AB186 - Income taxes: film tax credits.

Amended IN Senate August 28, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 186 Introduced by Assembly Member Gabriel Committee on Budget (Assembly Members Gabriel (Chair), Addis, Ahrens, Alvarez, Bennett, Bonta, Caloza, Connolly, Fong, Haney, Hart, Jackson, Lee, Ortega, Patel, Petrie-Norris, Quirk-Silva, Ramos, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Stefani, Ward, and Wilson) January 08, 2025 An act relating to the Budget Act of 2025. to amend Sections 17039.4, 17039.6, 17053.95, 17053.98, 17053.98.1, 23036.4, 23036.6, 23695, 23698, and 23698.1 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor, to take effect immediately, bill related to the budget. LEGISLATIVE COUNSEL'S DIGEST AB 186, as amended, Committee on Budget. Budget Act of 2025. Income taxes: film tax credits. (1) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law allows those credits to be sold if they are allocated to independent films, as defined. Existing law allows those credits to be carried forward for 9 years in the case that the credit exceeds the tax owed, as provided. Existing law allows a qualified taxpayer to elect to be paid a refund equal to 90% of the total refundable amount, as specified, over a period of 5 years if the amount allowable as a credit under motion picture credit 4.0 exceeds the qualified taxpayer’s tax liability for the taxable year, and allows the excess to be carried over, as specified. Existing law allows these refunds from the Tax Relief and Refund Account, which is a continuously appropriated fund. This bill would expand the carry forward provisions of motion picture credit 2.0 and 3.0 to 15 years. The bill would require the qualified taxpayer, or a related company, as specified, to be an active participant, as defined, to carry the credit forward for any of the 10th through the 15th years, inclusive. The bill would also increase the total refundable amount under motion picture credit 4.0 from 90% to 95%, and would make the refund payable over 2 years instead of over 5 years. By increasing the amounts refunded from a continuously appropriated fund, the bill would make an appropriation. (2) Existing law, for taxable years beginning on or after January 1, 2024, and before January 1, 2030, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, except as specified. Existing law, for taxable years beginning on or after January 1, 2030, similarly applies a business credit limit of 70% of the total taxes imposed or $5,000,000, whichever is greater, except as specified. This bill would, for taxable years beginning on or after January 1, 2027, exempt credits that have been sold from the business credit limit described above. (3) This bill would make legislative findings and declarations related to a gift of public funds. (4) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill. This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2025. Digest Key Vote: MAJORITY Appropriation: NO YES Fiscal Committee: NO YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 17039.4 of the Revenue and Taxation Code is amended to read: 17039.4. (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2024, and before January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than five million dollars ($5,000,000). (b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2024, and before January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than five million dollars ($5,000,000). (c) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits: (1) The credit allowed by Section 17052 (relating to credit for earned income). (2) The credit allowed by Section 17052.1 (relating to credit for young child). (3) The credit allowed by Section 17052.2 (relating to credit for foster youth). (4) The credit allowed by Section 17052.6 (relating to credit for household and dependent care). (5) The credit allowed by Section 17052.10 or 17052.11 (relating to the elective tax under the Small Business Relief Act). (6) The credit allowed by Section 17052.25 (relating to credit for adoption costs). (7) The credit allowed by Section 17053.5 (relating to renter’s tax credit). (8) The credit allowed by Section 17054 (relating to credit for personal exemption). (9) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent). (10) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household). (11) The credit allowed by Section 17058 (relating to credit for low-income housing). (12) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code). (d) Any annual refundable credit amount included in an election pursuant to Section 17039.5 is not included in the limitation set forth in subdivision (a) or (b). (e) Notwithstanding the operative date in subdivision (a), for taxable years beginning on or after January 1, 2027, if an election is made pursuant to subdivision (k) of Section 17053.98.1, both the credit allowed against the “net tax” under clause (i) of subparagraph (A) of paragraph (3) of subdivision (k) of Section 17053.98.1 and the annual refundable amount calculated under subdivision (k) of Section 17053.98.1 shall not be included in the limitation set forth in subdivisions (a) and (b). (f) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, or 23698.1 against qualified sales and use tax, as defined in Section 6902.5, are not included in the five-million-dollar ($5,000,000) limitation set forth in subdivision (a) or (b). (g) For taxable years beginning on or after January 1, 2027, any credit, or portion thereof, sold pursuant to paragraph (1) of subdivision (c) of Section 17053.95, 17053.98, or 17053.98.1, paragraph (3) of subdivision (c) of Section 23695 or 23698, or paragraph (2) of subdivision (c) of Section 23698.1, is not included in the limitation set forth in