HomeMy WebLinkAbout2018-06-12 - AGENDA REPORTS - SB 951 (2)5
Agenda Item: 5
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR
CITY MANAGER APPROVAL:
DATE: June 12, 2018
SUBJECT: STATE LEGISLATION: SENATE BILL 951
DEPARTMENT: City Manager's Office
PRESENTER: Masis Hagobian
RECOMMENDED ACTION
Senate Bill 951 and
transmit position statements to Senator Holly Mitchell
delegation, appropriate legislative committees, Governor Brown, and the League of California
Cities.
BACKGROUND
Authored by Senator Holly Mitchell (D-30-Culver City), Senate Bill 951 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) 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
California Film Commission, production of the tax credit approved show resulted in over 3,000
jobs each production year.
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The California Film and Television 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
nd
Senate Bill 951 was introduced on January 30, 2018, and passed the Senate Committee on
Governance and Finance (5-1-1) on April 18, 2018, and the Senate Committee on Appropriations
(6-0-1) on May 25, 2018. Senate Bill 951is pending a second reading in the Senate.
A similar measure has been introduced in the Assembly, Assembly Bill 1734 (Calderon).
The City Council Legislative Committee met on May 25, 2018, and recommends that the City
ALTERNATIVE ACTION
3. Take no action on Senate Bill 951
4. Refer Senate Bill 951 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
Senate Bill 951 - Bill Text
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AMENDED IN SENATEAPRIL 25, 2018
AMENDED IN SENATEAPRIL 12, 2018
AMENDED IN SENATE MARCH 22, 2018
SENATE BILL No. 951
Introduced by Senator Mitchell
January 30, 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
SB 951, as amended, Mitchell.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
year to $330 million, through and including the 201920 scal year.
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
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
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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 $330,000,000 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.
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.
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
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 9that has been assigned any portion of the credit amount by the
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line 1qualied taxpayer pursuant to subdivision (c) of Section 23685 or
line 2 23685, subdivision (c) of Section 23695. 23695, or subdivision
line 3(c) of Section 23698.
line 4(3) Credit amount means an amount equal to the tax credit
line 5amount that would otherwise be allowed to a qualied taxpayer
line 6pursuant to Section 17053.85, 17053.95, 17053.98, 23685, or
line 723695 23695, or 23698, but for the election made pursuant to this
line 8section.
line 9(4) Production period means the production period as dened
line 10in paragraph (12) of subdivision (b) of Section 17053.85, 17053.95,
line 1123685, or 23695. 23695 or in paragraph (14) of subdivision (b)
line 12 of Section 17053.98 or 23698.
line 13(5) (A) Qualied sales and use taxes means any state sales
line 14and use taxes imposed by Part 1 (commencing with Section 6001),
line 15on the operative date of the act adding this section.
line 16(B) Notwithstanding subparagraph (A), qualied sales and use
line 17taxes does not mean taxes imposed by Section 6051.2, 6051.5,
line 186201.2, 6201.5, Part 1.5 (commencing with Section 7200), Part
line 191.6 (commencing with Section 7251), or Section 35 of Article XIII
line 20of the California Constitution.
line 21(b) (1) A qualied taxpayer may, in lieu of claiming the credit
line 22allowed by Section 17053.85, 17053.95, 17053.98, 23685, or 23695
line 23 23695, or 23698, make an irrevocable election to apply the credit
line 24amount against qualied sales and use taxes imposed on the
line 25qualied taxpayer in accordance with this section.
line 26(2) An afliate may, in lieu of claiming the assigned portion of
line 27the credit allowed by Section 23685 or 23695, 23685, 23695, or
line 28 23698, make an irrevocable election to apply the assigned portion
line 29of the credit amount against qualied sales and use taxes imposed
line 30on the afliate in accordance with this section.
line 31(c) (1) A qualied taxpayer or afliate shall submit to the board
line 32 California Department of Tax and FeeAdministration an
line 33irrevocable election, in a form as prescribed by the board,
line 34 California Department of Tax and FeeAdministration, which shall
line 35include, but not be limited to, the following information:
line 36(A) Representation that the claimant is a qualied taxpayer or
line 37an afliate.
line 38(B) Statement of the dates on which the production period began
line 39and ended.
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
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line 1(C) The credit amount, and if an afliate, the portion of the
line 2credit amount assigned to it and documentation supporting the
line 3assignment of that portion of the credit amount.
line 4(D) The amount of qualied sales and use taxes the claimant
line 5remitted to the board California Department of Tax and Fee
line 6 Administration during the period commencing on the rst day of
line 7the calendar quarter commencing immediately before the beginning
line 8of the production period, and ending on the date the claimant was
line 9required to le its most recent sales and use tax return with the
line 10board. California Department of Tax and FeeAdministration.
line 11(E) A copy of the credit certicate issued pursuant to
line 12subparagraph (C) of paragraph (2) of subdivision (g) of Section
line 1317053.85 or 23685 or subparagraph (D) of paragraph (3) of
line 14subdivision (g) of Section 17053.95 or 23695. 17053.95, 17053.98,
line 15 23695, or 23698.
line 16(2) The election shall be led on or before the date on which
line 17the qualied taxpayer or afliate would rst be allowed to claim
line 18a credit pursuant to Section 17053.85, 17053.95, 17053.98, 23685,
line 19or 23695 23695, or 23698 on its tax return.
line 20(d) (1) The claimant may elect to obtain a refund of qualied
line 21sales and use taxes paid during the period described in
line 22subparagraph (D) of paragraph (1) of subdivision (c). If the
line 23claimant elects to obtain a refund of qualied sales and use taxes,
line 24the claimant shall le a claim for refund with the irrevocable
line 25election described in subdivision (c). The refund amount shall not
line 26exceed, for a qualied taxpayer, the credit amount, or for an
line 27afliate, the portion of the credit amount assigned to it.
line 28(2) No interest shall be paid on any amount refunded or credited
line 29pursuant to paragraph (1).
line 30(e) If the claimant does not elect to obtain a refund or in the
line 31case where the credit amount, or assigned portion, exceeds the
line 32amount of its claim for refund for the qualied sales and use taxes,
line 33the claimant may, for the reporting periods in the ve years
line 34following the last reporting period as described in subparagraph
line 35(D) of paragraph (1) of subdivision (c), offset any remaining credit
line 36amount, or assigned portion, against the qualied sales and use
line 37taxes imposed during those reporting periods.
line 38(f) Section 6961 shall apply to any refund, or part thereof, that
line 39is erroneously made and any credit, or part thereof, that is
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40erroneously allowed pursuant to this section.
