HomeMy WebLinkAbout2018-06-12 - AGENDA REPORTS - AB 1734 (2)4
Agenda Item: 4
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR
CITY MANAGER APPROVAL:
DATE: June 12, 2018
SUBJECT: STATE LEGISLATION: ASSEMBLY BILL 1734
DEPARTMENT: City Manager's Office
PRESENTER: Masis Hagobian
RECOMMENDED ACTION
1734
and transmit position statements to Assembly Member Ian Calderon
legislative delegation, appropriate legislative committees, Governor Brown, and the League of
California Cities.
BACKGROUND
Authored by Assembly Member Ian Calderon (D-57-Whittier), Assembly Bill 1734 extends the
California Film and Television Tax Credit Program for five additional fiscal years through June
30, 2025.
In 2009, the State Legislature passed the California Film and Television Tax Credit Program in
an effort to promote film production and create and retain jobs in California. The California Film
and Television Tax Credit Program (tax credit program) is scheduled to sunset on June 30, 2020.
This bill would extend the tax credit through June 30, 2025.
The tax credit program has played a significant role in incentivizing and retaining film and
television production companies in California. At the local level, the City of Santa Clarita (City)
has issued 130 tax credit approved featured films and television shows since the implementation
of the tax credit program. Additionally, nearly 20 different tax credit approved feature films and
television shows have or are currently based at sound stages in the City. To date, on-location
filming from tax credit approved projects that have filmed in the City has resulted in an
estimated $48,150,000 in economic benefit to the community.
The tax credit program has also created many jobs in the film and production industry in the
Studios for six seasons and filmed on location all around Santa Clarita Valley. According to the
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California Film Commission, production of the tax credit approved show resulted in over 3,000
jobs each production year.
The tax credit program is scheduled to sunset on June 30, 2020. Many motion picture and
television production companies make decisions regarding the location of their film project a
year or more in advance. This bill would establish the certainty of the tax credit program through
June 30, 2025, and allow for film and television production companies to remain in California.
The City of Santa Clarita 2018 Legislative Platform includes a component related to the tax
and
Assembly Bill 1734 was introduced on January 3, 2018, unanimously passed the Assembly
Committee on Arts, Entertainment, Sports, Tourism, and Internet Media (7-0) on April 17, 2018,
and passed the Assembly Committee on Revenue and Taxation (9-0-1) on May 14, 2018.
Assembly Member Dante Acosta voted in support of Assembly Bill 1734 as a committee
member in the Assembly Committee on Arts, Entertainment, Sports, Tourism, and Internet
Media. Assembly Bill 1734 passed the Assembly Committee on Appropriations (15-1-1) on
May 25, 2018, and is pending a second reading in the Assembly.
A similar measure has been introduced in the Senate, Senate Bill 951 (Mitchell).
The City Council Legislative Committee met on May 25, 2018, and recommends that the City
ALTERNATIVE ACTION
mbly Bill 1734
3. Take no action on Assembly Bill 1734
4. Refer Assembly Bill 1734 back to the Legislative Committee
5. Other action, as determined by the City Council
FISCAL IMPACT
The resources required to implement the recommended action are contained within the City of
Santa Clarita's adopted FY 2017-18 budget.
ATTACHMENTS
Assembly Bill 1734 - Bill Text
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AMENDED IN ASSEMBLY MAY 1, 2018
AMENDED IN ASSEMBLYAPRIL 12, 2018
AMENDED IN ASSEMBLYAPRIL 9, 2018
california legislature201718 regular session
ASSEMBLY BILL No. 1734
Introduced by Assembly Members Calderon, Bloom, Bonta, and
Gonzalez Fletcher
(Coauthors:Assembly Members Santiago, Acosta, Friedman, and
Waldron)
January 3, 2018
An act to amend Section 6902.5 of, and to add Sections 17053.98
and 23698 to to, the Revenue and Taxation Code, relating to taxation,
to take effect immediately, tax levy.
legislative counsels digest
AB 1734, as amended, Calderon.Income taxes: credits: motion
pictures.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including
motion picture credits for taxable years beginning on or after January
1, 2016, to be allocated by the California Film Commission on or after
July 1, 2015, and before July 1, 2020, subject to a computation and
ranking of applicants based on a jobs ratio. Existing law allows the
credit for the taxable year in which the commission issues a credit
certicate for the qualied motion picture for the applicable percentage
of all qualied expenditures, as dened, paid or incurred by the qualied
taxpayer in all taxable years for that qualied motion picture. Existing
law limits the aggregate amount of these credits allocated in each scal
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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AB 1734
year to $330 million, through and including the 201920 scal year.
Existing law also requires an applicant for the credit to le an
application that contains certain information.
This bill would establish similar credits under the Personal Income
Tax Law and the Corporation Tax Law for taxable years beginning on
or after January 1, 2020, to be allocated by the California Film
Commission on or after July 1, 2020, and before July 1, 2025, except
as provided.This bill would allow a credit in an amount equal to 20%
or 25% of qualied expenditures up to $100,000,000, for the production
of a qualied motion picture in this state, with additional credit amounts
allowed, including for amounts equal to specied qualied expenditures
and qualied wages relating to original photography outside the Los
Angeles zone, as specied.
This bill would limit the aggregate amount of these new credits to be
allocated in each scal year to $330 million plus the amount of any
unused credit amounts for preceding scal years and attributable to
existing motion picture credits, as specied. The bill, subject to a
computation and ranking of applicants based on the jobs ratio, as
dened, would require the California Film Commission to allocate
credit amounts subject to specied categories of qualied motion
pictures in 2 or more allocation periods per scal year beginning on or
after July 1, 2020, and issue credit certicates.The bill would
additionally require an applicant for the credit to include in the
application the applicant's written policy against unlawful harassment,
as specied.
Existing law, for taxable years beginning on or after January 1, 2016,
in lieu of the credits authorized under the Personal Income Tax Law
and the CorporationTax Law for qualied motion pictures described
above, also allows application of the credit amount against qualied
state sales and use taxes, as provided.
This bill, for taxable years beginning on or after January 1, 2020, in
lieu of the credits authorized under the Personal Income Tax Law and
the CorporationTax Law for qualied motion pictures described above,
would allow application of the credit amount against qualied state
sales and use taxes, as provided.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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AB 1734
The people of the State of California do enact as follows:
line 1 SECTION 1.Section 6902.5 of the Revenue and Taxation Code
line 2 is amended to read:
line 36902.5.(a) For the purposes of this section:
line 4(1) Qualied taxpayer means a person who is a qualied
line 5taxpayer within the meaning of paragraph (17) of subdivision (b)
line 6of Section 17053.85, 17053.95, 23685, or 23695. 23695, or
line 7 paragraph (19) of subdivision (b) of Section 17053.98 or 23698.
line 8(2) Afliate means a qualied taxpayer's afliated corporation
line 9that has been assigned any portion of the credit amount by the
line 10qualied taxpayer pursuant to subdivision (c) of Section 23685 or
line 11 23685, subdivision (c) of Section 23695. 23695, or subdivision
line 12(c) of Section 23698.
line 13(3) Credit amount means an amount equal to the tax credit
line 14amount that would otherwise be allowed to a qualied taxpayer
line 15pursuant to Section 17053.85, 17053.95, 17053.98, 23685, or
line 1623695 23695, or 23698, but for the election made pursuant to this
line 17section.
line 18(4) Production period means the production period as dened
line 19in paragraph (12) of subdivision (b) of Section 17053.85, 17053.95,
line 2023685, or 23695. 23695, or in paragraph (14) of subdivision (b)
line 21 of Section 17053.98 or 23698.
line 22(5) (A) Qualied sales and use taxes means any state sales
line 23and use taxes imposed by Part 1 (commencing with Section 6001),
line 24on the operative date of the act adding this section.
line 25(B) Notwithstanding subparagraph (A), qualied sales and use
line 26taxes does not mean taxes imposed by Section 6051.2, 6051.5,
line 276201.2, 6201.5, Part 1.5 (commencing with Section 7200), Part
line 281.6 (commencing with Section 7251), or Section 35 of Article XIII
line 29of the California Constitution.
line 30(b) (1) A qualied taxpayer may, in lieu of claiming the credit
line 31allowed by Section 17053.85, 17053.95, 17053.98, 23685, or 23695
line 32 23695, or 23698, make an irrevocable election to apply the credit
line 33amount against qualied sales and use taxes imposed on the
line 34qualied taxpayer in accordance with this section.
line 35(2) An afliate may, in lieu of claiming the assigned portion of
line 36the credit allowed by Section 23685 or 23695, 23685, 23695, or
line 37 23698, make an irrevocable election to apply the assigned portion
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1of the credit amount against qualied sales and use taxes imposed
line 2on the afliate in accordance with this section.
line 3(c) (1) A qualied taxpayer or afliate shall submit to the board
line 4 California Department of Tax and FeeAdministration an
line 5irrevocable election, in a form as prescribed by the board,
line 6 California Department of Tax and FeeAdministration, which shall
line 7include, but not be limited to, the following information:
line 8(A) Representation that the claimant is a qualied taxpayer or
line 9an afliate.
line 10(B) Statement of the dates on which the production period began
line 11and ended.
line 12(C) The credit amount, and if an afliate, the portion of the
line 13credit amount assigned to it and documentation supporting the
line 14assignment of that portion of the credit amount.
line 15(D) The amount of qualied sales and use taxes the claimant
line 16remitted to the board California Department of Tax and Fee
line 17 Administration during the period commencing on the rst day of
line 18the calendar quarter commencing immediately before the beginning
line 19of the production period, and ending on the date the claimant was
line 20required to le its most recent sales and use tax return with the
line 21board. California Department of Tax and FeeAdministration.
line 22(E) A copy of the credit certicate issued pursuant to
line 23subparagraph (C) of paragraph (2) of subdivision (g) of Section
line 2417053.85 or 23685 or subparagraph (D) of paragraph (3) of
line 25subdivision (g) of Section 17053.95 or 23695. 17053.95, 17053.98,
line 26 23695, or 23698.
line 27(2) The election shall be led on or before the date on which
line 28the qualied taxpayer or afliate would rst be allowed to claim
line 29a credit pursuant to Section 17053.85, 17053.95, 17053.98, 23685,
line 30or 23695 23695, or 23698 on its tax return.
line 31(d) (1) The claimant may elect to obtain a refund of qualied
line 32sales and use taxes paid during the period described in
line 33subparagraph (D) of paragraph (1) of subdivision (c). If the
line 34claimant elects to obtain a refund of qualied sales and use taxes,
line 35the claimant shall le a claim for refund with the irrevocable
line 36election described in subdivision (c). The refund amount shall not
line 37exceed, for a qualied taxpayer, the credit amount, or for an
line 38afliate, the portion of the credit amount assigned to it.
line 39(2) No interest shall be paid on any amount refunded or credited
line 40pursuant to paragraph (1).