subdivision (a) or (b). (g) (h) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part. (h) (i) The carryover period for any credit that is not allowed due to the application of this section shall be increased by the number of taxable years the credit or any portion thereof was not allowed. (i) (j) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied. (j) (k) For taxpayers that make the election under subdivision (k) of Section 17053.98.1, any amount of refundable credits pursuant to that subdivision over the five-million-dollar ($5,000,000) limitation under this section shall be allowed in the first taxable year beginning on or after January 1, 2027. (k) (l) If a taxpayer makes the election under both Section 17039.5 and subdivision (k) of Section 17053.98.1 with respect to the credit amount under Section 17053.98.1, the total amount of credit allowed pursuant to both elections shall not exceed the credit amount allowed under subdivision (a) of Section 17053.98.1. (l) (m) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section. (m) (n) The amendments made to this section by Section 6 of Chapter 17 of the Statutes of 2025 shall be operative for taxable years beginning on or after January 1, 2026. (n) (o) The amendments made to this section by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2027. SEC. 2. Section 17039.6 of the Revenue and Taxation Code is amended to read: 17039.6. (a) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers not required to be included in a combined report under Section 25101 or 25110, or taxpayers not authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, for the taxable year shall not reduce the “net tax,” as defined in Section 17039, by more than 70 percent or five million dollars ($5,000,000), whichever is greater. (b) Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for taxpayers required to be included in a combined report under Section 25101 or 25110, or taxpayers authorized to be included in a combined report under Section 25101.15, for each taxable year beginning on or after January 1, 2030, the total of all business credits otherwise allowable under any provision of Chapter 2 (commencing with Section 17041), including the carryover of any business credit under a former provision of that chapter, by all members of the combined report shall not reduce the aggregate amount of “tax,” as defined in Section 23036, of all members of the combined report by more than 70 percent or five million dollars ($5,000,000), whichever is greater. (c) For purposes of this section, “business credit” means a credit allowable under any provision of Chapter 2 (commencing with Section 17041) other than the following credits: (1) The credit allowed by Section 17052 (relating to credit for earned income). (2) The credit allowed by Section 17052.1 (relating to credit for young child). (3) The credit allowed by Section 17052.2 (relating to credit for foster youth). (4) The credit allowed by Section 17052.6 (relating to credit for household and dependent care). (5) The credit allowed by Section 17052.10 or 17052.11 (relating to the elective tax under the Small Business Relief Act). (6) The credit allowed by Section 17052.25 (relating to credit for adoption costs). (7) The credit allowed by Section 17053.5 (relating to renter’s tax credit). (8) The credit allowed by Section 17054 (relating to credit for personal exemption). (9) The credit allowed by Section 17054.5 (relating to credit for qualified joint custody head of household and a qualified taxpayer with a dependent parent). (10) The credit allowed by Section 17054.7 (relating to credit for qualified senior head of household). (11) The credit allowed by Section 17058 (relating to credit for low-income housing). (12) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code). (d) Any amounts included in an election pursuant to Section 6902.5, relating to an irrevocable election to apply credit amounts under Section 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, or 23698.1 against qualified sales and use tax, as defined in Section 6902.5, are not included in the limitation set forth in subdivision (a) or (b). (e) Any annual refundable credit amount included in an election pursuant to Section 17039.5 is not included in the limitation set forth in subdivision (a) or (b). (f) If an election is made pursuant to subdivision (k) of Section 17053.98.1, both the credit allowed against the “net tax” under clause (i) of subparagraph (A) of paragraph (3) of subdivision (k) of Section 17053.98.1 and the annual refundable amount calculated under subdivision (k) of Section 17053.98.1 shall not be included in the limitation set forth in subdivisions (a) and (b) of this section. (g) Any credit, or portion thereof, sold pursuant to paragraph (1) of subdivision (c) of Section 17053.95, 17053.98, or 17053.98.1, paragraph (3) of subdivision (c) of Section 23695 or 23698, or paragraph (2) of subdivision (c) of Section 23698.1, is not included in the limitation set forth in subdivision (a) or (b). (g) (h) The amount of any credit otherwise allowable for the taxable year under Section 17039 that is not allowed due to application of this section shall remain a credit carryover amount under this part. (h) (i) Notwithstanding anything to the contrary in this part or Part 10.2 (commencing with Section 18401), the credits listed in subdivision (c) shall be applied after any business credits, as limited by subdivision (a) or (b), are applied. (i) (j) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section. SEC. 3. Section 17053.95 of the Revenue and Taxation Code is amended to read: 17053.95. (a) (1) For taxable years beginning on or after January 1, 2016, the [Text truncated for display. Full text available on Congress.gov.]