaks Studios in Sun Valley and East End Studios in Glendale will further expand large-scale production capacity.

Workforce Development and Local Hiring Incentives

Training and hiring programs through the Career Pathways Training Program, which is backed by the California Film Commission, help productions connect with trainees from underserved communities for on-set experience with the following partner organizations:

• The Handy Foundation offers career placement and training for underrepresented professionals in post-production roles.
• Manifest Works connects those impacted by foster care, homelessness and incarceration with job opportunities and provides ongoing life and professional skills to support long-term success.
• Hollywood CPR offers vocational training in trades and skills required for careers in the Artist, Crafts, and Technician departments in the entertainment industry. Successful completion of this program leads to union membership.

By hiring 1-4 trainees through these programs, productions are eligible to receive an additional 2% tax credit bonus.

Public-Private Partnerships

Collaboration between State and industry leaders is central to California’s infrastructure strategy. Production giant, Apple TV+, is one example of studio investment in California-based campuses and soundstage developments. These partnerships not only create jobs but help ensure that local facilities meet the technological and scale demands of modern productions.

Innovation in Production Technology

California is also investing in advanced production technologies that are reshaping the industry. The State is becoming a hub for virtual production and LED volume stages, with facilities like MBS Media Campus and Cinelease Studios that incorporate cutting-edge tools for real-time rendering and digital environments. These innovations reduce location costs, enable more flexible shoots, and position California as a global leader in next-gen filmmaking.

Together, these efforts underscore California’s holistic approach to strengthening its film and television ecosystem to support long-term growth.

What’s next for California’s film industry?

California's Film and Television Tax Credit Program 4.0 is ushering in a new era of investment, eligibility, and flexibility for the State’s entertainment industry. However, the road ahead isn’t without friction or doubt.

Above-the-line (ATL) expenses, such as salaries for lead actors, directors, and producers, remain excluded. And while jobs are predicted to increase with the hope for more incoming production, skeptics still wonder if it’s already too late. Matt Belloni, founder of Puck and host of the podcast The Town, believes some producers and studios are less motivated by bringing business back to California than finding better deals elsewhere. He’s not an outlier. It will take some convincing that these renewed incentives can and will have a positive impact on the State and on our struggling industry.

While the film industry in California may not bounce back to what it once was – prior to the 2020 pandemic, the 2022 worker strikes, and the recent wildfires, the incentive overhaul is a start in the right direction, especially for LA County and independent filmmaking. Ten percent (10%) of the $750 million allocated budget is set aside specifically for independent projects, split evenly between films under and above $10 million. The application window for both Independent and Non-Independent Feature Films opens August 25-27, 2025. Here’s what you need to know to apply.

Despite the critics, the message is clear: California is prepared to invest in its creative workforce, production infrastructure, and long-term industry leadership. While Georgia is leading the way, New York and New Jersey are tied at second, and California has caught up to them, joining in the great incentive race! Only time will tell who will come out winning.

Tell us what you think

Are you hopeful for the future of filmmaking in California? Tell us what you think about the incentive program changes – and where the industry is headed.