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line 1(g) The board California Department of Tax and Fee
line 2 Administration shall provide an annual listing to the Franchise Tax
line 3Board, in a form and manner agreed upon by the board California
line 4 Department of Tax and FeeAdministration and the Franchise Tax
line 5Board, of the qualied taxpayers, or afliates that have been
line 6assigned a portion of the credit allowed under Section 23685
line 7pursuant to subdivision (c) of Section 23685 or 23685, Section
line 823695 pursuant to subdivision (c) of Section 23695, or Section
line 9 23698 pursuant to subdivision (c) of Section 23698, who, during
line 10the year, have made an irrevocable election pursuant to this section
line 11and the credit amount, or portion of the credit amount, claimed by
line 12each qualied taxpayer or afliate.
line 13(h) The board California Department of Tax and Fee
line 14 Administration may prescribe rules and regulations for the
line 15administration of this section.
line 16SECTION 1.
line 17 SEC. 2.Section 17053.98 is added to the Revenue and Taxation
line 18Code, to read:
line 1917053.98.(a) (1) For taxable years beginning on or after
line 20January 1, 2020, there shall be allowed to a qualied taxpayer a
line 21credit against the net tax, as dened in Section 17039, subject
line 22to a computation and ranking by the California Film Commission
line 23in subdivision (g) and the allocation amount categories described
line 24in subdivision (i), in an amount equal to 20 percent or 25 percent,
line 25whichever is the applicable credit percentage described in
line 26paragraph (4), of the qualied expenditures for the production of
line 27a qualied motion picture in California. A credit shall not be
line 28allowed under this section for any qualied expenditures for the
line 29production of a motion picture in California if a credit has been
line 30claimed for those same expenditures under Section 17053.85 or
line 3117053.95.
line 32(2) Except as otherwise provided in this section, the credit shall
line 33be allowed for the taxable year in which the California Film
line 34Commission issues the credit certicate pursuant to subdivision
line 35(g) for the qualied motion picture, but in no instance prior to July
line 361, 2020, and shall be for the applicable percentage of all qualied
line 37expenditures paid or incurred by the qualied taxpayer in all
line 38taxable years for that qualied motion picture.
line 39(3) The amount of the credit allowed to a qualied taxpayer
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40shall be limited to the amount specied in the credit certicate
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line 1issued to the qualied taxpayer by the California Film Commission
line 2pursuant to subdivision (g).
line 3(4) For purposes of paragraphs (1) and (2), the applicable credit
line 4percentage shall be:
line 5(A) Twenty percent of the qualied expenditures attributable
line 6to the production of a qualied motion picture in California,
line 7including, but not limited to, a feature, up to one hundred million
line 8dollars ($100,000,000) in qualied expenditures, or a television
line 9series that relocated to California that is in its second or subsequent
line 10years of receiving a tax credit allocation pursuant to this section,
line 11Section 17053.85, or Section 17053.95.
line 12(B) Twenty-ve percent of the qualied expenditures
line 13attributable to the production of a qualied motion picture in
line 14California where the qualied motion picture is a television series
line 15that relocated to California in its rst year of receiving a tax credit
line 16allocation pursuant to this section.
line 17(C) Twenty-ve percent of the qualied expenditures, up to ten
line 18million dollars ($10,000,000), attributable to the production of a
line 19qualied motion picture that is an independent lm.
line 20(D) Additional credits shall be allowed for the production of a
line 21qualied motion picture whose applicable credit percentage is
line 22determined pursuant to subparagraph (A), in an aggregate amount
line 23not to exceed 5 percent of the qualied expenditures under that
line 24subparagraph, as follows:
line 25(i) (I) Five percent of qualied expenditures, excluding qualied
line 26wages described in subparagraph (E), relating to original
line 27photography outside the Los Angeles zone.
line 28(II) For purposes of this clause and subparagraph (E):
line 29(ia) Applicable period means the period that commences with
line 30preproduction and ends when original photography concludes. The
line 31applicable period includes the time necessary to strike a remote
line 32location and return to the Los Angeles zone.
line 33(ib) LosAngeles zone means the area within a circle 30 miles
line 34in radius from Beverly Boulevard and La Cienega Boulevard, Los
line 35Angeles, California, and includes Agua Dulce, Castaic, including
line 36Lake Castaic, Castaic Lake, Leo Carrillo State Beach, Ontario
line 37InternationalAirport, Piru, and Pomona, including the Los Angeles
line 38County Fairgrounds.The Metro Goldwyn Mayer,
line 39 Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40LosAngeles zone.