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1(e) If the claimant does not elect to obtain a refund or in the
line 2case where the credit amount, or assigned portion, exceeds the
line 3amount of its claim for refund for the qualied sales and use taxes,
line 4the claimant may, for the reporting periods in the ve years
line 5following the last reporting period as described in subparagraph
line 6(D) of paragraph (1) of subdivision (c), offset any remaining credit
line 7amount, or assigned portion, against the qualied sales and use
line 8taxes imposed during those reporting periods.
line 9(f) Section 6961 shall apply to any refund, or part thereof, that
line 10is erroneously made and any credit, or part thereof, that is
line 11erroneously allowed pursuant to this section.
line 12(g) The board California Department of Tax and Fee
line 13 Administration shall provide an annual listing to the Franchise Tax
line 14Board, in a form and manner agreed upon by the board California
line 15 Department of Tax and FeeAdministration and the Franchise Tax
line 16Board, of the qualied taxpayers, or afliates that have been
line 17assigned a portion of the credit allowed under Section 23685
line 18pursuant to subdivision (c) of Section 23685 or 23685, Section
line 1923695 pursuant to subdivision (c) of Section 23695, or Section
line 20 23698 pursuant to subdivision (c) of Section 23698, who, during
line 21the year, have made an irrevocable election pursuant to this section
line 22and the credit amount, or portion of the credit amount, claimed by
line 23each qualied taxpayer or afliate.
line 24(h) The board California Department of Tax and Fee
line 25 Administration may prescribe rules and regulations for the
line 26administration of this section.
line 27SECTION 1.
line 28 SEC. 2.Section 17053.98 is added to the Revenue and Taxation
line 29Code, to read:
line 3017053.98.(a) (1) For taxable years beginning on or after
line 31January 1, 2020, there shall be allowed to a qualied taxpayer a
line 32credit against the net tax, as dened in Section 17039, subject
line 33to a computation and ranking by the California Film Commission
line 34in subdivision (g) and the allocation amount categories described
line 35in subdivision (i), in an amount equal to 20 percent or 25 percent,
line 36whichever is the applicable credit percentage described in
line 37paragraph (4), of the qualied expenditures for the production of
line 38a qualied motion picture in California. A credit shall not be
line 39allowed under this section for any qualied expenditures for the
line 40production of a motion picture in California if a credit has been
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1claimed for those same expenditures under Section 17053.85 or
line 217053.95.
line 3(2) Except as otherwise provided in this section, the credit shall
line 4be allowed for the taxable year in which the California Film
line 5Commission issues the credit certicate pursuant to subdivision
line 6(g) for the qualied motion picture, but in no instance prior to July
line 71, 2020, and shall be for the applicable percentage of all qualied
line 8expenditures paid or incurred by the qualied taxpayer in all
line 9taxable years for that qualied motion picture.
line 10(3) The amount of the credit allowed to a qualied taxpayer
line 11shall be limited to the amount specied in the credit certicate
line 12issued to the qualied taxpayer by the California Film Commission
line 13pursuant to subdivision (g).
line 14(4) For purposes of paragraphs (1) and (2), the applicable credit
line 15percentage shall be:
line 16(A) Twenty percent of the qualied expenditures attributable
line 17to the production of a qualied motion picture in California,
line 18including, but not limited to, a feature, up to one hundred million
line 19dollars ($100,000,000) in qualied expenditures, or a television
line 20series that relocated to California that is in its second or subsequent
line 21years of receiving a tax credit allocation pursuant to this section,
line 22Section 17053.85, or Section 17053.95.
line 23(B) Twenty-ve percent of the qualied expenditures
line 24attributable to the production of a qualied motion picture in
line 25California where the qualied motion picture is a television series
line 26that relocated to California in its rst year of receiving a tax credit
line 27allocation pursuant to this section.
line 28(C) Twenty-ve percent of the qualied expenditures, up to ten
line 29million dollars ($10,000,000), attributable to the production of a
line 30qualied motion picture that is an independent lm.
line 31(D) Additional credits shall be allowed for the production of a
line 32qualied motion picture whose applicable credit percentage is
line 33determined pursuant to subparagraph (A), in an aggregate amount
line 34not to exceed 5 percent of the qualied expenditures under that
line 35subparagraph, as follows:
line 36(i) (I) Five percent of qualied expenditures, excluding qualied
line 37wages described in subparagraph (E), relating to original
line 38photography outside the Los Angeles zone.
line 39(II) For purposes of this clause and subparagraph (E):
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1(ia) Applicable period means the period that commences with
line 2preproduction and ends when original photography concludes. The
line 3applicable period includes the time necessary to strike a remote
line 4location and return to the Los Angeles zone.
line 5(ib) LosAngeles zone means the area within a circle 30 miles
line 6in radius from Beverly Boulevard and La Cienega Boulevard, Los
line 7Angeles, California, and includes Agua Dulce, Castaic, including
line 8Lake Castaic, Castaic Lake, Leo Carrillo State Beach, Ontario
line 9InternationalAirport, Piru, and Pomona, including the Los Angeles
line 10County Fairgrounds.The Metro Goldwyn Mayer,
line 11 Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the
line 12LosAngeles zone.
line 13(ic) Original photography includes principal photography and
line 14reshooting original footage.
line 15(id) Qualied expenditures relating to original photography
line 16outside the Los Angeles zone means amounts paid or incurred
line 17during the applicable period for tangible personal property
line 18purchased or leased and used or consumed outside the Los Angeles
line 19zone and relating to original photography outside the Los Angeles
line 20zone and qualied wages paid for services performed outside the
line 21LosAngeles zone and relating to original photography outside the
line 22LosAngeles zone.
line 23(ii) Five percent of the qualied expenditures relating to
line 24qualied visual effects attributable to the production of a qualied
line 25motion picture in California.
line 26(E) (i) Notwithstanding subparagraph (D), an amount equal to
line 2710 percent of qualied wages paid for services performed relating
line 28to original photography outside of the Los Angeles zone to
line 29qualied individuals who reside in California but outside the Los
line 30Angeles zone shall be allowed as an additional credit for the
line 31production of a qualied motion picture whose applicable credit
line 32percentage is determined pursuant to subparagraph (A).
line 33(ii) Notwithstanding subparagraph (D), an amount equal to 5
line 34 percent of qualied wages paid for services performed relating to
line 35 original photography outside of the Los Angeles zone to qualied
line 36 individuals who reside in California but outside the Los Angeles
line 37 zone shall be allowed as an additional credit for the production
line 38 of a qualied motion picture whose applicable credit percentage
line 39 is determined pursuant to subparagraph (B) or (C).
line 40(b) For purposes of this section:
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1(1) Ancillary product means any article for sale to the public
line 2that contains a portion of, or any element of, the qualied motion
line 3picture.
line 4(2) Budget means an estimate of all expenses paid or incurred
line 5during the production period of a qualied motion picture. It shall
line 6be the same budget used by the qualied taxpayer and production
line 7company for all qualied motion picture purposes.
line 8(3) Clip use means a use of any portion of a motion picture,
line 9other than the qualied motion picture, used in the qualied motion
line 10picture.
line 11(4) Credit certicate means the certicate issued by the
line 12California Film Commission pursuant to subparagraph (D) of
line 13paragraph (3) of subdivision (g).
line 14(5) (A) Employee fringe benets means the amount allowable
line 15as a deduction under this part to the qualied taxpayer involved
line 16in the production of the qualied motion picture, exclusive of any
line 17amounts contributed by employees, for any year during the
line 18production period with respect to any of the following:
line 19(i) Employer contributions under any pension, prot-sharing,
line 20annuity, or similar plan.
line 21(ii) Employer-provided coverage under any accident or health
line 22plan for employees.
line 23(iii) The employer's cost of life or disability insurance provided
line 24to employees.
line 25(B) Any amount treated as wages under clause (i) of
line 26subparagraph (A) of paragraph (21) shall not be taken into account
line 27under this paragraph.
line 28(6) Independent lm means a motion picture with a minimum
line 29budget of one million dollars ($1,000,000) that is produced by a
line 30company that is not publicly traded and publicly traded companies
line 31do not own, directly or indirectly, more than 25 percent of the
line 32producing company.
line 33(7) Jobs ratio means the amount of qualied wages paid to
line 34qualied individuals divided by the amount of tax credit, not
line 35including any additional credit allowed pursuant to subparagraph
line 36(D) subparagraphs (D) and (E) of paragraph (4) of subdivision
line 37(a), as computed by the California Film Commission. For the
line 38purposes of the calculation of the jobs ratio only, 70 percent of
line 39qualied expenditures for visual effects paid to third party vendors
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1for work performed in California shall be deemed to be qualied
line 2wages paid to a qualied individual.
line 3(8) Licensing means any grant of rights to distribute the
line 4qualied motion picture, in whole or in part.
line 5(9) New use means any use of a motion picture in a medium
line 6other than the medium for which it was initially created.
line 7(10) Pilot for a new television series means the initial episode
line 8produced for a proposed television series.
line 9(11) (A) Postproduction means the nal activities in a
line 10qualied motion picture's production, including editing, foley
line 11recording, automatic dialogue replacement, sound editing, scoring,
line 12music track recording by musicians and music editing, beginning
line 13and end credits, negative cutting, negative processing and
line 14duplication, the addition of sound and visual effects, sound mixing,
line 15lm-to-tape transfers, encoding, and color correction.
line 16(B) Postproduction does not include the manufacture or
line 17shipping of release prints or their equivalent.
line 18(12) Preproduction means the process of preparation for actual
line 19physical production which begins after a qualied motion picture
line 20has received a nal agreement of nancial commitment, or is
line 21greenlit, with, for example, the establishment of a dedicated
line 22production ofce, the hiring of key crew members, and includes,
line 23but is not limited to, activities that include location scouting and
line 24execution of contracts with vendors of equipment and stage space.
line 25(13) Principal photography means the phase of production
line 26during which the motion picture is actually shot, as distinguished
line 27from preproduction and postproduction.
line 28(14) Production period means the period beginning with
line 29preproduction and ending upon completion of postproduction.
line 30(15) Qualied entity means a personal service corporation as
line 31dened in Section 269A(b)(1) of the Internal Revenue Code, a
line 32payroll services corporation, or any entity receiving qualied wages
line 33with respect to services performed by a qualied individual.
line 34(16) Qualied expenditures means amounts paid or incurred
line 35for tangible personal property purchased or leased, and used, within
line 36this state in the production of a qualied motion picture and
line 37payments, including qualied wages, for services performed within
line 38this state in the production of a qualied motion picture.
Attachment: Assembly Bill 1734 - Bill Text (State Legislation: Assembly Bill 1734)
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line 1(17) (A) Qualied individual means any individual who
line 2performs services during the production period in an activity related
line 3to the production of a qualied motion picture.
line 4(B) Qualied individual shall not include either of the
line 5following:
line 6(i) Any individual related to the qualied taxpayer as described
line 7in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
line 8Revenue Code.
line 9(ii) Any 5-percent owner, as dened in Section 416(i)(1)(B) of
line 10the Internal Revenue Code, of the qualied taxpayer.
line 11(18) (A) Qualied motion picture means a motion picture
line 12that is produced for distribution to the general public, regardless
line 13of medium, that is one of the following:
line 14(i) A feature with a minimum production budget of one million
line 15dollars ($1,000,000).
line 16(ii) A miniseries consisting of two or more episodes, each longer
line 17than 40 minutes of running time, exclusive of commercials, that
line 18is produced in California, with a minimum production budget of
line 19one million dollars ($1,000,000) per episode.
line 20(iii) A new television series of episodes longer than 40 minutes
line 21each of running time, exclusive of commercials, that is produced
line 22in California, with a minimum production budget of one million
line 23dollars ($1,000,000) per episode.
line 24(iv) An independent lm.
line 25(v) A television series that relocated to California.
line 26(vi) A pilot for a new television series that is longer than 40
line 27minutes of running time, exclusive of commercials, that is produced
line 28in California, and with a minimum production budget of one
line 29million dollars ($1,000,000).
line 30(B) To qualify as a qualied motion picture, all of the
line 31following conditions shall be satised:
line 32(i) At least 75 percent of the principal photography days occur
line 33wholly in California or 75 percent of the production budget is
line 34incurred for payment for services performed within the state and
line 35the purchase or rental of property used within the state.
line 36(ii) Production of the qualied motion picture is completed
line 37within 30 months from the date on which the qualied taxpayer's
line 38application is approved by the California Film Commission. For
line 39purposes of this section, a qualied motion picture is completed
line 40when the process of postproduction has been nished.
