Made in California: Proposals to Accelerate Manufacturing in the State Move Forward

In response to the risk of California’s film industry jobs moving to other states like Georgia and New Mexico, where tax incentives are stronger and costs are lower, Gov. Gavin Newsom and the California State Legislature prioritizes changes to the state’s annual film and television tax credit. The proposal, signed in mid-June, raised the amount in the program from $330 million to $750 million and addressed technical challenges that inhibited the program’s impact in keeping jobs in the Golden State. Now a pair of proposals could turbocharge California’s manufacturing sector.

Contained in budget trailer bill language (SB 131), Gov. Newsom and the legislature approved a California Environmental Quality Act (CEQA) exemption for “advanced manufacturing.” The trailer bill, signed on June 30, would allow projects consisting exclusively of facilities for advanced manufacturing located in industrial zones to be exempt from CEQA. Another proposal, SB 587 by Sen. Tim Grayson (D-Concord), would allow an income tax credit under both the Personal Income Tax Law and the Corporation Tax Law equal to the amount of sales tax reimbursement or use tax paid on qualifying purchases that were only partially exempt under the existing sales and use tax exemption for manufacturing and research and development. Together, these proposals represent a significant shot in the arm for companies considering manufacturing in California.

SB 587 (Grayson)

Manufacturing once drove California’s economy, fueling mid‑20th-century population booms and earnings growth. Today, it is smaller by employment but stronger in output per worker, focused on innovation, exports and high‑value goods. Modern manufacturing remains vital as a supporting engine—producing high added value, paying well and sustaining diversified, resilient growth.

In 2021, manufacturing in California made up 11% ($300 billion in goods) of the state’s GDP in exports. In California, 1.1 million people work in the manufacturing industry, with over 70% of manufacturers having less than 20 employees. According to the 2024 California Jobs Market Briefing by the Employment Development Department (EDD), the manufacturing sector was one of the only three industries that lost jobs.

SB 587 (Grayson) strengthens this job base, ensuring the state promotes the growth of high-wage jobs and supports small businesses. Thirty-eight other states already cover the taxes on qualified manufacturing purchases. The bill is sponsored by Brownstein client the Bay Area Council, representing over 350 employers in the nine-county San Francisco Bay Area in partnership with the California Manufacturers & Technology Association (CMTA).

SB 131 (Public Resources Trailer Bill)

On June 30, 2025, Gov. Newsom signed into law SB 131, the Public Resources trailer bill that would allow projects consisting exclusively of facilities for advanced manufacturing located in industrial zones to be exempt from CEQA. This exemption would include chipmakers, semiconductors and other high-tech manufacturers. The CEQA exemption would not apply to projects located on natural and protected lands. Advanced manufacturing facilities are defined as manufacturing processes that improve existing or create entirely new materials, products and processes. This CEQA exemption would allow advanced manufacturers to more easily bring their business into the state, closer to Silicon Valley and the technology hub. To bring down the cost of construction in California, the bill also narrows the documents that courts can consider under CEQA, restricting legal hurdles and making way for an expedited CEQA process. The CEQA exemption in the bill has the potential to bring clean, advanced manufacturing to California.

SB 587 is currently in the Senate Revenue and Taxation suspense file and has advanced with zero no votes. Amendments are being considered to tailor the SB 131 CEQA exemption further and the Brownstein team will continue to monitor and update on these proposals.

This document is intended to provide you with general information regarding legislation aimed at bolstering manufacturing in California. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.