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line 1(ic) Original photography includes principal photography and
line 2reshooting original footage.
line 3(id) Qualied expenditures relating to original photography
line 4outside the Los Angeles zone means amounts paid or incurred
line 5during the applicable period for tangible personal property
line 6purchased or leased and used or consumed outside the Los Angeles
line 7zone and relating to original photography outside the Los Angeles
line 8zone and qualied wages paid for services performed outside the
line 9LosAngeles zone and relating to original photography outside the
line 10LosAngeles zone.
line 11(ii) Five percent of the qualied expenditures relating to
line 12qualied visual effects attributable to the production of a qualied
line 13motion picture in California.
line 14(E) Notwithstanding subparagraph (D), an amount equal to 10
line 15percent of qualied wages paid for services performed relating to
line 16original photography outside of the Los Angeles zone to qualied
line 17individuals who reside in California but outside the Los Angeles
line 18zone shall be allowed as an additional credit for the production of
line 19a qualied motion picture whose applicable credit percentage is
line 20determined pursuant to subparagraph (A).
line 21(b) For purposes of this section:
line 22(1) Ancillary product means any article for sale to the public
line 23that contains a portion of, or any element of, the qualied motion
line 24picture.
line 25(2) Budget means an estimate of all expenses paid or incurred
line 26during the production period of a qualied motion picture. It shall
line 27be the same budget used by the qualied taxpayer and production
line 28company for all qualied motion picture purposes.
line 29(3) Clip use means a use of any portion of a motion picture,
line 30other than the qualied motion picture, used in the qualied motion
line 31picture.
line 32(4) Credit certicate means the certicate issued by the
line 33California Film Commission pursuant to subparagraph (D) of
line 34paragraph (3) of subdivision (g).
line 35(5) (A) Employee fringe benets means the amount allowable
line 36as a deduction under this part to the qualied taxpayer involved
line 37in the production of the qualied motion picture, exclusive of any
line 38amounts contributed by employees, for any year during the
line 39production period with respect to any of the following:
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
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line 1(i) Employer contributions under any pension, prot-sharing,
line 2annuity, or similar plan.
line 3(ii) Employer-provided coverage under any accident or health
line 4plan for employees.
line 5(iii) The employer's cost of life or disability insurance provided
line 6to employees.
line 7(B) Any amount treated as wages under clause (i) of
line 8subparagraph (A) of paragraph (21) shall not be taken into account
line 9under this paragraph.
line 10(6) Independent lm means a motion picture with a minimum
line 11budget of one million dollars ($1,000,000) that is produced by a
line 12company that is not publicly traded and publicly traded companies
line 13do not own, directly or indirectly, more than 25 percent of the
line 14producing company.
line 15(7) Jobs ratio means the amount of qualied wages paid to
line 16qualied individuals divided by the amount of tax credit, not
line 17including any additional credit allowed pursuant to subparagraphs
line 18(D) and (E) of paragraph (4) of subdivision (a), as computed by
line 19the California Film Commission. For the purposes of the
line 20calculation of the jobs ratio only, 70 percent of qualied
line 21expenditures for visual effects paid to third-party vendors for work
line 22performed in California shall be deemed to be qualied wages
line 23paid to a qualied individual.
line 24(8) Licensing means any grant of rights to distribute the
line 25qualied motion picture, in whole or in part.
line 26(9) New use means any use of a motion picture in a medium
line 27other than the medium for which it was initially created.
line 28(10) Pilot for a new television series means the initial episode
line 29produced for a proposed television series.
line 30(11) (A) Postproduction means the nal activities in a
line 31qualied motion picture's production, including editing, foley
line 32recording, automatic dialogue replacement, sound editing, scoring,
line 33music track recording by musicians and music editing, beginning
line 34and end credits, negative cutting, negative processing and
line 35duplication, the addition of sound and visual effects, sound mixing,
line 36lm-to-tape transfers, encoding, and color correction.
line 37(B) Postproduction does not include the manufacture or
line 38shipping of release prints or their equivalent.
line 39(12) Preproduction means the process of preparation for actual
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40physical production which begins after a qualied motion picture
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line 1has received a nal agreement of nancial commitment, or is
line 2greenlit, with, for example, the establishment of a dedicated
line 3production ofce, the hiring of key crew members, and includes,
line 4but is not limited to, activities that include location scouting and
line 5execution of contracts with vendors of equipment and stage space.
line 6(13) Principal photography means the phase of production
line 7during which the motion picture is actually shot, as distinguished
line 8from preproduction and postproduction.
line 9(14) Production period means the period beginning with
line 10preproduction and ending upon completion of postproduction.
line 11(15) Qualied entity means a personal service corporation as
line 12dened in Section 269A(b)(1) of the Internal Revenue Code, a
line 13payroll services corporation, or any entity receiving qualied wages
line 14with respect to services performed by a qualied individual.
line 15(16) Qualied expenditures means amounts paid or incurred
line 16for tangible personal property purchased or leased, and used, within
line 17this state in the production of a qualied motion picture and
line 18payments, including qualied wages, for services performed within
line 19this state in the production of a qualied motion picture.
line 20(17) (A) Qualied individual means any individual who
line 21performs services during the production period in an activity related
line 22to the production of a qualied motion picture.
line 23(B) Qualied individual shall not include either of the
line 24following:
line 25(i) Any individual related to the qualied taxpayer as described
line 26in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
line 27Revenue Code.
line 28(ii) Any 5-percent owner, as dened in Section 416(i)(1)(B) of
line 29the Internal Revenue Code, of the qualied taxpayer.
line 30(18) (A) Qualied motion picture means a motion picture
line 31that is produced for distribution to the general public, regardless
line 32of medium, that is one of the following:
line 33(i) A feature with a minimum production budget of one million
line 34dollars ($1,000,000).
line 35(ii) A miniseries consisting of two or more episodes, each longer
line 36than 40 minutes of running time, exclusive of commercials, that
line 37is produced in California, with a minimum production budget of
line 38one million dollars ($1,000,000) per episode.
line 39(iii) A new television series of episodes longer than 40 minutes
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40each of running time, exclusive of commercials, that is produced
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line 1in California, with a minimum production budget of one million
line 2dollars ($1,000,000) per episode.
line 3(iv) An independent lm.
line 4(v) A television series that relocated to California.
line 5(vi) A pilot for a new television series that is longer than 40
line 6minutes of running time, exclusive of commercials, that is produced
line 7in California, and with a minimum production budget of one
line 8million dollars ($1,000,000).