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line 1(iii) The copyright for the motion picture is registered with the
line 2United States Copyright Ofce pursuant to Title 17 of the United
line 3States Code.
line 4(iv) Principal photography of the qualied motion picture
line 5commences after the date on which the application is approved by
line 6the California Film Commission, but no later than 180 days after
line 7the date of that approval if the qualied motion picture has a budget
line 8with qualied expenditures of less than one hundred million dollars
line 9($100,000,000), and no later than 240 days after the date of that
line 10approval in the case of a qualied motion picture with a budget
line 11of qualied expenditures with at least one hundred million dollars
line 12($100,000,000), unless death, disability, or disgurement of the
line 13director or of a principal cast member; an act of God, including,
line 14but not limited to, re, ood, earthquake, storm, hurricane, or other
line 15natural disaster; terrorist activities; or government sanction has
line 16directly prevented a production's ability to begin principal
line 17photography within the prescribed 180- or 240-day commencement
line 18period.
line 19(C) For the purposes of subparagraph (A), in computing the
line 20total wages paid or incurred for the production of a qualied
line 21motion picture, all amounts paid or incurred by all persons or
line 22entities that share in the costs of the qualied motion picture shall
line 23be aggregated.
line 24(D) Qualied motion picture shall not include commercial
line 25advertising, music videos, a motion picture produced for private
line 26noncommercial use, such as weddings, graduations, or as part of
line 27an educational course and made by students, a news program,
line 28current events or public events program, talk show, game show,
line 29sporting event or activity, awards show, telethon or other
line 30production that solicits funds, reality television program, clip-based
line 31programming if more than 50 percent of the content is comprised
line 32of licensed footage, documentaries, variety programs, daytime
line 33dramas, strip shows, one-half hour (air time) episodic television
line 34shows, or any production that falls within the recordkeeping
line 35requirements of Section 2257 of Title 18 of the United States Code.
line 36(19) (A) Qualied taxpayer means a taxpayer who has paid
line 37or incurred qualied expenditures, participated in the Career
line 38Readiness requirement in Section 17053.95, and has been issued
line 39a credit certicate by the California Film Commission pursuant
line 40to subdivision (g).
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line 1(B) In the case of any pass-thru entity, the determination of
line 2whether a taxpayer is a qualied taxpayer under this section shall
line 3be made at the entity level and any credit under this section is not
line 4allowed to the pass-thru entity, but shall be passed through to the
line 5partners or shareholders in accordance with applicable provisions
line 6of Part 10 (commencing with Section 17001) or Part 11
line 7(commencing with Section 23001). For purposes of this paragraph,
line 8pass-thru entity means any entity taxed as a partnership or S
line 9corporation.
line 10(20) Qualied visual effects means visual effects where at
line 11least 75 percent or a minimum of ten million dollars ($10,000,000)
line 12of the qualied expenditures for the visual effects is paid or
line 13incurred in California.
line 14(21) (A) Qualied wages means all of the following:
line 15(i) Any wages subject to withholding under Division 6
line 16(commencing with Section 13000) of the Unemployment Insurance
line 17Code that were paid or incurred by any taxpayer involved in the
line 18production of a qualied motion picture with respect to a qualied
line 19individual for services performed on the qualied motion picture
line 20production within this state.
line 21(ii) The portion of any employee fringe benets paid or incurred
line 22by any taxpayer involved in the production of the qualied motion
line 23picture that are properly allocable to qualied wage amounts
line 24described in clauses (i), (iii), and (iv).
line 25(iii) Any payments made to a qualied entity for services
line 26performed in this state by qualied individuals within the meaning
line 27of paragraph (17).
line 28(iv) Remuneration paid to an independent contractor who is a
line 29qualied individual for services performed within this state by that
line 30qualied individual.
line 31(B) Qualied wages shall not include any of the following:
line 32(i) Expenses, including wages, related to new use, reuse, clip
line 33use, licensing, secondary markets, or residual compensation, or
line 34the creation of any ancillary product, including, but not limited to,
line 35a soundtrack album, toy, game, trailer, or teaser.
line 36(ii) Expenses, including wages, paid or incurred with respect to
line 37acquisition, development, turnaround, or any rights thereto.
line 38(iii) Expenses, including wages, related to nancing, overhead,
line 39marketing, promotion, or distribution of a qualied motion picture.
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line 1(iv) Expenses, including wages, paid per person per qualied
line 2motion picture for writers, directors, music directors, music
line 3composers, music supervisors, producers, and performers, other
line 4than background actors with no scripted lines.
line 5(22) Residual compensation means supplemental
line 6compensation paid at the time that a motion picture is exhibited
line 7through new use, reuse, clip use, or in secondary markets, as
line 8distinguished from payments made during production.
line 9(23) Reuse means any use of a qualied motion picture in the
line 10same medium for which it was created, following the initial use
line 11in that medium.
line 12(24) Secondary markets means media in which a qualied
line 13motion picture is exhibited following the initial media in which it
line 14is exhibited.
line 15(25) Television series that relocated to California means a
line 16television series, without regard to episode length or initial media
line 17exhibition, with a minimum production budget of one million
line 18dollars ($1,000,000) per episode, that lmed at least 75 percent of
line 19principal photography days in its most recent season outside of
line 20California or has lmed all seasons outside of California and for
line 21which the taxpayer certies that the credit provided pursuant to
line 22this section is the primary reason for relocating to California.
line 23(26) Visual effects means the creation, alteration, or
line 24enhancement of images that cannot be captured on a set or location
line 25during live action photography and therefore is accomplished in
line 26postproduction. It includes, but is not limited to, matte paintings,
line 27animation, set extensions, computer-generated objects, characters
line 28and environments, compositing (combining two or more elements
line 29in a nal image), and wire removals. Visual effects does not
line 30include fully animated projects, whether created by traditional or
line 31digital means.
line 32(c) (1) Notwithstanding any other law, a qualied taxpayer
line 33may sell any credit allowed under this section that is attributable
line 34to an independent lm, as dened in paragraph (6) of subdivision
line 35(b), to an unrelated party.
line 36(2) The qualied taxpayer shall report to the Franchise Tax
line 37Board prior to the sale of the credit, in the form and manner
line 38specied by the Franchise Tax Board, all required information
line 39regarding the purchase and sale of the credit, including the social
line 40security or other taxpayer identication number of the unrelated
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line 1party to whom the credit has been sold, the face amount of the
line 2credit sold, and the amount of consideration received by the
line 3qualied taxpayer for the sale of the credit.
line 4(3) In the case where the credit allowed under this section
line 5exceeds the net tax, the excess credit may be carried over to
line 6reduce the net tax in the following taxable year, and succeeding
line 7eight taxable years, if necessary, until the credit has been exhausted.
line 8(4) A credit shall not be sold pursuant to this subdivision to
line 9more than one taxpayer, nor may the credit be resold by the
line 10unrelated party to another taxpayer or other party.
line 11(5) A party that has acquired tax credits under this subdivision
line 12shall be subject to the requirements of this section.
line 13(6) In no event may a qualied taxpayer assign or sell any tax
line 14credit to the extent the tax credit allowed by this section is claimed
line 15on any tax return of the qualied taxpayer.
line 16(7) In the event that both the taxpayer originally allocated a
line 17credit under this section by the California Film Commission and
line 18a taxpayer to whom the credit has been sold both claim the same
line 19amount of credit on their tax returns, the Franchise Tax Board may
line 20disallow the credit of either taxpayer, so long as the statute of
line 21limitations upon assessment remains open.
line 22(8) Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 23Division 3 of Title 2 of the Government Code does not apply to
line 24any standard, criterion, procedure, determination, rule, notice, or
line 25guideline established or issued by the Franchise Tax Board
line 26pursuant to this subdivision.
line 27(9) Subdivision (g) of Section 17039 shall not apply to any
line 28credit sold pursuant to this subdivision.
line 29(10) For purposes of this subdivision, the unrelated party or
line 30parties that purchase a credit pursuant to this subdivision shall be
line 31treated as a qualied taxpayer pursuant to paragraph (1) of
line 32subdivision (a).
line 33(d) (1) No credit shall be allowed pursuant to this section unless
line 34the qualied taxpayer provides the following to the California
line 35Film Commission:
line 36(A) Identication of each qualied individual.
line 37(B) The specic start and end dates of production.
line 38(C) The total wages paid.
line 39(D) The total amount of qualied wages paid to qualied
line 40individuals.
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line 1(E) The copyright registration number, as reected on the
line 2certicate of registration issued under the authority of Section 410
line 3ofTitle 17 of the United States Code, relating to registration of
line 4claim and issuance of certicate. The registration number shall be
line 5provided on the return claiming the credit.
line 6(F) The total amounts paid or incurred to purchase or lease
line 7tangible personal property used in the production of a qualied
line 8motion picture.
line 9(G) Information to substantiate its qualied expenditures.
line 10(H) Information required by the California Film Commission
line 11under regulations promulgated pursuant to subdivision (g)
line 12necessary to verify the amount of credit claimed.
line 13(I) Documentation verifying completion of the Career Readiness
line 14requirement.
line 15(J) Documentation verifying that the qualied taxpayer paid a
line 16fee as described in subdivision (e).
line 17(2) (A) Based on the information provided in paragraph (1),
line 18the California Film Commission shall recompute the jobs ratio
line 19previously computed in subdivision (g) and compare this
line 20recomputed jobs ratio to the jobs ratio that the qualied taxpayer
line 21previously listed on the application submitted pursuant to
line 22subdivision (g).
line 23(B) (i) If the California Film Commission determines that the
line 24jobs ratio has been reduced by more than 10 percent for a qualied
line 25motion picture, the California Film Commission shall reduce the
line 26amount of credit allowed by an equal percentage, unless the
line 27qualied taxpayer demonstrates, and the California Film
line 28Commission determines, that reasonable cause exists for the jobs
line 29ratio reduction.
line 30(ii) If the California Film Commission determines that the jobs
line 31ratio has been reduced by more than 20 percent for a qualied
line 32motion picture, the California Film Commission shall not accept
line 33an application described in subdivision (g) from that qualied
line 34taxpayer or any member of the qualied taxpayer's controlled
line 35group for a period of not less than one year from the date of that
line 36determination, unless the qualied taxpayer demonstrates, and the
line 37California Film Commission determines, that reasonable cause
line 38exists for the jobs ratio reduction.
line 39(C) For the purposes of this paragraph, reasonable cause
line 40means unforeseen circumstances beyond the control of the qualied
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line 1taxpayer, such as, but not limited to, the cancellation of a television
line 2series prior to the completion of the scheduled number of episodes
line 3or other similar circumstances as determined by the California
line 4Film Commission in regulations to be adopted pursuant to
line 5subdivision (e).
