California Gov. Gavin Newsom announced Monday that he wants to increase the state's film and television tax credit program from $750 million to at least $1 billion annually, expanding taxpayer-funded incentives in an effort to bring Hollywood productions back to California after years of losing business to competing states and foreign countries.

The proposal would make California's program the largest capped film and television tax credit in the country. It would also expand eligibility to include above-the-line compensation, covering salaries for actors, directors, writers, and producers, rather than concentrating primarily on production expenses.

Newsom's plan would dedicate $100 million annually to independent productions, extend the program through 2040 and provide an additional 5% tax credit boost to companies that commit to producing at least two separate projects in California.

"At least $1 billion in tax credits means more investment flowing into our economy and more opportunity across the industry," Newsom said in announcing the proposal. He argued that the expansion would help maintain California's position as the center of the entertainment business.

The proposal comes as California continues struggling to retain film and television production. Georgia, Illinois, and other states have attracted projects by offering competitive tax incentives, while countries including the United Kingdom and Australia have also drawn American productions overseas through substantial financial benefits.

Los Angeles has been particularly affected by the industry's relocation. Between 2022 and 2024, Los Angeles County lost approximately 42,000 motion picture industry jobs, reflecting the broader decline in local production and employment.

Newsom previously expanded California's tax credit program in 2025, increasing its annual allocation from $330 million to $750 million. That expansion represented a $3.75 billion commitment over five years, with the existing program scheduled to expire in 2030.

However, the larger incentive has not fully reversed the production downturn. FilmLA, the nonprofit organization that tracks filming activity across the greater Los Angeles region, reported that on-location production declined 4.8% between July and September compared with the same period in 2025. The region recorded 4,171 shoot days during the quarter, nearly 29% below its five-year average.

Productions receiving California tax credits accounted for 40.3% of scripted on-location filming during the third quarter, nearly double their share a year earlier. The increase suggests the incentives are helping attract certain projects, but overall filming activity continues to lag.

The governor's latest proposal also follows legislative changes intended to repair problems with California's existing tax incentive structure. A provision associated with Newsom's SB 122 imposed a $5 million annual cap on certain business tax credits, limiting the amount production companies could claim in a given year. Lawmakers subsequently revised the program to reduce the impact of those restrictions and make the incentives more valuable.

Newsom is also seeking federal assistance to make American production more competitive internationally. Bipartisan lawmakers introduced the Motion Picture, Television and Entertainment Revitalization Act in September, proposing a federal tax credit of 20% for eligible domestic film and television production labor, including post-production and visual effects work. Newsom renewed his call Monday for Congress to pass the legislation before the end of the year.

Newsom's proposal would commit California to an even larger taxpayer-funded incentive program at a time when the state's entertainment industry is still struggling to recover. While the existing credits have helped bring some productions back, the continued decline in Los Angeles filming raises questions about whether another expansion will be enough to reverse the industry's departure from Hollywood.