line 9(B) To qualify as a qualied motion picture, all of the
line 10following conditions shall be satised:
line 11(i) At least 75 percent of the principal photography days occur
line 12wholly in California or 75 percent of the production budget is
line 13incurred for payment for services performed within the state and
line 14the purchase or rental of property used within the state.
line 15(ii) Production of the qualied motion picture is completed
line 16within 30 months from the date on which the qualied taxpayer's
line 17application is approved by the California Film Commission. For
line 18purposes of this section, a qualied motion picture is completed
line 19when the process of postproduction has been nished.
line 20(iii) The copyright for the motion picture is registered with the
line 21United States Copyright Ofce pursuant to Title 17 of the United
line 22States Code.
line 23(iv) Principal photography of the qualied motion picture
line 24commences after the date on which the application is approved by
line 25the California Film Commission, but no later than 180 days after
line 26the date of that approval if the qualied motion picture has a budget
line 27with qualied expenditures of less than one hundred million dollars
line 28($100,000,000), and no later than 240 days after the date of that
line 29approval in the case of a qualied motion picture with a budget
line 30of qualied expenditures with at least one hundred million dollars
line 31($100,000,000), unless death, disability, or disgurement of the
line 32director or of a principal cast member; an act of God, including,
line 33but not limited to, re, ood, earthquake, storm, hurricane, or other
line 34natural disaster; terrorist activities; or government sanction has
line 35directly prevented a production's ability to begin principal
line 36photography within the prescribed 180- or 240-day commencement
line 37period.
line 38(C) For the purposes of subparagraph (A), in computing the
line 39total wages paid or incurred for the production of a qualied
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40motion picture, all amounts paid or incurred by all persons or
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line 1entities that share in the costs of the qualied motion picture shall
line 2be aggregated.
line 3(D) Qualied motion picture shall not include commercial
line 4advertising, music videos, a motion picture produced for private
line 5noncommercial use, such as weddings, graduations, or as part of
line 6an educational course and made by students, a news program,
line 7current events or public events program, talk show, game show,
line 8sporting event or activity, awards show, telethon or other
line 9production that solicits funds, reality television program, clip-based
line 10programming if more than 50 percent of the content is comprised
line 11of licensed footage, documentaries, variety programs, daytime
line 12dramas, strip shows, one-half hour (air time) episodic television
line 13shows, or any production that falls within the recordkeeping
line 14requirements of Section 2257 of Title 18 of the United States Code.
line 15(19) (A) Qualied taxpayer means a taxpayer who has paid
line 16or incurred qualied expenditures, participated in the Career
line 17Readiness requirement in Section 17053.95, and has been issued
line 18a credit certicate by the California Film Commission pursuant
line 19to subdivision (g).
line 20(B) In the case of any pass-thru entity, the determination of
line 21whether a taxpayer is a qualied taxpayer under this section shall
line 22be made at the entity level and any credit under this section is not
line 23allowed to the pass-thru entity, but shall be passed through to the
line 24partners or shareholders in accordance with applicable provisions
line 25of Part 10 (commencing with Section 17001) or Part 11
line 26(commencing with Section 23001). For purposes of this paragraph,
line 27pass-thru entity means any entity taxed as a partnership or S
line 28corporation.
line 29(20) Qualied visual effects means visual effects where at
line 30least 75 percent or a minimum of ten million dollars ($10,000,000)
line 31of the qualied expenditures for the visual effects is paid or
line 32incurred in California.
line 33(21) (A) Qualied wages means all of the following:
line 34(i) Any wages subject to withholding under Division 6
line 35(commencing with Section 13000) of the Unemployment Insurance
line 36Code that were paid or incurred by any taxpayer involved in the
line 37production of a qualied motion picture with respect to a qualied
line 38individual for services performed on the qualied motion picture
line 39production within this state.
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line 1(ii) The portion of any employee fringe benets paid or incurred
line 2by any taxpayer involved in the production of the qualied motion
line 3picture that are properly allocable to qualied wage amounts
line 4described in clauses (i), (iii), and (iv).
line 5(iii) Any payments made to a qualied entity for services
line 6performed in this state by qualied individuals within the meaning
line 7of paragraph (17).
line 8(iv) Remuneration paid to an independent contractor who is a
line 9qualied individual for services performed within this state by that
line 10qualied individual.
line 11(B) Qualied wages shall not include any of the following:
line 12(i) Expenses, including wages, related to new use, reuse, clip
line 13use, licensing, secondary markets, or residual compensation, or
line 14the creation of any ancillary product, including, but not limited to,
line 15a soundtrack album, toy, game, trailer, or teaser.
line 16(ii) Expenses, including wages, paid or incurred with respect to
line 17acquisition, development, turnaround, or any rights thereto.
line 18(iii) Expenses, including wages, related to nancing, overhead,
line 19marketing, promotion, or distribution of a qualied motion picture.
line 20(iv) Expenses, including wages, paid per person per qualied
line 21motion picture for writers, directors, music directors, music
line 22composers, music supervisors, producers, and performers, other
line 23than background actors with no scripted lines.
line 24(22) Residual compensation means supplemental
line 25compensation paid at the time that a motion picture is exhibited
line 26through new use, reuse, clip use, or in secondary markets, as
line 27distinguished from payments made during production.
line 28(23) Reuse means any use of a qualied motion picture in the
line 29same medium for which it was created, following the initial use
line 30in that medium.
line 31(24) Secondary markets means media in which a qualied
line 32motion picture is exhibited following the initial media in which it
line 33is exhibited.
line 34(25) Television series that relocated to California means a
line 35television series, without regard to episode length or initial media
line 36exhibition, with a minimum production budget of one million
line 37dollars ($1,000,000) per episode, that lmed at least 75 percent of
line 38principal photography days in its most recent season outside of
line 39California or has lmed all seasons outside of California and for
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line 1which the taxpayer certies that the credit provided pursuant to
line 2this section is the primary reason for relocating to California.