line 6(e) (1) (A) Subject to the Administrative Procedure Act
line 7(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 8Division 3 of Title 2 of the Government Code), the California Film
line 9Commission shall adopt rules and regulations to implement a pilot
line 10Career PathwaysTraining program including a fee to be paid by
line 11the qualied taxpayer, if the qualied taxpayer receives a credit
line 12under this section, to fund technical skills training to individuals
line 13from underserved communities for entry into lm and television
line 14industry jobs. The California Film Commission shall (i) identify
line 15a not-for-prot scal agent with direct relationships to industry
line 16skills training programs to manage the funds; and (ii) engage
line 17labor-management jointly administered training programs with
line 18skills training focused on the entertainment industry to implement
line 19the program with California Film Commission approval and
line 20oversight.With regard to the Career Readiness requirement in
line 21Section 17053.95 by which 17053.95, the California Film
line 22Commission shall identify training and public service opportunities
line 23that may include, but not be limited to, hiring interns, public service
line 24announcements, and community outreach shall continue. The
line 25California Film Commission may prescribe rules and regulations
line 26to carry out the purposes of this section, including, subparagraph
line 27(D) of paragraph (4) of subdivision (a) and clause (iv) of
line 28subparagraph (D) of paragraph (2) of subdivision (g), and including
line 29any rules and regulations necessary to establish procedures,
line 30processes, requirements, application fee structure, and rules
line 31identied in or required to implement this section, including credit
line 32and logo requirements and credit allocation procedures over
line 33multiple scal years where the qualied taxpayer is producing a
line 34series of features that will be lmed concurrently.
line 35(B) Notwithstanding any other law, prior to preparing a notice
line 36of proposed action pursuant to Section 11346.4 of the Government
line 37Code and prior to making any revision to the proposed regulation
line 38other than a change that is nonsubstantial or solely grammatical
line 39in nature, the Governor's Ofce of Business and Economic
line 40Development shall rst approve the proposed regulation or
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line 1proposed change to a proposed regulation regarding allocating the
line 2credit pursuant to subdivision (i), computing the jobs ratio as
line 3described in subdivisions (d) and (g), and dening reasonable
line 4cause pursuant to subparagraph (C) of paragraph (2) of subdivision
line 5(d).
line 6(2) (A) Implementation of this section for the 202021 scal
line 7year is deemed an emergency and necessary for the immediate
line 8preservation of the public peace, health, and safety, or general
line 9welfare and, therefore, the California Film Commission is hereby
line 10authorized to adopt emergency regulations to implement this
line 11section during the 202021 scal year in accordance with the
line 12rulemaking provisions of the Administrative Procedure Act
line 13(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 14Division 3 of Title 2 of the Government Code).
line 15(B) Nothing in this paragraph shall be construed to require the
line 16Governor's Ofce of Business and Economic Development to
line 17approve emergency regulations adopted pursuant to this paragraph.
line 18(3) The California Film Commission shall not be required to
line 19prepare an economic impact analysis pursuant to the Administrative
line 20ProcedureAct (Chapter 3.5 (commencing with Section 11340) of
line 21Part 1 of Division 3 of Title 2 of the Government Code) with regard
line 22to any rules and regulations adopted pursuant to this subdivision.
line 23(f) If the qualied taxpayer fails to provide the copyright
line 24registration number as required in subparagraph (E) of paragraph
line 25(1) of subdivision (d), the credit shall be disallowed and assessed
line 26and collected under Section 19051 until the procedures are
line 27satised.
line 28(g) For purposes of this section, the California Film Commission
line 29shall do the following:
line 30(1) Subject to the requirements of subparagraphs (A) through
line 31(E), inclusive, of paragraph (2), on or after July 1, 2020, and before
line 32July 1, 2025, in two or more allocation periods per scal year,
line 33allocate tax credits to applicants.
line 34(2) (A) Establish a procedure for applicants to le with the
line 35California Film Commission a written application, on a form jointly
line 36prescribed by the California Film Commission and the Franchise
line 37Tax Board for the allocation of the tax credit. The application shall
line 38include, but not be limited to, the following information:
line 39(i) The budget for the motion picture production.
line 40(ii) The number of production days.
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line 1(iii) A nancing plan for the production.
line 2(iv) The diversity of the workforce employed by the applicant,
line 3including, but not limited to, the ethnic and racial makeup of the
line 4individuals employed by the applicant during the production of
line 5the qualied motion picture, to the extent possible.
line 6(v) All members of a combined reporting group, if known at
line 7the time of the application.
line 8(vi) Financial information, if available, including, but not limited
line 9to, the most recently produced balance sheets, annual statements
line 10of prots and losses, audited or unaudited nancial statements,
line 11summary budget projections or results, or the functional equivalent
line 12of these documents of a partnership or owner of a single member
line 13limited liability company that is disregarded pursuant to Section
line 1423038.The information provided pursuant to this clause shall be
line 15condential and shall not be subject to public disclosure.
line 16(vii) The names of all partners in a partnership not publicly
line 17traded or the names of all members of a limited liability company
line 18classied as a partnership not publicly traded for California income
line 19tax purposes that have a nancial interest in the applicant's
line 20qualied motion picture. The information provided pursuant to
line 21this clause shall be condential and shall not be subject to public
line 22disclosure.
line 23(viii) The amount of qualied wages the applicant expects to
line 24pay to qualied individuals.
line 25(ix) The amount of tax credit the applicant computes the
line 26qualied motion picture will receive, applying the applicable credit
line 27percentages described in paragraph (4) of subdivision (a).
line 28(x) A statement establishing that the tax credit described in this
line 29section is a signicant factor in the applicant's choice of location
line 30for the qualied motion picture. The statement shall include
line 31information about whether the qualied motion picture is at risk
line 32of not being lmed or specify the jurisdiction or jurisdictions in
line 33which the qualied motion picture will be located in the absence
line 34of the tax credit. The statement shall be signed by an ofcer or
line 35executive of the applicant.
line 36(xi) The applicant's written policy against unlawful harassment,
line 37 including, but not limited to, sexual harassment, which includes
line 38 procedures for reporting and investigating harassment claims, a
line 39 phone number for an individual who will be responsible for
line 40 receiving harassment claims, and a statement that the company
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line 1 will not retaliate against an individual who reports harassment.
line 2 The applicant shall also indicate how the policy will be distributed
line 3 to employees and include a summary of education training
line 4 resources, including the prohibition against, and prevention and
line 5 correction of, sexual harassment and remedies available.
line 6(xi)
line 7(xii) Any other information deemed relevant by the California
line 8Film Commission or the Franchise Tax Board.
line 9(B) Establish criteria, consistent with the requirements of this
line 10section, for allocating tax credits.
line 11(C) Determine and designate applicants who meet the
line 12requirements of this section.
line 13(D) (i) For purposes of allocating the credit amounts subject to
line 14the categories described in subdivision (i) in any scal year, the
line 15California Film Commission shall do all of the following:
line 16(ii) For each allocation date and for each category, list each
line 17applicant from highest to lowest according to the jobs ratio as
line 18computed by the California Film Commission.
line 19(iii) Subject to the applicable credit percentage, allocate the
line 20credit to each applicant according to the highest jobs ratio, working
line 21down the list, until the credit amount is exhausted.
line 22(iv) Pursuant to regulations adopted pursuant to subdivision (e),
line 23the California Film Commission may increase the jobs ratio by up
line 24to 25 percent if a qualied motion picture increases economic
line 25activity in California according to criteria developed by the
line 26California Film Commission that would include, but not be limited
line 27to, such factors as, the amount of the production and postproduction
line 28spending in California, the utilization of scoring musicians in
line 29California, and other criteria measuring economic impact in
line 30California as determined by the California Film Commission.
line 31(v) Notwithstanding any other provision, any television series,
line 32relocating television series, or any new television series based on
line 33a pilot for a new television series that has been approved and issued
line 34a credit allocation by the California Film Commission under this
line 35section, Section 23698, 17053.95, 23695, 17053.85, or 23685 shall
line 36be issued a credit for each subsequent season, for the life of that
line 37television series whenever credits are allocated within a scal year.
line 38(E) Subject to the annual cap and the allocation credit amounts
line 39based on categories described in subdivision (i), allocate an
line 40aggregate amount of credits under this section and Section 23698,
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line 1and allocate any carryover of unallocated or unused credits from
line 2prior years and Sections 17053.85, 17053.95, 23685, and 23695,
line 3and the amount of any credits reduced pursuant to paragraph (2)
line 4of subdivision (d).
line 5(3) Certify tax credits allocated to qualied taxpayers.
line 6(A) Establish a verication procedure for the amount of qualied
line 7expenditures paid or incurred by the applicant, including, but not
line 8limited to, updates to the information in subparagraph (A) of
line 9paragraph (2) of subdivision (g).
line 10(B) Establish audit requirements that shall be satised before a
line 11credit certicate may be issued by the California Film Commission.
line 12(C) (i) Establish a procedure for a qualied taxpayer to report
line 13to the California Film Commission, prior to the issuance of a credit
line 14certicate, the following information:
line 15(I) If readily available, a list of the states, provinces, or other
line 16jurisdictions in which any member of the applicant's combined
line 17reporting group in the same business unit as the qualied taxpayer
line 18that, in the preceding calendar year, has produced a qualied
line 19motion picture intended for release in the United States market.
line 20For purposes of this clause, qualied motion picture shall not
line 21include any episodes of a television series that were complete or
line 22in production prior to July 1, 2020.
line 23(II) Whether a qualied motion picture described in subclause
line 24(I) was awarded any nancial incentive by the state, province, or
line 25other jurisdiction that was predicated on the performance of
line 26primary principal photography or postproduction in that location.
line 27(ii) The California Film Commission may provide that the report
line 28required by this subparagraph be led in a single report provided
line 29on a calendar year basis for those qualied taxpayers that receive
line 30multiple credit certicates in a calendar year.
line 31(D) Issue a credit certicate to a qualied taxpayer upon
line 32completion of the qualied motion picture reecting the credit
line 33amount allocated after qualied expenditures have been veried
line 34and the jobs ratio computed under this section. The amount of
line 35credit shown on the credit certicate shall not exceed the amount
line 36of credit allocated to that qualied taxpayer pursuant to this section.
line 37(4) Obtain, when possible, the following information from
line 38applicants that do not receive an allocation of credit:
line 39(A) Whether the qualied motion picture that was the subject
line 40of the application was completed.
