The Senate Appropriations Committee convened on June 30, 2025, to discuss Assembly Bill 1138, introduced by Assemblymember Zabir and Senator Allen, which focuses on income and corporate tax credits for the motion picture industry. This urgency bill is tied to the 2025-26 budget and aims to address the current crisis facing California's film and television production sector.

Assemblymember Zabir opened the discussion by highlighting the dire state of California's iconic film industry, noting that it is experiencing unemployment and business losses reminiscent of the Great Depression. He cited a report from the LA County Economic Development Corporation, which indicated that every dollar spent on tax credits generates approximately $24.16 in economic output, $8.60 in wages, and $1.07 in state and local tax revenue. The bill seeks to modernize the existing tax credit program to make California more competitive with other states that have enhanced their film tax incentives.

Key changes proposed in AB 1138 include increasing the base tax credit rate, expanding eligibility for various types of productions, and adjusting qualified expenditures to better reflect actual production costs. The bill aims to retain and create high-quality jobs while supporting small businesses within the industry. Zabir expressed gratitude to Governor Newsom and legislative members for their support, noting that the bill has already passed both houses with bipartisan backing.

Senator Allen emphasized the significant job losses in the industry, stating that many projects have moved out of state due to insufficient tax credits. He underscored the importance of the program as a net revenue generator for California and a crucial job creator. The bill is seen as a necessary step to revitalize the state's entertainment sector and restore economic activity.

Support for AB 1138 was voiced by various stakeholders, including representatives from the Motion Picture Association, the Hollywood Chamber of Commerce, and major production companies like Warner Brothers and Netflix. They highlighted the bill's potential to create thousands of middle-class jobs and stimulate economic growth.

During the discussion, some committee members expressed concerns about the broader issues affecting the film industry, such as rising production costs and the legal environment in California. One member noted that while AB 1138 may serve as a temporary solution, it is essential to monitor the industry's challenges to prevent further exodus of production work from the state.

The committee ultimately moved to support the bill, recognizing its potential to bolster California's film industry and contribute to a sustainable economy. The discussions concluded with a commitment to continue addressing the underlying issues affecting the industry in future legislative efforts.