line 3(26) Visual effects means the creation, alteration, or
line 4enhancement of images that cannot be captured on a set or location
line 5during live action photography and therefore is accomplished in
line 6postproduction. It includes, but is not limited to, matte paintings,
line 7animation, set extensions, computer-generated objects, characters
line 8and environments, compositing (combining two or more elements
line 9in a nal image), and wire removals. Visual effects does not
line 10include fully animated projects, whether created by traditional or
line 11digital means.
line 12(c) (1) Notwithstanding any other law, a qualied taxpayer
line 13may sell any credit allowed under this section that is attributable
line 14to an independent lm, as dened in paragraph (6) of subdivision
line 15(b), to an unrelated party.
line 16(2) The qualied taxpayer shall report to the Franchise Tax
line 17Board prior to the sale of the credit, in the form and manner
line 18specied by the Franchise Tax Board, all required information
line 19regarding the purchase and sale of the credit, including the social
line 20security or other taxpayer identication number of the unrelated
line 21party to whom the credit has been sold, the face amount of the
line 22credit sold, and the amount of consideration received by the
line 23qualied taxpayer for the sale of the credit.
line 24(3) In the case where the credit allowed under this section
line 25exceeds the net tax, the excess credit may be carried over to
line 26reduce the net tax in the following taxable year, and succeeding
line 27eight taxable years, if necessary, until the credit has been exhausted.
line 28(4) A credit shall not be sold pursuant to this subdivision to
line 29more than one taxpayer, nor may the credit be resold by the
line 30unrelated party to another taxpayer or other party.
line 31(5) A party that has acquired tax credits under this subdivision
line 32shall be subject to the requirements of this section.
line 33(6) In no event may a qualied taxpayer assign or sell any tax
line 34credit to the extent the tax credit allowed by this section is claimed
line 35on any tax return of the qualied taxpayer.
line 36(7) In the event that both the taxpayer originally allocated a
line 37credit under this section by the California Film Commission and
line 38a taxpayer to whom the credit has been sold both claim the same
line 39amount of credit on their tax returns, the Franchise Tax Board may
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line 1disallow the credit of either taxpayer, so long as the statute of
line 2limitations upon assessment remains open.
line 3(8) Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 4Division 3 of Title 2 of the Government Code does not apply to
line 5any standard, criterion, procedure, determination, rule, notice, or
line 6guideline established or issued by the Franchise Tax Board
line 7pursuant to this subdivision.
line 8(9) Subdivision (g) of Section 17039 shall not apply to any
line 9credit sold pursuant to this subdivision.
line 10(10) For purposes of this subdivision, the unrelated party or
line 11parties that purchase a credit pursuant to this subdivision shall be
line 12treated as a qualied taxpayer pursuant to paragraph (1) of
line 13subdivision (a).
line 14(d) (1) No credit shall be allowed pursuant to this section unless
line 15the qualied taxpayer provides the following to the California
line 16Film Commission:
line 17(A) Identication of each qualied individual.
line 18(B) The specic start and end dates of production.
line 19(C) The total wages paid.
line 20(D) The total amount of qualied wages paid to qualied
line 21individuals.
line 22(E) The copyright registration number, as reected on the
line 23certicate of registration issued under the authority of Section 410
line 24ofTitle 17 of the United States Code, relating to registration of
line 25claim and issuance of certicate. The registration number shall be
line 26provided on the return claiming the credit.
line 27(F) The total amounts paid or incurred to purchase or lease
line 28tangible personal property used in the production of a qualied
line 29motion picture.
line 30(G) Information to substantiate its qualied expenditures.
line 31(H) Information required by the California Film Commission
line 32under regulations promulgated pursuant to subdivision (g)
line 33necessary to verify the amount of credit claimed.
line 34(I) Documentation verifying completion of the Career Readiness
line 35requirement.
line 36(J) Documentation verifying that the qualied taxpayer paid a
line 37fee as described in subdivision (e).
line 38(2) (A) Based on the information provided in paragraph (1),
line 39the California Film Commission shall recompute the jobs ratio
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line 40previously computed in subdivision (g) and compare this
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line 1recomputed jobs ratio to the jobs ratio that the qualied taxpayer
line 2previously listed on the application submitted pursuant to
line 3subdivision (g).
line 4(B) (i) If the California Film Commission determines that the
line 5jobs ratio has been reduced by more than 10 percent for a qualied
line 6motion picture, the California Film Commission shall reduce the
line 7amount of credit allowed by an equal percentage, unless the
line 8qualied taxpayer demonstrates, and the California Film
line 9Commission determines, that reasonable cause exists for the jobs
line 10ratio reduction.
line 11(ii) If the California Film Commission determines that the jobs
line 12ratio has been reduced by more than 20 percent for a qualied
line 13motion picture, the California Film Commission shall not accept
line 14an application described in subdivision (g) from that qualied
line 15taxpayer or any member of the qualied taxpayer's controlled
line 16group for a period of not less than one year from the date of that
line 17determination, unless the qualied taxpayer demonstrates, and the
line 18California Film Commission determines, that reasonable cause
line 19exists for the jobs ratio reduction.
line 20(C) For the purposes of this paragraph, reasonable cause
line 21means unforeseen circumstances beyond the control of the qualied
line 22taxpayer, such as, but not limited to, the cancellation of a television
line 23series prior to the completion of the scheduled number of episodes
line 24or other similar circumstances as determined by the California
line 25Film Commission in regulations to be adopted pursuant to
line 26subdivision (e).