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line 1(B) If completed, in which state or foreign jurisdiction was the
line 2primary principal photography completed.
line 3(C) Whether the applicant received any nancial incentives
line 4from the state or foreign jurisdiction to make the qualied motion
line 5picture in that location.
line 6(5) Provide the LegislativeAnalyst's Ofce, upon request, any
line 7or all application materials or any other materials received from,
line 8or submitted by, the applicants, in electronic format when available,
line 9including, but not limited to, information provided pursuant to
line 10clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).
line 11(6) The information provided to the California Film Commission
line 12pursuant to this section shall constitute condential tax information
line 13for purposes of Article 2 (commencing with Section 19542) of
line 14Chapter 7 of Part 10.2.
line 15(7) Notwithstanding any other provision, if on July 1, 2025, the
line 16California Film Commission determines that credits allocated
line 17under this section and Section 23698 remain unused and have not
line 18been added to credit amounts available for allocation under a
line 19successor section or sections, the California Film Commission
line 20may continue to make allocations of the unused credits pursuant
line 21to the terms of this section and Section 23698 until such time as
line 22the unused credits are fully utilized.
line 23(h) (1) The California Film Commission shall annually provide
line 24the LegislativeAnalyst's Ofce, the Franchise Tax Board, and the
line 25board California Department of Tax and FeeAdministration with
line 26a list of qualied taxpayers and the tax credit amounts allocated
line 27to each qualied taxpayer by the California Film Commission.
line 28The list shall include the names and taxpayer identication
line 29numbers, including taxpayer identication numbers of each partner
line 30or shareholder, as applicable, of the qualied taxpayer.
line 31(2) (A) Notwithstanding paragraph (6) of subdivision (g), the
line 32California Film Commission shall annually post on its Internet
line 33Web site and make available for public release the following:
line 34(i) A table which includes all of the following information: a
line 35list of qualied taxpayers and the tax credit amounts allocated to
line 36each qualied taxpayer by the California Film Commission, the
line 37number of production days in California the qualied taxpayer
line 38represented in its application would occur, the number of California
line 39jobs that the qualied taxpayer represented in its application would
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line 1be directly created by the production, and the total amount of
line 2qualied expenditures expected to be spent by the production.
line 3(ii) A narrative staff summary describing the production of the
line 4qualied taxpayer as well as background information regarding
line 5the qualied taxpayer contained in the qualied taxpayer's
line 6application for the credit.
line 7(B) Nothing in this subdivision shall be construed to make the
line 8information submitted by an applicant for a tax credit under this
line 9section a public record.
line 10(3) The California Film Commission shall provide each city
line 11and county in California with an instructional guide that includes,
line 12but is not limited to, a review of best practices for facilitating
line 13motion picture production in local jurisdictions, resources on
line 14hosting and encouraging motion picture production, and the
line 15California Film Commissions' Commission's Model Film Filming
line 16Ordinance.The California Film Commission shall maintain on its
line 17InternetWeb site a list of initiatives by locality that encourage
line 18motion picture production in regions across the state. The list shall
line 19be distributed to each approved applicant for the program to
line 20highlight local jurisdictions that offer incentives to facilitate lm
line 21production.
line 22(i) (1) (A) The aggregate amount of credits that may be
line 23allocated for a scal year pursuant to this section and Section
line 2423698 is three hundred thirty million dollars ($330,000,000), plus
line 25any amount described in subparagraph (B), (C), (D), or (E) in
line 26credits for the 202021 scal year and each scal year thereafter,
line 27through and including the 202425 scal year, except as provided
line 28in paragraph (7) of subdivision (g).
line 29(B) The unused allocation credit amount, if any, for the
line 30preceding scal year.
line 31(C) The amount of previously allocated credits not certied.
line 32(D) The amount of any credits reduced pursuant to paragraph
line 33(2) of subdivision (d).
line 34(E) That portion of any unused allocation credit amount, if any,
line 35attributable to Section 17053.85, 17053.95, 23685, or 23695
line 36available for that scal year in a manner as determined by
line 37regulations promulgated by the California Film Commission.
line 38(2) (A) Notwithstanding the foregoing, the California Film
line 39Commission shall allocate the credit amounts subject to the
line 40following categories:
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line 1(i) Independent lms with qualied expenditures of ten million
line 2dollars ($10,000,000) or less shall be allocated 4.8 percent of the
line 3amount specied in paragraph (1). Independent lms with qualied
line 4expenditures in excess of ten million dollars ($10,000,000) shall
line 5be allocated 3.2 percent of the amount specied in paragraph (1).
line 6(ii) Features shall be allocated 35 percent of the amount specied
line 7in paragraph (1).
line 8(iii) A relocating television series shall be allocated 17 percent
line 9of the amount specied in paragraph (1).
line 10(iv) (A) A new television series, pilots for a new television
line 11series, miniseries, and recurring television series shall be allocated
line 1240 percent of the amount specied in paragraph (1).
line 13(B) (i) Within any allocation period for credits to a relocating
line 14television series, any unused amount shall be reallocated to the
line 15category described in clause (iv) of subparagraph (A) and, if any
line 16unused amount remains, reallocated in the next allocation period
line 17for credits to a relocating television series.
line 18(ii) Notwithstanding clause (i), within any scal year, any
line 19unused amount within any category in any allocation period may
line 20be reallocated to another category in a subsequent allocation period
line 21as may be determined by regulations promulgated by the California
line 22Film Commission.
line 23(C) With respect to a relocating television series issued a credit
line 24in a subsequent year pursuant to clause (v) of subparagraph (D)
line 25of paragraph (2) of subdivision (g), that subsequent credit amount
line 26shall be allowed from the allocation amount described in clause
line 27(iv) of subparagraph (A).
line 28(3) Any act that reduces the amount that may be allocated
line 29pursuant to paragraph (1) constitutes a change in state taxes for
line 30the purpose of increasing revenues within the meaning of Section
line 313 of Article XIIIA of the California Constitution and may be passed
line 32by not less than two-thirds of all Members elected to each of the
line 33two houses of the Legislature.
line 34(j) The California Film Commission shall have the authority to
line 35allocate tax credits in accordance with this section and in
line 36accordance with any regulations prescribed pursuant to subdivision
line 37(e) upon adoption.
line 38(k) Section 41 shall not apply to the credit allowed by this
line 39section.
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line 1SEC. 2.
line 2 SEC. 3.Section 23698 is added to the Revenue and Taxation
line 3Code, to read:
line 423698.(a) (1) For taxable years beginning on or after January
line 51, 2020, there shall be allowed to a qualied taxpayer a credit
line 6against the tax, as dened in Section 23036, subject to a
line 7computation and ranking by the California Film Commission in
line 8subdivision (g) and the allocation amount categories described in
line 9subdivision (i), in an amount equal to 20 percent or 25 percent,
line 10whichever is the applicable credit percentage described in
line 11paragraph (4), of the qualied expenditures for the production of
line 12a qualied motion picture in California. A credit shall not be
line 13allowed under this section for any qualied expenditures for the
line 14production of a motion picture in California if a credit has been
line 15claimed for those same expenditures under Section 23685 or 23695.
line 16(2) Except as otherwise provided in this section, the credit shall
line 17be allowed for the taxable year in which the California Film
line 18Commission issues the credit certicate pursuant to subdivision
line 19(g) for the qualied motion picture, but in no instance prior to July
line 201, 2020, and shall be for the applicable percentage of all qualied
line 21expenditures paid or incurred by the qualied taxpayer in all
line 22taxable years for that qualied motion picture.
line 23(3) The amount of the credit allowed to a qualied taxpayer
line 24shall be limited to the amount specied in the credit certicate
line 25issued to the qualied taxpayer by the California Film Commission
line 26pursuant to subdivision (g).
line 27(4) For purposes of paragraphs (1) and (2), the applicable credit
line 28percentage shall be:
line 29(A) Twenty percent of the qualied expenditures attributable
line 30to the production of a qualied motion picture in California,
line 31including, but not limited to, a feature, up to one hundred million
line 32dollars ($100,000,000) in qualied expenditures, or a television
line 33series that relocated to California that is in its second or subsequent
line 34years of receiving a tax credit allocation pursuant to this section,
line 35Section 23685, or Section 23695.
line 36(B) Twenty-ve percent of the qualied expenditures
line 37attributable to the production of a qualied motion picture in
line 38California where the qualied motion picture is a television series
line 39that relocated to California in its rst year of receiving a tax credit
line 40allocation pursuant to this section.
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line 1(C) Twenty-ve percent of the qualied expenditures, up to ten
line 2million dollars ($10,000,000), attributable to the production of a
line 3qualied motion picture that is an independent lm.
line 4(D) Additional credits shall be allowed for the production of a
line 5qualied motion picture whose applicable credit percentage is
line 6determined pursuant to subparagraph (A), in an aggregate amount
line 7not to exceed 5 percent of the qualied expenditures under that
line 8subparagraph, as follows:
line 9(i) (I) Five percent of qualied expenditures, excluding qualied
line 10wages described in subparagraph (E), relating to original
line 11photography outside the Los Angeles zone.
line 12(II) For purposes of this clause and subparagraph (E):
line 13(ia) Applicable period means the period that commences with
line 14preproduction and ends when original photography concludes. The
line 15applicable period includes the time necessary to strike a remote
line 16location and return to the Los Angeles zone.
line 17(ib) LosAngeles zone means the area within a circle 30 miles
line 18in radius from Beverly Boulevard and La Cienega Boulevard, Los
line 19Angeles, California, and includes Agua Dulce, Castaic, including
line 20Lake Castaic, Castaic Lake, Leo Carrillo State Beach, Ontario
line 21InternationalAirport, Piru, and Pomona, including the Los Angeles
line 22County Fairgrounds.The Metro Goldwyn Mayer,
line 23 Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the
line 24LosAngeles zone.
line 25(ic) Original photography includes principal photography and
line 26reshooting original footage.
line 27(id) Qualied expenditures relating to original photography
line 28outside the Los Angeles zone means amounts paid or incurred
line 29during the applicable period for tangible personal property
line 30purchased or leased and used or consumed outside the Los Angeles
line 31zone and relating to original photography outside the Los Angeles
line 32zone and qualied wages paid for services performed outside the
line 33LosAngeles zone and relating to original photography outside the
line 34LosAngeles zone.
line 35(ii) Five percent of the qualied expenditures relating to
line 36qualied visual effects attributable to the production of a qualied
line 37motion picture in California.
line 38(E) (i) Notwithstanding subparagraph (D), an amount equal to
line 3910 percent of qualied wages paid for services performed relating
line 40to original photography outside of the Los Angeles zone to
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line 1qualied individuals who reside in California but outside the Los
line 2Angeles zone shall be allowed as an additional credit for the
line 3production of a qualied motion picture whose applicable credit
line 4percentage is determined pursuant to subparagraph (A).
line 5(ii) Notwithstanding subparagraph (D), an amount equal to 5
line 6 percent of qualied wages paid for services performed relating to
line 7 original photography outside of the Los Angeles zone to qualied
line 8 individuals who reside in California but outside the Los Angeles
line 9 zone shall be allowed as an additional credit for the production
line 10 of a qualied motion picture whose applicable credit percentage
line 11 is determined pursuant to subparagraph (B) or (C).
line 12(b) For purposes of this section:
line 13(1) Ancillary product means any article for sale to the public
line 14that contains a portion of, or any element of, the qualied motion
line 15picture.
line 16(2) Budget means an estimate of all expenses paid or incurred
line 17during the production period of a qualied motion picture. It shall
line 18be the same budget used by the qualied taxpayer and production
line 19company for all qualied motion picture purposes.
line 20(3) Clip use means a use of any portion of a motion picture,
line 21other than the qualied motion picture, used in the qualied motion
line 22picture.
line 23(4) Credit certicate means the certicate issued by the
line 24California Film Commission pursuant to subparagraph (D) of
line 25paragraph (3) of subdivision (g).
line 26(5) (A) Employee fringe benets means the amount allowable
line 27as a deduction under this part to the qualied taxpayer involved
line 28in the production of the qualied motion picture, exclusive of any
line 29amounts contributed by employees, for any year during the
line 30production period with respect to any of the following:
line 31(i) Employer contributions under any pension, prot-sharing,
line 32annuity, or similar plan.
line 33(ii) Employer-provided coverage under any accident or health
line 34plan for employees.
line 35(iii) The employer's cost of life or disability insurance provided
line 36to employees.
line 37(B) Any amount treated as wages under clause (i) of
line 38subparagraph (A) of paragraph (21) shall not be taken into account
line 39under this paragraph.
