California Unveils Partial Fix for Film Tax Credit Cap

Overview

• Lawmakers unveiled trailer bill AB 186 on Friday evening as a targeted response to SB 122, the budget law that capped annual tax credits at $5 million or 70% of liability.
• AB 186 shortens refundable credit payouts from five years to two years and reduces the refund discount from 10% to 5%, improving cash flow for productions that sell credits for cash.
• The bill fully exempts independent films from the $5 million cap and extends expiration and carry‑forward windows for older non‑refundable credits so studios can recover unused credit value.
• Legislators stopped short of a broad studio carveout because they feared setting a precedent that other industries would demand similar exemptions, leaving some eligibility and implementation details unresolved.
• AB 186 was printed just before the legislative deadline and is expected to pass both houses soon, with remaining questions about post‑production credit funding and how faster payouts will be administered for large studio projects.