line 27(e) (1) (A) Subject to the Administrative Procedure Act
line 28(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 29Division 3 of Title 2 of the Government Code), the California Film
line 30Commission shall adopt rules and regulations to implement a pilot
line 31Career PathwaysTraining program including a fee to be paid by
line 32the qualied taxpayer, if the qualied taxpayer receives a credit
line 33under this section, to fund technical skills training to individuals
line 34from underserved communities for entry into lm and television
line 35industry jobs. The California Film Commission shall (i) identify
line 36a not-for-prot scal agent with direct relationships to industry
line 37skills training programs to manage the funds; and (ii) engage
line 38labor-management jointly administered training programs with
line 39skills training focused on the entertainment industry to implement
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line 40the program with California Film Commission approval and
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line 1oversight.With regard to the Career Readiness requirement in
line 2Section 17053.95, the California Film Commission shall identify
line 3training and public service opportunities that may include, but not
line 4be limited to, hiring interns, public service announcements, and
line 5community outreach shall continue. The California Film
line 6Commission may prescribe rules and regulations to carry out the
line 7purposes of this section, including, subparagraph (D) of paragraph
line 8(4) of subdivision (a) and clause (iv) of subparagraph (D) of
line 9paragraph (2) of subdivision (g), and including any rules and
line 10regulations necessary to establish procedures, processes,
line 11requirements, application fee structure, and rules identied in or
line 12required to implement this section, including credit and logo
line 13requirements and credit allocation procedures over multiple scal
line 14years where the qualied taxpayer is producing a series of features
line 15that will be lmed concurrently.
line 16(B) Notwithstanding any other law, prior to preparing a notice
line 17of proposed action pursuant to Section 11346.4 of the Government
line 18Code and prior to making any revision to the proposed regulation
line 19other than a change that is nonsubstantial or solely grammatical
line 20in nature, the Governor's Ofce of Business and Economic
line 21Development shall rst approve the proposed regulation or
line 22proposed change to a proposed regulation regarding allocating the
line 23credit pursuant to subdivision (i), computing the jobs ratio as
line 24described in subdivisions (d) and (g), and dening reasonable
line 25cause pursuant to subparagraph (C) of paragraph (2) of subdivision
line 26(d).
line 27(2) (A) Implementation of this section for the 202021 scal
line 28year is deemed an emergency and necessary for the immediate
line 29preservation of the public peace, health, and safety, or general
line 30welfare and, therefore, the California Film Commission is hereby
line 31authorized to adopt emergency regulations to implement this
line 32section during the 202021 scal year in accordance with the
line 33rulemaking provisions of the Administrative Procedure Act
line 34(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 35Division 3 of Title 2 of the Government Code).
line 36(B) Nothing in this paragraph shall be construed to require the
line 37Governor's Ofce of Business and Economic Development to
line 38approve emergency regulations adopted pursuant to this paragraph.
line 39(3) The California Film Commission shall not be required to
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line 40prepare an economic impact analysis pursuant to the Administrative
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line 1ProcedureAct (Chapter 3.5 (commencing with Section 11340) of
line 2Part 1 of Division 3 of Title 2 of the Government Code) with regard
line 3to any rules and regulations adopted pursuant to this subdivision.
line 4(f) If the qualied taxpayer fails to provide the copyright
line 5registration number as required in subparagraph (E) of paragraph
line 6(1) of subdivision (d), the credit shall be disallowed and assessed
line 7and collected under Section 19051 until the procedures are
line 8satised.
line 9(g) For purposes of this section, the California Film Commission
line 10shall do the following:
line 11(1) Subject to the requirements of subparagraphs (A) through
line 12(E), inclusive, of paragraph (2), on or after July 1, 2020, and before
line 13July 1, 2025, in two or more allocation periods per scal year,
line 14allocate tax credits to applicants.
line 15(2)(A) Establish a procedure for applicants to le with the
line 16California Film Commission a written application, on a form jointly
line 17prescribed by the California Film Commission and the Franchise
line 18Tax Board for the allocation of the tax credit. The application shall
line 19include, but not be limited to, the following information:
line 20(i) The budget for the motion picture production.
line 21(ii) The number of production days.
line 22(iii) A nancing plan for the production.
line 23(iv) The diversity of the workforce employed by the applicant,
line 24including, but not limited to, the ethnic and racial makeup of the
line 25individuals employed by the applicant during the production of
line 26the qualied motion picture, to the extent possible.
line 27(v) All members of a combined reporting group, if known at
line 28the time of the application.
line 29(vi) Financial information, if available, including, but not limited
line 30to, the most recently produced balance sheets, annual statements
line 31of prots and losses, audited or unaudited nancial statements,
line 32summary budget projections or results, or the functional equivalent
line 33of these documents of a partnership or owner of a single member
line 34limited liability company that is disregarded pursuant to Section
line 3523038.The information provided pursuant to this clause shall be
line 36condential and shall not be subject to public disclosure.
line 37(vii) The names of all partners in a partnership not publicly
line 38traded or the names of all members of a limited liability company
line 39classied as a partnership not publicly traded for California income
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line 40tax purposes that have a nancial interest in the applicant's
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line 1qualied motion picture. The information provided pursuant to
line 2this clause shall be condential and shall not be subject to public
line 3disclosure.
line 4(viii) The amount of qualied wages the applicant expects to
line 5pay to qualied individuals.
line 6(ix) The amount of tax credit the applicant computes the
line 7qualied motion picture will receive, applying the applicable credit
line 8percentages described in paragraph (4) of subdivision (a).
line 9(x) A statement establishing that the tax credit described in this
line 10section is a signicant factor in the applicant's choice of location
line 11for the qualied motion picture. The statement shall include
line 12information about whether the qualied motion picture is at risk
line 13of not being lmed or specify the jurisdiction or jurisdictions in
line 14which the qualied motion picture will be located in the absence
line 15of the tax credit. The statement shall be signed by an ofcer or
line 16executive of the applicant.
line 17(xi) Any other information deemed relevant by the California
line 18Film Commission or the Franchise Tax Board.
line 19(B) Establish criteria, consistent with the requirements of this
line 20section, for allocating tax credits.
line 21(C) Determine and designate applicants who meet the
line 22requirements of this section.