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line 1(6) Independent lm means a motion picture with a minimum
line 2budget of one million dollars ($1,000,000) that is produced by a
line 3company that is not publicly traded and publicly traded companies
line 4do not own, directly or indirectly, more than 25 percent of the
line 5producing company.
line 6(7) Jobs ratio means the amount of qualied wages paid to
line 7qualied individuals divided by the amount of tax credit, not
line 8including any additional credit allowed pursuant to subparagraph
line 9(D) subparagraphs (D) and (E) of paragraph (4) of subdivision
line 10(a), as computed by the California Film Commission. For the
line 11purposes of the calculation of the jobs ratio only, 70 percent of
line 12qualied expenditures for visual effects paid to third party vendors
line 13for work performed in California shall be deemed to be qualied
line 14wages paid to a qualied individual.
line 15(8) Licensing means any grant of rights to distribute the
line 16qualied motion picture, in whole or in part.
line 17(9) New use means any use of a motion picture in a medium
line 18other than the medium for which it was initially created.
line 19(10) Pilot for a new television series means the initial episode
line 20produced for a proposed television series.
line 21(11) (A) Postproduction means the nal activities in a
line 22qualied motion picture's production, including editing, foley
line 23recording, automatic dialogue replacement, sound editing, scoring,
line 24music track recording by musicians and music editing, beginning
line 25and end credits, negative cutting, negative processing and
line 26duplication, the addition of sound and visual effects, sound mixing,
line 27lm-to-tape transfers, encoding, and color correction.
line 28(B) Postproduction does not include the manufacture or
line 29shipping of release prints or their equivalent.
line 30(12) Preproduction means the process of preparation for actual
line 31physical production which begins after a qualied motion picture
line 32has received a nal agreement of nancial commitment, or is
line 33greenlit, with, for example, the establishment of a dedicated
line 34production ofce, the hiring of key crew members, and includes,
line 35but is not limited to, activities that include location scouting and
line 36execution of contracts with vendors of equipment and stage space.
line 37(13) Principal photography means the phase of production
line 38during which the motion picture is actually shot, as distinguished
line 39from preproduction and postproduction.
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line 1(14) Production period means the period beginning with
line 2preproduction and ending upon completion of postproduction.
line 3(15) Qualied entity means a personal service corporation as
line 4dened in Section 269A(b)(1) of the Internal Revenue Code, a
line 5payroll services corporation, or any entity receiving qualied wages
line 6with respect to services performed by a qualied individual.
line 7(16) Qualied expenditures means amounts paid or incurred
line 8for tangible personal property purchased or leased, and used, within
line 9this state in the production of a qualied motion picture and
line 10payments, including qualied wages, for services performed within
line 11this state in the production of a qualied motion picture.
line 12(17) (A) Qualied individual means any individual who
line 13performs services during the production period in an activity related
line 14to the production of a qualied motion picture.
line 15(B) Qualied individual shall not include either of the
line 16following:
line 17(i) Any individual related to the qualied taxpayer as described
line 18in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
line 19Revenue Code.
line 20(ii) Any 5-percent owner, as dened in Section 416(i)(1)(B) of
line 21the Internal Revenue Code, of the qualied taxpayer.
line 22(18) (A) Qualied motion picture means a motion picture
line 23that is produced for distribution to the general public, regardless
line 24of medium, that is one of the following:
line 25(i) A feature with a minimum production budget of one million
line 26dollars ($1,000,000).
line 27(ii) A miniseries consisting of two or more episodes, each longer
line 28than 40 minutes of running time, exclusive of commercials, that
line 29is produced in California, with a minimum production budget of
line 30one million dollars ($1,000,000) per episode.
line 31(iii) A new television series of episodes longer than 40 minutes
line 32each of running time, exclusive of commercials, that is produced
line 33in California, with a minimum production budget of one million
line 34dollars ($1,000,000) per episode.
line 35(iv) An independent lm.
line 36(v) A television series that relocated to California.
line 37(vi) A pilot for a new television series that is longer than 40
line 38minutes of running time, exclusive of commercials, that is produced
line 39in California, and with a minimum production budget of one
line 40million dollars ($1,000,000).
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line 1(B) To qualify as a qualied motion picture, all of the
line 2following conditions shall be satised:
line 3(i) At least 75 percent of the principal photography days occur
line 4wholly in California or 75 percent of the production budget is
line 5incurred for payment for services performed within the state and
line 6the purchase or rental of property used within the state.
line 7(ii) Production of the qualied motion picture is completed
line 8within 30 months from the date on which the qualied taxpayer's
line 9application is approved by the California Film Commission. For
line 10purposes of this section, a qualied motion picture is completed
line 11when the process of postproduction has been nished.
line 12(iii) The copyright for the motion picture is registered with the
line 13United States Copyright Ofce pursuant to Title 17 of the United
line 14States Code.
line 15(iv) Principal photography of the qualied motion picture
line 16commences after the date on which the application is approved by
line 17the California Film Commission, but no later than 180 days after
line 18the date of that approval if the qualied motion picture has a budget
line 19with qualied expenditures of less than one hundred million dollars
line 20($100,000,000), and no later than 240 days after the date of that
line 21approval in the case of a qualied motion picture with a budget
line 22of qualied expenditures with at least one hundred million dollars
line 23($100,000,000), unless death, disability, or disgurement of the
line 24director or of a principal cast member; an act of God, including,
line 25but not limited to, re, ood, earthquake, storm, hurricane, or other
line 26natural disaster; terrorist activities; or government sanction has
line 27directly prevented a production's ability to begin principal
line 28photography within the prescribed 180- or 240-day commencement
line 29period.
line 30(C) For the purposes of subparagraph (A), in computing the
line 31total wages paid or incurred for the production of a qualied
line 32motion picture, all amounts paid or incurred by all persons or
line 33entities that share in the costs of the qualied motion picture shall
line 34be aggregated.
line 35(D) Qualied motion picture shall not include commercial
line 36advertising, music videos, a motion picture produced for private
line 37noncommercial use, such as weddings, graduations, or as part of
line 38an educational course and made by students, a news program,
line 39current events or public events program, talk show, game show,
line 40sporting event or activity, awards show, telethon or other
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line 1production that solicits funds, reality television program, clip-based
line 2programming if more than 50 percent of the content is comprised
line 3of licensed footage, documentaries, variety programs, daytime
line 4dramas, strip shows, one-half hour (air time) episodic television
line 5shows, or any production that falls within the recordkeeping
line 6requirements of Section 2257 of Title 18 of the United States Code.
line 7(19) (A) Qualied taxpayer means a taxpayer who has paid
line 8or incurred qualied expenditures, participated in the Career
line 9Readiness requirement in Section 23695, and has been issued a
line 10credit certicate by the California Film Commission pursuant to
line 11subdivision (g).
line 12(B) (i) In the case of any pass-thru entity, the determination of
line 13whether a taxpayer is a qualied taxpayer under this section shall
line 14be made at the entity level and any credit under this section is not
line 15allowed to the pass-thru entity, but shall be passed through to the
line 16partners or shareholders in accordance with applicable provisions
line 17of Part 10 (commencing with Section 17001) or Part 11
line 18(commencing with Section 23001). For purposes of this paragraph,
line 19pass-thru entity means any entity taxed as a partnership or S
line 20corporation.
line 21(ii) In the case of an S corporation, the credit allowed under
line 22this section shall not be used by an S corporation as a credit
line 23against a tax imposed under Chapter 4.5 (commencing with Section
line 2423800) of Part 11 of Division 2.
line 25(20) Qualied visual effects means visual effects where at
line 26least 75 percent or a minimum of ten million dollars ($10,000,000)
line 27of the qualied expenditures for the visual effects is paid or
line 28incurred in California.
line 29(21) (A) Qualied wages means all of the following:
line 30(i) Any wages subject to withholding under Division 6
line 31(commencing with Section 13000) of the Unemployment Insurance
line 32Code that were paid or incurred by any taxpayer involved in the
line 33production of a qualied motion picture with respect to a qualied
line 34individual for services performed on the qualied motion picture
line 35production within this state.
line 36(ii) The portion of any employee fringe benets paid or incurred
line 37by any taxpayer involved in the production of the qualied motion
line 38picture that are properly allocable to qualied wage amounts
line 39described in clauses (i), (iii), and (iv).
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line 1(iii) Any payments made to a qualied entity for services
line 2performed in this state by qualied individuals within the meaning
line 3of paragraph (17).
line 4(iv) Remuneration paid to an independent contractor who is a
line 5qualied individual for services performed within this state by that
line 6qualied individual.
line 7(B) Qualied wages shall not include any of the following:
line 8(i) Expenses, including wages, related to new use, reuse, clip
line 9use, licensing, secondary markets, or residual compensation, or
line 10the creation of any ancillary product, including, but not limited to,
line 11a soundtrack album, toy, game, trailer, or teaser.
line 12(ii) Expenses, including wages, paid or incurred with respect to
line 13acquisition, development, turnaround, or any rights thereto.
line 14(iii) Expenses, including wages, related to nancing, overhead,
line 15marketing, promotion, or distribution of a qualied motion picture.
line 16(iv) Expenses, including wages, paid per person per qualied
line 17motion picture for writers, directors, music directors, music
line 18composers, music supervisors, producers, and performers, other
line 19than background actors with no scripted lines.
line 20(22) Residual compensation means supplemental
line 21compensation paid at the time that a motion picture is exhibited
line 22through new use, reuse, clip use, or in secondary markets, as
line 23distinguished from payments made during production.
line 24(23) Reuse means any use of a qualied motion picture in the
line 25same medium for which it was created, following the initial use
line 26in that medium.
line 27(24) Secondary markets means media in which a qualied
line 28motion picture is exhibited following the initial media in which it
line 29is exhibited.
line 30(25) Television series that relocated to California means a
line 31television series, without regard to episode length or initial media
line 32exhibition, with a minimum production budget of one million
line 33dollars ($1,000,000) per episode, that lmed at least 75 percent of
line 34principal photography days in its most recent season outside of
line 35California or has lmed all seasons outside of California and for
line 36which the taxpayer certies that the credit provided pursuant to
line 37this section is the primary reason for relocating to California.
line 38(26) Visual effects means the creation, alteration, or
line 39enhancement of images that cannot be captured on a set or location
line 40during live action photography and therefore is accomplished in
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line 1postproduction. It includes, but is not limited to, matte paintings,
line 2animation, set extensions, computer-generated objects, characters
line 3and environments, compositing (combining two or more elements
line 4in a nal image), and wire removals. Visual effects does not
line 5include fully animated projects, whether created by traditional or
line 6digital means.
line 7(c) (1) Notwithstanding subdivision (i) of Section 23036, in
line 8the case where the credit allowed by this section exceeds the
line 9taxpayer's tax liability computed under this part, a qualied
line 10taxpayer may elect to assign any portion of the credit allowed
line 11under this section to one or more afliated corporations for each
line 12taxable year in which the credit is allowed. For purposes of this
line 13subdivision, afliated corporation has the meaning provided in
line 14subdivision (b) of Section 25110, as that section was amended by
line 15Chapter 881 of the Statutes of 1993, as of the last day of the taxable
line 16year in which the credit is allowed, except that 100 percent is
line 17substituted for more than 50 percent wherever it appears in the
line 18section, and voting common stock is substituted for voting
line 19stock wherever it appears in the section.
