California lawmakers introduced a budget fix on Thursday aimed at softening the impact of a new $5 million annual cap on film and TV tax credits, following weeks of pressure from studios and industry unions. While the bill stops short of the full carveout the industry had sought since June, it fully exempts independent film credits from the cap and improves terms for major studio productions, addressing concerns that the cap would undermine the state's $750 million production incentive programme.

The bill, SB 1229, is backed by the Motion Picture Association, the Producers Guild of America and the Entertainment Union Coalition, and was authored by Assemblyman Rick Chavez Zbur and Senator Ben Allen. Rather than exempting the industry outright, which risked prompting similar demands from other sectors, the deal sweetens the terms under which studios can convert tax credits into cash: the repayment period drops from five years to two, and the discount required falls from 10% to 5%. It also extends by up to five years the expiry window for older, non-refundable credits issued before 2025, giving studios more time to use credits they might otherwise lose.