line 23(D) (i) For purposes of allocating the credit amounts subject to
line 24the categories described in subdivision (i) in any scal year, the
line 25California Film Commission shall do all of the following:
line 26(ii) For each allocation date and for each category, list each
line 27applicant from highest to lowest according to the jobs ratio as
line 28computed by the California Film Commission.
line 29(iii) Subject to the applicable credit percentage, allocate the
line 30credit to each applicant according to the highest jobs ratio, working
line 31down the list, until the credit amount is exhausted.
line 32(iv) Pursuant to regulations adopted pursuant to subdivision (e),
line 33the California Film Commission may increase the jobs ratio by up
line 34to 25 percent if a qualied motion picture increases economic
line 35activity in California according to criteria developed by the
line 36California Film Commission that would include, but not be limited
line 37to, such factors as as, the amount of the production and
line 38postproduction spending in California California, the utilization
line 39 of scoring musicians in California, and other criteria measuring
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line 1economic impact in California as determined by the California
line 2Film Commission.
line 3(v) Notwithstanding any other provision, any television series,
line 4relocating television series, or any new television series based on
line 5a pilot for a new television series that has been approved and issued
line 6a credit allocation by the California Film Commission under this
line 7section, Section 23698, 17053.95, 23695, 17053.85, or 23685 shall
line 8be issued a credit for each subsequent season, for the life of that
line 9television series whenever credits are allocated within a scal year.
line 10(E) Subject to the annual cap and the allocation credit amounts
line 11based on categories described in subdivision (i), allocate an
line 12aggregate amount of credits under this section and Section 23698,
line 13and allocate any carryover of unallocated or unused credits from
line 14prior years and Sections 17053.85, 17053.95, 23685, and 23695,
line 15and the amount of any credits reduced pursuant to paragraph (2)
line 16of subdivision (d).
line 17(3) Certify tax credits allocated to qualied taxpayers.
line 18(A) Establish a verication procedure for the amount of qualied
line 19expenditures paid or incurred by the applicant, including, but not
line 20limited to, updates to the information in subparagraph (A) of
line 21paragraph (2) of subdivision (g).
line 22(B) Establish audit requirements that shall be satised before a
line 23credit certicate may be issued by the California Film Commission.
line 24(C) (i) Establish a procedure for a qualied taxpayer to report
line 25to the California Film Commission, prior to the issuance of a credit
line 26certicate, the following information:
line 27(I) If readily available, a list of the states, provinces, or other
line 28jurisdictions in which any member of the applicant's combined
line 29reporting group in the same business unit as the qualied taxpayer
line 30that, in the preceding calendar year, has produced a qualied
line 31motion picture intended for release in the United States market.
line 32For purposes of this clause, qualied motion picture shall not
line 33include any episodes of a television series that were complete or
line 34in production prior to July 1, 2020.
line 35(II) Whether a qualied motion picture described in subclause
line 36(I) was awarded any nancial incentive by the state, province, or
line 37other jurisdiction that was predicated on the performance of
line 38primary principal photography or postproduction in that location.
line 39(ii) The California Film Commission may provide that the report
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line 40required 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 23698 remain unused and have not
line 30been 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 23698 until such time as
line 34the 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.
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
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 3523698 is three hundred thirty million dollars ($330,000,000), plus
line 36any amount described in subparagraph (B), (C), (D), or (E) in
line 37credits 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) A new television series, pilots for a new television
line 23series, miniseries, and recurring television series shall be allocated
line 2440 percent 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. 2.
line 14 SEC. 3.Section 23698 is added to the Revenue and Taxation
line 15Code, to read:
line 1623698.(a) (1) For taxable years beginning on or after January
line 171, 2020, there shall be allowed to a qualied taxpayer a credit
line 18against the tax, as dened in Section 23036, subject to a
line 19computation and ranking by the California Film Commission in
line 20subdivision (g) and the allocation amount categories described in
line 21subdivision (i), in an amount equal to 20 percent or 25 percent,
line 22whichever is the applicable credit percentage described in
line 23paragraph (4), of the qualied expenditures for the production of
line 24a qualied motion picture in California. A credit shall not be
line 25allowed under this section for any qualied expenditures for the
line 26production of a motion picture in California if a credit has been
line 27claimed for those same expenditures under Section 23685 or 23695.
line 28(2) Except as otherwise provided in this section, the credit shall
line 29be allowed for the taxable year in which the California Film
line 30Commission issues the credit certicate pursuant to subdivision
line 31(g) for the qualied motion picture, but in no instance prior to July
line 321, 2020, and shall be for the applicable percentage of all qualied
line 33expenditures paid or incurred by the qualied taxpayer in all
line 34taxable years for that qualied motion picture.
line 35(3) The amount of the credit allowed to a qualied taxpayer
line 36shall be limited to the amount specied in the credit certicate
line 37issued to the qualied taxpayer by the California Film Commission
line 38pursuant to subdivision (g).
line 39(4) For purposes of paragraphs (1) and (2), the applicable credit
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line 40percentage shall be:
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line 1(A) Twenty percent of the qualied expenditures attributable
line 2to the production of a qualied motion picture in California,
line 3including, but not limited to, a feature, up to one hundred million
line 4dollars ($100,000,000) in qualied expenditures, or a television
line 5series that relocated to California that is in its second or subsequent
line 6years of receiving a tax credit allocation pursuant to this section,
line 7Section 23685, or Section 23695.
line 8(B) Twenty-ve percent of the qualied expenditures
line 9attributable to the production of a qualied motion picture in
line 10California where the qualied motion picture is a television series
line 11that relocated to California in its rst year of receiving a tax credit
line 12allocation pursuant to this section.
line 13(C) Twenty-ve percent of the qualied expenditures, up to ten
line 14million dollars ($10,000,000), attributable to the production of a
line 15qualied motion picture that is an independent lm.