line 20(2) The election provided in paragraph (1):
line 21(A) May be based on any method selected by the qualied
line 22taxpayer that originally receives the credit.
line 23(B) Shall be irrevocable for the taxable year the credit is allowed,
line 24once made.
line 25(C) May be changed for any subsequent taxable year if the
line 26election to make the assignment is expressly shown on each of the
line 27returns of the qualied taxpayer and the qualied taxpayer's
line 28afliated corporations that assign and receive the credits.
line 29(D) Shall be reported to the Franchise Tax Board, in the form
line 30and manner specied by the Franchise Tax Board, along with all
line 31required information regarding the assignment of the credit,
line 32including the corporation number, the federal employer
line 33identication number, or other taxpayer identication number of
line 34the assignee, and the amount of the credit assigned.
line 35(3) (A) Notwithstanding any other law, a qualied taxpayer
line 36may sell any credit allowed under this section that is attributable
line 37to an independent lm, as dened in paragraph (6) of subdivision
line 38(b), to an unrelated party.
line 39(B) The qualied taxpayer shall report to the Franchise Tax
line 40Board prior to the sale of the credit, in the form and manner
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line 1specied by the Franchise Tax Board, all required information
line 2regarding the purchase and sale of the credit, including the social
line 3security or other taxpayer identication number of the unrelated
line 4party to whom the credit has been sold, the face amount of the
line 5credit sold, and the amount of consideration received by the
line 6qualied taxpayer for the sale of the credit.
line 7(4) In the case where the credit allowed under this section
line 8exceeds the tax, the excess credit may be carried over to reduce
line 9the tax in the following taxable year, and succeeding eight
line 10taxable years, if necessary, until the credit has been exhausted.
line 11(5) A credit shall not be sold pursuant to this subdivision to
line 12more than one taxpayer, nor may the credit be resold by the
line 13unrelated party to another taxpayer or other party.
line 14(6) A party that has been assigned or acquired tax credits under
line 15this subdivision shall be subject to the requirements of this section.
line 16(7) In no event may a qualied taxpayer assign or sell any tax
line 17credit to the extent the tax credit allowed by this section is claimed
line 18on any tax return of the qualied taxpayer.
line 19(8) In the event that both the taxpayer originally allocated a
line 20credit under this section by the California Film Commission and
line 21a taxpayer to whom the credit has been sold both claim the same
line 22amount of credit on their tax returns, the Franchise Tax Board may
line 23disallow the credit of either taxpayer, so long as the statute of
line 24limitations upon assessment remains open.
line 25(9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 26Division 3 of Title 2 of the Government Code does not apply to
line 27any standard, criterion, procedure, determination, rule, notice, or
line 28guideline established or issued by the Franchise Tax Board
line 29pursuant to this subdivision.
line 30(10) Subdivision (i) of Section 23036 shall not apply to any
line 31credit sold pursuant to this subdivision.
line 32(11) For purposes of this subdivision:
line 33(A) An afliated corporation or corporations that are assigned
line 34a credit pursuant to paragraph (1) shall be treated as a qualied
line 35taxpayer pursuant to paragraph (1) of subdivision (a).
line 36(B) The unrelated party or parties that purchase a credit pursuant
line 37to paragraphs (3) to (10), inclusive, shall be treated as a qualied
line 38taxpayer pursuant to paragraph (1) of subdivision (a).
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line 1(d) (1) No credit shall be allowed pursuant to this section unless
line 2the qualied taxpayer provides the following to the California
line 3Film Commission:
line 4(A) Identication of each qualied individual.
line 5(B) The specic start and end dates of production.
line 6(C) The total wages paid.
line 7(D) The total amount of qualied wages paid to qualied
line 8individuals.
line 9(E) The copyright registration number, as reected on the
line 10certicate of registration issued under the authority of Section 410
line 11ofTitle 17 of the United States Code, relating to registration of
line 12claim and issuance of certicate. The registration number shall be
line 13provided on the return claiming the credit.
line 14(F) The total amounts paid or incurred to purchase or lease
line 15tangible personal property used in the production of a qualied
line 16motion picture.
line 17(G) Information to substantiate its qualied expenditures.
line 18(H) Information required by the California Film Commission
line 19under regulations promulgated pursuant to subdivision (g)
line 20necessary to verify the amount of credit claimed.
line 21(I) Documentation verifying completion of the Career Readiness
line 22requirement.
line 23(J) Documentation verifying that the qualied taxpayer paid a
line 24fee as described in subdivision (e).
line 25(2) (A) Based on the information provided in paragraph (1),
line 26the California Film Commission shall recompute the jobs ratio
line 27previously computed in subdivision (g) and compare this
line 28recomputed jobs ratio to the jobs ratio that the qualied taxpayer
line 29previously listed on the application submitted pursuant to
line 30subdivision (g).
line 31(B) (i) If the California Film Commission determines that the
line 32jobs ratio has been reduced by more than 10 percent for a qualied
line 33motion picture, the California Film Commission shall reduce the
line 34amount of credit allowed by an equal percentage, unless the
line 35qualied taxpayer demonstrates, and the California Film
line 36Commission determines, that reasonable cause exists for the jobs
line 37ratio reduction.
line 38(ii) If the California Film Commission determines that the jobs
line 39ratio has been reduced by more than 20 percent for a qualied
line 40motion picture, the California Film Commission shall not accept
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line 1an application described in subdivision (g) from that qualied
line 2taxpayer or any member of the qualied taxpayer's controlled
line 3group for a period of not less than one year from the date of that
line 4determination, unless the qualied taxpayer demonstrates, and the
line 5California Film Commission determines, that reasonable cause
line 6exists for the jobs ratio reduction.
line 7(C) For the purposes of this paragraph, reasonable cause
line 8means unforeseen circumstances beyond the control of the qualied
line 9taxpayer, such as, but not limited to, the cancellation of a television
line 10series prior to the completion of the scheduled number of episodes
line 11or other similar circumstances as determined by the California
line 12Film Commission in regulations to be adopted pursuant to
line 13subdivision (e).
line 14(e) (1) (A) Subject to the Administrative Procedure Act
line 15(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 16Division 3 of Title 2 of the Government Code), the California Film
line 17Commission shall adopt rules and regulations to implement a pilot
line 18Career PathwaysTraining program including a fee to be paid by
line 19the qualied taxpayer, if the qualied taxpayer receives a credit
line 20under this section, to fund technical skills training to individuals
line 21from underserved communities for entry into lm and television
line 22industry jobs. The California Film Commission shall (i) identify
line 23a not-for-prot scal agent with direct relationships to industry
line 24skills training programs to manage the funds; and (ii) engage
line 25labor-management jointly administered training programs with
line 26skills training focused on the entertainment industry to implement
line 27the program with California Film Commission approval and
line 28oversight.With regard to the Career Readiness requirement in
line 29Section 23695, the California Film Commission shall identify
line 30training and public service opportunities that may include, but not
line 31be limited to, hiring interns, public service announcements, and
line 32community outreach shall continue. The California Film
line 33Commission may prescribe rules and regulations to carry out the
line 34purposes of this section, including, subparagraph (D) of paragraph
line 35(4) of subdivision (a) and clause (iv) of subparagraph (D) of
line 36paragraph (2) of subdivision (g), and including any rules and
line 37regulations necessary to establish procedures, processes,
line 38requirements, application fee structure, and rules identied in or
line 39required to implement this section, including credit and logo
line 40requirements and credit allocation procedures over multiple scal
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line 1years where the qualied taxpayer is producing a series of features
line 2that will be lmed concurrently.
line 3(B) Notwithstanding any other law, prior to preparing a notice
line 4of proposed action pursuant to Section 11346.4 of the Government
line 5Code and prior to making any revision to the proposed regulation
line 6other than a change that is nonsubstantial or solely grammatical
line 7in nature, the Governor's Ofce of Business and Economic
line 8Development shall rst approve the proposed regulation or
line 9proposed change to a proposed regulation regarding allocating the
line 10credit pursuant to subdivision (i), computing the jobs ratio as
line 11described in subdivisions (d) and (g), and dening reasonable
line 12cause pursuant to subparagraph (C) of paragraph (2) of subdivision
line 13(d).
line 14(2) (A) Implementation of this section for the 202021 scal
line 15year is deemed an emergency and necessary for the immediate
line 16preservation of the public peace, health, and safety, or general
line 17welfare and, therefore, the California Film Commission is hereby
line 18authorized to adopt emergency regulations to implement this
line 19section during the 202021 scal year in accordance with the
line 20rulemaking provisions of the Administrative Procedure Act
line 21(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 22Division 3 of Title 2 of the Government Code).
line 23(B) Nothing in this paragraph shall be construed to require the
line 24Governor's Ofce of Business and Economic Development to
line 25approve emergency regulations adopted pursuant to this paragraph.
line 26(3) The California Film Commission shall not be required to
line 27prepare an economic impact analysis pursuant to the Administrative
line 28ProcedureAct (Chapter 3.5 (commencing with Section 11340) of
line 29Part 1 of Division 3 of Title 2 of the Government Code) with regard
line 30to any rules and regulations adopted pursuant to this subdivision.
line 31(f) If the qualied taxpayer fails to provide the copyright
line 32registration number as required in subparagraph (E) of paragraph
line 33(1) of subdivision (d), the credit shall be disallowed and assessed
line 34and collected under Section 19051 until the procedures are
line 35satised.
line 36(g) For purposes of this section, the California Film Commission
line 37shall do the following:
line 38(1) Subject to the requirements of subparagraphs (A) through
line 39(E), inclusive, of paragraph (2), on or after July 1, 2020, and before
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line 1July 1, 2025, in two or more allocation periods per scal year,
line 2allocate tax credits to applicants.
line 3(2) (A) Establish a procedure for applicants to le with the
line 4California Film Commission a written application, on a form jointly
line 5prescribed by the California Film Commission and the Franchise
line 6Tax Board for the allocation of the tax credit. The application shall
line 7include, but not be limited to, the following information:
line 8(i) The budget for the motion picture production.
line 9(ii) The number of production days.
line 10(iii) A nancing plan for the production.
line 11(iv) The diversity of the workforce employed by the applicant,
line 12including, but not limited to, the ethnic and racial makeup of the
line 13individuals employed by the applicant during the production of
line 14the qualied motion picture, to the extent possible.
line 15(v) All members of a combined reporting group, if known at
line 16the time of the application.
line 17(vi) Financial information, if available, including, but not limited
line 18to, the most recently produced balance sheets, annual statements
line 19of prots and losses, audited or unaudited nancial statements,
line 20summary budget projections or results, or the functional equivalent
line 21of these documents of a partnership or owner of a single member
line 22limited liability company that is disregarded pursuant to Section
line 2323038.The information provided pursuant to this clause shall be
line 24condential and shall not be subject to public disclosure.
line 25(vii) The names of all partners in a partnership not publicly
line 26traded or the names of all members of a limited liability company
line 27classied as a partnership not publicly traded for California income
line 28tax purposes that have a nancial interest in the applicant's
line 29qualied motion picture. The information provided pursuant to
line 30this clause shall be condential and shall not be subject to public
line 31disclosure.
line 32(viii) The amount of qualied wages the applicant expects to
line 33pay to qualied individuals.
line 34(ix) The amount of tax credit the applicant computes the
line 35qualied motion picture will receive, applying the applicable credit
line 36percentages described in paragraph (4) of subdivision (a).
