The Studio, Apple TV’s satirical comedy about the Los Angeles film industry, has been raking in kudos and awards. In real life, however, the outlook for Hollywood is not so amusing, despite California’s new tax incentives for the entertainment industry.
Last summer, Gov. Gavin Newsom signed in to law two measures designed to lure creative projects back to La La Land and the rest of the Golden State.
One nearly doubles the state’s tax incentives for film and TV projects. The cap for California’s film tax credit has gone from $330 million to $750 million a year.
In addition, more types of productions qualify for the California tax credits as long as they spend $1 million or more. This includes animated series and films; multi-camera sitcoms; large-scale competition shows, such as reality or game shows; and television shows with run times of less than 30 minutes.
Will the California tax incentive enhancements work? It’s too early to tell.
But Golden State lawmakers and the local film and TV industry believe the changes were necessary to keep the state competitive in today’s changing entertainment industry.
California losing production ground: Entertainment long been the backbone of California’s economy, but during the last quarter of 2025, the number of movies and TV shows filmed in the state dropped by 20 percent.
It was the continuation of a disturbing trend for creators who still support the Golden State’s role in such projects.
In addition, production spending of $1.35 billion from those fourth quarter projects also was down 22 percent, according to the latest data from industry tracker ProdPro that was cited in a recent The Hollywood Reporter story.
A changing, expanding industry: Part of the economic drop is the entertainment industry’s evolving business model. Free social media content has put pressure on the traditional studios’ fiscal margins.
California’s film and TV production dominance also has suffered from geographic competition. States across the country offer more appealing tax breaks to creators. So do other countries.
Georgia is one of California’s biggest challengers. If you, like me, sit through credits, you’ve seen the Peach State’s film incentives noted at the end of various productions. Georgia has become a go-to location thanks to its uncapped, transferable tax credits for qualifying productions.
New Mexico also is a major draw, with its 25 percent refundable tax credit that can increase to 40 percent via stacked bonuses. That financial benefit is one reason that the Land of Enchantment is home base to Vince Gilligan’s popular Breaking Bad, Better Call Saul, and Plur1bus television shows.
The ProdPro data also show that New Jersey, New York, and Illinois saw gains in film and television production last year.
And the trend is global.
As U.S. productions fell 4 percent overall in the last quarter of 2025, Canada and the United Kingdom saw double-digit growth during that same period.
Studio heads (and their accountants) are obviously seeking the cheapest locations, which also includes those with the best tax breaks.
Potential for tax abuse: While tax benefits can entice productions, they are like all tax breaks. There’s potential for abuse.
Critics of the state film tax credits cite lax oversight. In many cases, they say production companies have received credits for which they were not eligible and/or tax credits that were higher than what was legitimately earned.
Some productions also allegedly cook the books when it comes to state tax credit qualifications and/or claims. Fraud has been reported or found when companies —
- Create fake employees or inflating payroll to claim more credits;
- Claim credits for ancillary expenses instead of direct production costs, or for costs related to films that are never made or distributed; and
- Use expenses incurred in other states as tax credit claims.
Even states that tout their film tax credit programs’ success have faced fraud scandals in the past.
An audit of the Georgia program found companies received credits for ineligible expenses due to weak controls. Iowa suspended its program due to rampant fraud and abuse, including using credits for luxury cars. Payments in Illinois reportedly were made to individuals with mob ties who allegedly claimed the state’s credits.
State and more film tax credits: Still, as evidenced by California’s expansion, tax credits for film, TV and other productions remain popular.
Entertainment Partners (EP), a global provider of digital solutions, payroll, finance, and management services for the film, television, and streaming industries, keeps track of tax benefits in the United States and worldwide.
You can find details in EP’s latest update, posted this month, of entertainment industry tax incentives, ranging from popular U.S. film and TV tax incentives to efforts abroad to capture the next wave of production spending.
Academy Awards tax connection: Some of these tax breaks no doubt were used by some of the newly minted Oscar nominees, who were announced this morning.
As longtime readers of the ol’ blog know, I’m a big film buff and a vidiot. Much of my recreational time is spend watching movies, mostly via streaming, and television shows.
From my blogging perspective, I’ve posted a lot about the entertainment industry’s tax connections, most recently on Tim Hiddleston playing an accountant (and dancing!) in The Life of Chuck.
I also was thrilled to be interviewed by Caitlin Mullaney for her Tax Notes story on how The IRS Remains the Villain on Screen and Off, where I explored the agency’s lead role in the multiple Oscar-winning Everything Everywhere All at Once.
That means I also follow the annual entertainment awards ceremonies, although their subjectiveness leaves usually prompts a mix of joy at seeing my favorites tapped for a top prize and frustration at how the selectors could overlook such obviously deserving shows and individuals.
I’m mostly happy with today’s Oscars announcement, with some of my personal favorites, which also happen to be longshots to win, getting nominated.
They include lead actors Ethan Hawke (Blue Moon) and Wagner Moura (The Secret Agent) and Delroy Lindo (Sinners), Stellen Skarsgård (Sentimental Value), and Wunmi Mosaku (Sinners) in the supporting role categories.
Train Dreams making the best picture list also was a nice surprise.
Maybe I’ll be happily surprised again when the iconic gold statuettes are handed out on March 15. After all, movies are the ultimate dreams, for both the creators and viewers.
Until then, I’ll catch up on some of the other Oscar nominees I’ve yet to see. And, of course, I’ll keep an eye on developments in the convergence of the tax world and entertainment industry.
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