The film industry depends on the work of electricians, carpenters, camera operators, designers, and editors—skilled craftspeople chasing a solid middle-class life, not stardom. Yet California legislators have sometimes treated Hollywood like a luxury instead of a necessity, questioning why taxpayer dollars should support a “glamour” industry.
Thankfully, Sacramento has recognized the jobs and investments at stake. The state government over the summer enacted a supersized film incentive called Program 4.0. It’s a five-year, $3.75 billion refresh of its production tax credit that more than doubles annual funding to $750 million and—for the first time—allows all productions to elect cash refunds. Applications under the new program, which aims to pull crews back to California, began on July 1.
Producers have much to gain from the expanded incentives, but they must stay abreast of documentation deadlines and plan out job ratios and filming locations to maximize credit eligibility.
Program 4.0 Changes
Productions in every category can now elect to have excess credits paid out in cash. The election must be made on the tax return for the year the credit certificate is issued. The refundable amount equals 90% of credits above the taxpayer’s liability and is paid over five consecutive tax years. Independent films retain the option to sell their credits; studio projects can’t sell but can elect refunds.
Rates are higher and caps are clearer. Most features and scripted television receive a 35% refundable credit on up to $120 million of qualified spend. “Relocating” television series earn 40% in their first California season, and 35% thereafter. Independent features receive 35% on up to $20 million of qualified spend.
The program also includes three targeted uplifts. Projects can add 5% for qualifying visual effects if the greater of $10 million or 75% of global visual effects spend is in state.
A second 5% uplift rewards filming outside the Los Angeles studio zone. A local-hire bonus adds 10% for non-independent projects (5% for independent films and relocating television) on wages paid to California residents who live and work outside the zone. These are stackable where applicable.
Eligibility and Requirements
Program 4.0 widens the tent. Features, scripted series, pilots, and limited series remain eligible. Newly eligible projects are animated features and animated or live-action shows with episodes averaging at least 20 minutes.
Large-scale competition shows now qualify if they spend at least $1 million per episode, and all scripted television/pilots must spend at least $1 million per episode. Features (studio and independent) must have a $1 million minimum budget.
The credit applies to below-the-line wages and in-state vendor costs. Above-the-line compensation doesn’t qualify, though those amounts can help meet the in-state spending requirements.
California’s program isn’t a lottery. Eligibility flows through two “75% tests”: Either 75% of the total production budget is spent in California, or 75% of principal photography occurs in-state. Once budget thresholds are met and the 75% test is applied, applications are ranked by a jobs ratio formula that weighs qualified wages and a portion of qualified non-wage spend—with bonus points for out-of-zone filming, in-state visual effects, and music wages.
The California Film Commission advances two times the available pool to a second round, where finalists submit detailed budgets and documentation on a short turnaround. Based on those materials, the CFC cuts the pool in half, and selected projects then receive credit allocation letters. Final credits are verified by audit—if the jobs ratio falls below the allocation level, the credit can be reduced.
Program 4.0 introduces two notable requirements: diversity, equity, inclusion, and accessibility provisions and a safety-adviser requirement. Every finalist must submit a DEIA checklist, and productions that opt in to further DEIA steps receive 100% of their allocated credit, while those that opt out receive 96%. Also, every recipient must retain a safety adviser and submit a final safety evaluation report before certification.
Timing and Strategy
Timing matters. The commission opens application windows by category and posts the calendar, and demand is heavy. In March, for example, the state approved a record 51 films in one round, projecting nearly $580 million in economic activity and more than 6,490 jobs.
Missing a documentation deadline can cost a slot, and starting principal photography in California before receiving a credit allocation letter can jeopardize eligibility for that spend. Paperwork and budget tagging must be built around the state’s qualified expenditure chart and audit requirements.
Producers should consider several steps to maximize Program 4.0’s benefits:
Engineer your jobs ratio early and model the uplifts. If you can structure visual effects to meet the $10 million or 75% in-state threshold, the extra 5% is material. If your script supports it, plan days outside the 30-mile zone to capture the out-of-zone uplift and local-hire bonus. Lock in DEIA participation to avoid the 4% haircut. Align with application windows and keep documentation airtight for the audit.California Against Everyone
Even at $750 million a year, California is playing catchup. New York runs a 30% rebate plus various uplifts funded at $800 million per year, with a $100 million annual pot for independent features.
The state also qualifies above-the-line expenditures, which can be huge for talent-heavy productions. Georgia’s 20% base plus 10% uplift is uncapped, and credits are transferable—a combination that has anchored a durable production base.
California’s counterpunch is to make the make the credit behave closer to cash and raise the ceiling so that fewer projects leave the area. With Program 4.0, the state has given productions a competitive reason to stay. If the program operates as projected, it will deliver $10 billion in economic value and more than 60,000 jobs, putting the core of Hollywood film production back in California and delivering huge value statewide.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Merlin Camozzi is fractional general counsel for entertainment, sports, and tech clients.
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