SB 186 California Senate · 2025-2026 Regular Session

Income taxes: film tax credits.

SB 186 is a procedural bill that expresses the California Legislature's intent to later enact statutory changes related to the upcoming Budget Act of 2025. It does not propose specific budget changes or affect any programs directly; it merely states the legislature's future intention to make adjustments to budget-related statutes. The bill passed the Senate unanimously (28-10) and is now pending in the Assembly Budget Committee. This is a preparatory step, not a substantive policy change.

Bill status passed 3 of 5 stages cleared

Introduction

Jan 2025

Committee Review

Mar 2025

Senate Passage

Mar 2025

Assembly Passage

Governor

Introduced Jan 23, 2025 Last action Aug 30, 2026

Maddy AI version diff · 2 comparisons

What changed between versions

08/28/26 - Amended Assembly → SB186 · 5 edits

MODERATE

SB 186 amends California's film tax credit system to make credits more valuable and liquid for producers. It extends the carryforward period for motion picture credits 2.0 and 3.0 from 9 years to 15 years, increases the refundable percentage for credit 4.0 from 90% to 95%, shortens the refund payment period from 5 years to 2 years, and exempts sold credits from the $5 million business credit limit starting in 2027. These changes are designed to make California's film tax credits more competitive with other states by improving their liquidity and long-term usability.

REQUIREMENT

The carryforward period for motion picture credit 2.0 (Section 17053.95) and 3.0 (Section 17053.98) is extended from 9 years to 15 years, giving producers more time to use credits that exceed their tax liability in a given year.

ELIGIBILITY

A new 'active participant' requirement is imposed for claiming credit carryovers in the 10th through 15th years. The taxpayer or a related entity must have an outstanding credit allocation or issued credit certificate under Section 17053.98.1 or 23698.1 for that taxable year to claim the carryover.

FISCAL

The total refundable amount under motion picture credit 4.0 (Section 17053.98.1) is increased from 90% to 95% of the total refundable amount, meaning taxpayers can recover more cash when their credit exceeds tax liability.

TIMELINE

The refund payment period for motion picture credit 4.0 is shortened from 5 years to 2 years, accelerating cash flow to qualifying producers.

SCOPE

For taxable years beginning on or after January 1, 2027, credits that have been sold (transferred to unrelated parties) are exempted from the $5 million business credit limit in Sections 17039.4 and 17039.6, effectively removing a cap that previously constrained the value of sold credits.

01/23/25 - Introduced → 08/28/26 - Amended Assembly · 5 edits · Aug 28, 2026

MODERATE

SB 186 was transformed from a simple legislative intent bill into a full substantive tax amendment addressing California's motion picture tax credit programs. The amended version expands carryforward periods for film credits 2.0 and 3.0 from 9 to 15 years (with an active participation requirement for the final 5 years), increases the refundable percentage for credit 4.0 from 90% to 95%, shortens the refund payment period from 5 years to 2 years, and exempts sold credits from the $5 million business credit cap starting in 2027. These changes make the film tax credit program more attractive to producers by improving liquidity and reducing the risk of unused expiring credits.

SCOPE

The bill changed from a single-section intent statement to a multi-section amendment of at least 10 sections of the Revenue and Taxation Code, covering both personal income tax and corporation tax provisions for motion picture credits.

REQUIREMENT

Motion picture credit 2.0 and 3.0 carryforward period expanded from 9 years to 15 years. For years 10 through 15, the taxpayer or a related entity must be an 'active participant' - meaning it has an outstanding credit allocation or issued credit certificate under Section 17053.98.1 or 23698.1 for that taxable year.

FISCAL

The refundable amount under motion picture credit 4.0 increased from 90% to 95% of the total refundable amount, and the payment period was shortened from 5 years to 2 years. This draws more quickly from the Tax Relief and Refund Account, a continuously appropriated fund, constituting an appropriation.

ELIGIBILITY

For taxable years beginning on or after January 1, 2027, credits that have been sold (under the independent film sale provisions of Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, or 23698.1) are excluded from the $5 million annual business credit limitation, effectively allowing unlimited use of sold credits against tax liability.

TIMELINE

The bill now takes effect immediately as an appropriation-related budget bill, rather than following the standard January 1 operative date for non-emergency bills.

Floor votes · Senate Mar 20, 2025

How they voted

28–10

Passed · 2 other

Total votes 40

Mar 20, 2025

D Democratic30

28 Yea 2

93% Yea

R Republican10

10 Nay

100% Nay

Vote distribution

All Yea All Nay Mixed No data

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Aug 28, 2026

Lower · Passed

From committee with author's amendments. Read second time and amended. Re-referred to Com. on BUDGET.

lower

Mar 24, 2025

Committee

Referred to Com. on BUDGET.

lower

Mar 20, 2025

Upper · Passed

Read third time. Passed. (Ayes 28. Noes 10. Page 459.) Ordered to the Assembly.

upper

Feb 5, 2025

Committee

Referred to Com. on B. & F. R.

upper

Jan 23, 2025

Introduced

Introduced. Read first time. To Com. on RLS. for assignment. To print.

upper

0 primary · 0 co-sponsors

What changed between versions

How they voted

Actions timeline

Sponsors