line 37(x) A statement establishing that the tax credit described in this
line 38section is a signicant factor in the applicant's choice of location
line 39for the qualied motion picture. The statement shall include
line 40information about whether the qualied motion picture is at risk
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line 1of not being lmed or specify the jurisdiction or jurisdictions in
line 2which the qualied motion picture will be located in the absence
line 3of the tax credit. The statement shall be signed by an ofcer or
line 4executive of the applicant.
line 5(xi) The applicant's written policy against unlawful harassment,
line 6 including, but not limited to, sexual harassment, which includes
line 7 procedures for reporting and investigating harassment claims, a
line 8 phone number for an individual who will be responsible for
line 9 receiving harassment claims, and a statement that the company
line 10 will not retaliate against an individual who reports harassment.
line 11 The applicant shall also indicate how the policy will be distributed
line 12 to employees and include a summary of education training
line 13 resources, including the prohibition against, and prevention and
line 14 correction of, sexual harassment and remedies available.
line 15(xi)
line 16(xii) Any other information deemed relevant by the California
line 17Film Commission or the Franchise Tax Board.
line 18(B) Establish criteria, consistent with the requirements of this
line 19section, for allocating tax credits.
line 20(C) Determine and designate applicants who meet the
line 21requirements of this section.
line 22(D) (i) For purposes of allocating the credit amounts subject to
line 23the categories described in subdivision (i) in any scal year, the
line 24California Film Commission shall do all of the following:
line 25(ii) For each allocation date and for each category, list each
line 26applicant from highest to lowest according to the jobs ratio as
line 27computed by the California Film Commission.
line 28(iii) Subject to the applicable credit percentage, allocate the
line 29credit to each applicant according to the highest jobs ratio, working
line 30down the list, until the credit amount is exhausted.
line 31(iv) Pursuant to regulations adopted pursuant to subdivision (e),
line 32the California Film Commission may increase the jobs ratio by up
line 33to 25 percent if a qualied motion picture increases economic
line 34activity in California according to criteria developed by the
line 35California Film Commission that would include, but not be limited
line 36to, such factors as, the amount of the production and postproduction
line 37spending in California, the utilization of scoring musicians in
line 38California, and other criteria measuring economic impact in
line 39California as determined by the California Film Commission.
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line 1(v) Notwithstanding any other provision, any television series,
line 2relocating television series, or any new television series based on
line 3a pilot for a new television series that has been approved and issued
line 4a credit allocation by the California Film Commission under this
line 5section, Section 17053.98, 17053.85, 17053.95, 23685, or 23695
line 6shall be issued a credit for each subsequent season, for the life of
line 7that television series whenever credits are allocated within a scal
line 8year.
line 9(E) Subject to the annual cap and the allocation credit amounts
line 10based on categories described in subdivision (i), allocate an
line 11aggregate amount of credits under this section and Section
line 1217053.98, and allocate any carryover of unallocated or unused
line 13credits from prior years and Sections 17053.85, 17053.95, 23685,
line 14and 23695, and the amount of any credits reduced pursuant to
line 15paragraph (2) of subdivision (d).
line 16(3) Certify tax credits allocated to qualied taxpayers.
line 17(A) Establish a verication procedure for the amount of qualied
line 18expenditures paid or incurred by the applicant, including, but not
line 19limited to, updates to the information in subparagraph (A) of
line 20paragraph (2) of subdivision (g).
line 21(B) Establish audit requirements that shall be satised before a
line 22credit certicate may be issued by the California Film Commission.
line 23(C) (i) Establish a procedure for a qualied taxpayer to report
line 24to the California Film Commission, prior to the issuance of a credit
line 25certicate, the following information:
line 26(I) If readily available, a list of the states, provinces, or other
line 27jurisdictions in which any member of the applicant's combined
line 28reporting group in the same business unit as the qualied taxpayer
line 29that, in the preceding calendar year, has produced a qualied
line 30motion picture intended for release in the United States market.
line 31For purposes of this clause, qualied motion picture shall not
line 32include any episodes of a television series that were complete or
line 33in production prior to July 1, 2020.
line 34(II) Whether a qualied motion picture described in subclause
line 35(I) was awarded any nancial incentive by the state, province, or
line 36other jurisdiction that was predicated on the performance of
line 37primary principal photography or postproduction in that location.
line 38(ii) The California Film Commission may provide that the report
line 39required by this subparagraph be led in a single report provided
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line 1on a calendar year basis for those qualied taxpayers that receive
line 2multiple credit certicates in a calendar year.
line 3(D) Issue a credit certicate to a qualied taxpayer upon
line 4completion of the qualied motion picture reecting the credit
line 5amount allocated after qualied expenditures have been veried
line 6and the jobs ratio computed under this section. The amount of
line 7credit shown on the credit certicate shall not exceed the amount
line 8of credit allocated to that qualied taxpayer pursuant to this section.
line 9(4) Obtain, when possible, the following information from
line 10applicants that do not receive an allocation of credit:
line 11(A) Whether the qualied motion picture that was the subject
line 12of the application was completed.
line 13(B) If completed, in which state or foreign jurisdiction was the
line 14primary principal photography completed.
line 15(C) Whether the applicant received any nancial incentives
line 16from the state or foreign jurisdiction to make the qualied motion
line 17picture in that location.
line 18(5) Provide the LegislativeAnalyst's Ofce, upon request, any
line 19or all application materials or any other materials received from,
line 20or submitted by, the applicants, in electronic format when available,
line 21including, but not limited to, information provided pursuant to
line 22clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).
line 23(6) The information provided to the California Film Commission
line 24pursuant to this section shall constitute condential tax information
line 25for purposes of Article 2 (commencing with Section 19542) of
line 26Chapter 7 of Part 10.2.
line 27(7) Notwithstanding any other provision, if on July 1, 2025, the
line 28California Film Commission determines that credits allocated
line 29under this section and Section 17053.98 remain unused and have
line 30not been added to credit amounts available for allocation under a
line 31successor section or sections, the California Film Commission
line 32may continue to make allocations of the unused credits pursuant
line 33to the terms of this section and Section 17053.98 until such time
line 34as the unused credits are fully utilized.
line 35(h) (1) The California Film Commission shall annually provide
line 36the LegislativeAnalyst's Ofce, the Franchise Tax Board, and the
line 37board California Department of Tax and FeeAdministration with
line 38a list of qualied taxpayers and the tax credit amounts allocated
line 39to each qualied taxpayer by the California Film Commission.
line 40The list shall include the names and taxpayer identication
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line 1numbers, including taxpayer identication numbers of each partner
line 2or shareholder, as applicable, of the qualied taxpayer.
line 3(2) (A) Notwithstanding paragraph (6) of subdivision (g), the
line 4California Film Commission shall annually post on its Internet
line 5Web site and make available for public release the following:
line 6(i) A table which includes all of the following information: a
line 7list of qualied taxpayers and the tax credit amounts allocated to
line 8each qualied taxpayer by the California Film Commission, the
line 9number of production days in California the qualied taxpayer
line 10represented in its application would occur, the number of California
line 11jobs that the qualied taxpayer represented in its application would
line 12be directly created by the production, and the total amount of
line 13qualied expenditures expected to be spent by the production.
line 14(ii) A narrative staff summary describing the production of the
line 15qualied taxpayer as well as background information regarding
line 16the qualied taxpayer contained in the qualied taxpayer's
line 17application for the credit.
line 18(B) Nothing in this subdivision shall be construed to make the
line 19information submitted by an applicant for a tax credit under this
line 20section a public record.
line 21(3) The California Film Commission shall provide each city
line 22and county in California with an instructional guide that includes,
line 23but is not limited to, a review of best practices for facilitating
line 24motion picture production in local jurisdictions, resources on
line 25hosting and encouraging motion picture production, and the
line 26California Film Commissions' Commission's Model Film Filming
line 27Ordinance.The California Film Commission shall maintain on its
line 28InternetWeb site a list of initiatives by locality that encourage
line 29motion picture production in regions across the state. The list shall
line 30be distributed to each approved applicant for the program to
line 31highlight local jurisdictions that offer incentives to facilitate lm
line 32production.
line 33(i) (1) (A) The aggregate amount of credits that may be
line 34allocated for a scal year pursuant to this section and Section
line 3517053.98 is three hundred thirty million dollars ($330,000,000),
line 36plus any amount described in subparagraph (B), (C), (D), or (E)
line 37in credits for the 202021 scal year and each scal year thereafter,
line 38through and including the 202425 scal year, except as provided
line 39in paragraph (7) of subdivision (g).
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line 1(B) The unused allocation credit amount, if any, for the
line 2preceding scal year.
line 3(C) The amount of previously allocated credits not certied.
line 4(D) The amount of any credits reduced pursuant to paragraph
line 5(2) of subdivision (d).
line 6(E) That portion of any unused allocation credit amount, if any,
line 7attributable to Section 17053.85, 17053.95, 23685, or 23695
line 8available for that scal year in a manner as determined by
line 9regulations promulgated by the California Film Commission.
line 10(2) (A) Notwithstanding the foregoing, the California Film
line 11Commission shall allocate the credit amounts subject to the
line 12following categories:
line 13(i) Independent lms with qualied expenditures of ten million
line 14dollars ($10,000,000) or less shall be allocated 4.8 percent of the
line 15amount specied in paragraph (1). Independent lms with qualied
line 16expenditures in excess of ten million dollars ($10,000,000) shall
line 17be allocated 3.2 percent of the amount specied in paragraph (1).
line 18(ii) Features shall be allocated 35 percent of the amount specied
line 19in paragraph (1).
line 20(iii) A relocating television series shall be allocated 17 percent
line 21of the amount specied in paragraph (1).
line 22(iv) A new television series, pilots for a new television series,
line 23miniseries, and recurring television series shall be allocated 40
line 24percent of the amount specied in paragraph (1).
line 25(B) (i) Within any allocation period for credits to a relocating
line 26television series, any unused amount shall be reallocated to the
line 27category described in clause (iv) of subparagraph (A) and, if any
line 28unused amount remains, reallocated in the next allocation period
line 29for credits to a relocating television series.
line 30(ii) Notwithstanding clause (i), within any scal year, any
line 31unused amount within any category in any allocation period may
line 32be reallocated to another category in a subsequent allocation period
line 33as may be determined by regulations promulgated by the California
line 34Film Commission.
line 35(C) With respect to a relocating television series issued a credit
line 36in a subsequent year pursuant to clause (v) of subparagraph (D)
line 37of paragraph (2) of subdivision (g), that subsequent credit amount
line 38shall be allowed from the allocation amount described in clause
line 39(iv) of subparagraph (A).
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line 1(3) Any act that reduces the amount that may be allocated
line 2pursuant to paragraph (1) constitutes a change in state taxes for
line 3the purpose of increasing revenues within the meaning of Section
line 43 of Article XIIIA of the California Constitution and may be passed
line 5by not less than two-thirds of all Members elected to each of the
line 6two houses of the Legislature.
line 7(j) The California Film Commission shall have the authority to
line 8allocate tax credits in accordance with this section and in
line 9accordance with any regulations prescribed pursuant to subdivision
line 10(e) upon adoption.
line 11(k) Section 41 shall not apply to the credit allowed by this
line 12section.
line 13SEC. 3.
line 14 SEC. 4.This act provides for a tax levy within the meaning
line 15ofArticle IV of the California Constitution and shall go into
line 16immediate effect.
O
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