line 16(D) Additional credits shall be allowed for the production of a
line 17qualied motion picture whose applicable credit percentage is
line 18determined pursuant to subparagraph (A), in an aggregate amount
line 19not to exceed 5 percent of the qualied expenditures under that
line 20subparagraph, as follows:
line 21(i) (I) Five percent of qualied expenditures, excluding qualied
line 22wages described in subparagraph (E), relating to original
line 23photography outside the Los Angeles zone.
line 24(II) For purposes of this clause and subparagraph (E):
line 25(ia) Applicable period means the period that commences with
line 26preproduction and ends when original photography concludes. The
line 27applicable period includes the time necessary to strike a remote
line 28location and return to the Los Angeles zone.
line 29(ib) LosAngeles zone means the area within a circle 30 miles
line 30in radius from Beverly Boulevard and La Cienega Boulevard, Los
line 31Angeles, California, and includes Agua Dulce, Castaic, including
line 32Lake Castaic, Castaic Lake, Leo Carrillo State Beach, Ontario
line 33InternationalAirport, Piru, and Pomona, including the Los Angeles
line 34County Fairgrounds.The Metro Goldwyn Mayer,
line 35 Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the
line 36LosAngeles zone.
line 37(ic) Original photography includes principal photography and
line 38reshooting original footage.
line 39(id) Qualied expenditures relating to original photography
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line 40outside the Los Angeles zone means amounts paid or incurred
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line 1during the applicable period for tangible personal property
line 2purchased or leased and used or consumed outside the Los Angeles
line 3zone and relating to original photography outside the Los Angeles
line 4zone and qualied wages paid for services performed outside the
line 5LosAngeles zone and relating to original photography outside the
line 6LosAngeles zone.
line 7(ii) Five percent of the qualied expenditures relating to
line 8qualied visual effects attributable to the production of a qualied
line 9motion picture in California.
line 10(E) Notwithstanding subparagraph (D), an amount equal to 10
line 11percent of qualied wages paid for services performed relating to
line 12original photography outside of the Los Angeles zone to qualied
line 13individuals who reside in California but outside the Los Angeles
line 14zone shall be allowed as an additional credit for the production of
line 15a qualied motion picture whose applicable credit percentage is
line 16determined pursuant to subparagraph (A).
line 17(b) For purposes of this section:
line 18(1) Ancillary product means any article for sale to the public
line 19that contains a portion of, or any element of, the qualied motion
line 20picture.
line 21(2) Budget means an estimate of all expenses paid or incurred
line 22during the production period of a qualied motion picture. It shall
line 23be the same budget used by the qualied taxpayer and production
line 24company for all qualied motion picture purposes.
line 25(3) Clip use means a use of any portion of a motion picture,
line 26other than the qualied motion picture, used in the qualied motion
line 27picture.
line 28(4) Credit certicate means the certicate issued by the
line 29California Film Commission pursuant to subparagraph (D) of
line 30paragraph (3) of subdivision (g).
line 31(5) (A) Employee fringe benets means the amount allowable
line 32as a deduction under this part to the qualied taxpayer involved
line 33in the production of the qualied motion picture, exclusive of any
line 34amounts contributed by employees, for any year during the
line 35production period with respect to any of the following:
line 36(i) Employer contributions under any pension, prot-sharing,
line 37annuity, or similar plan.
line 38(ii) Employer-provided coverage under any accident or health
line 39plan for employees.
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line 1(iii) The employer's cost of life or disability insurance provided
line 2to employees.
line 3(B) Any amount treated as wages under clause (i) of
line 4subparagraph (A) of paragraph (21) shall not be taken into account
line 5under this paragraph.
line 6(6) Independent lm means a motion picture with a minimum
line 7budget of one million dollars ($1,000,000) that is produced by a
line 8company that is not publicly traded and publicly traded companies
line 9do not own, directly or indirectly, more than 25 percent of the
line 10producing company.
line 11(7) Jobs ratio means the amount of qualied wages paid to
line 12qualied individuals divided by the amount of tax credit, not
line 13including any additional credit allowed pursuant to subparagraphs
line 14(D) and (E) of paragraph (4) of subdivision (a), as computed by
line 15the California Film Commission. For the purposes of the
line 16calculation of the jobs ratio only, 70 percent of qualied
line 17expenditures for visual effects paid to third-party vendors for work
line 18performed in California shall be deemed to be qualied wages
line 19paid to a qualied individual.
line 20(8) Licensing means any grant of rights to distribute the
line 21qualied motion picture, in whole or in part.
line 22(9) New use means any use of a motion picture in a medium
line 23other than the medium for which it was initially created.
line 24(10) Pilot for a new television series means the initial episode
line 25produced for a proposed television series.
line 26(11) (A) Postproduction means the nal activities in a
line 27qualied motion picture's production, including editing, foley
line 28recording, automatic dialogue replacement, sound editing, scoring,
line 29music track recording by musicians and music editing, beginning
line 30and end credits, negative cutting, negative processing and
line 31duplication, the addition of sound and visual effects, sound mixing,
line 32lm-to-tape transfers, encoding, and color correction.
line 33(B) Postproduction does not include the manufacture or
line 34shipping of release prints or their equivalent.
line 35(12) Preproduction means the process of preparation for actual
line 36physical production which begins after a qualied motion picture
line 37has received a rm agreement of nancial commitment, or is
line 38greenlit, with, for example, the establishment of a dedicated
line 39production ofce, the hiring of key crew members, and includes,
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line 1but is not limited to, activities that include location scouting and
line 2execution of contracts with vendors of equipment and stage space.
line 3(13) Principal photography means the phase of production
line 4during which the motion picture is actually shot, as distinguished
line 5from preproduction and postproduction.
line 6(14) Production period means the period beginning with
line 7preproduction and ending upon completion of postproduction.
line 8(15) Qualied entity means a personal service corporation as
line 9dened in Section 269A(b)(1) of the Internal Revenue Code, a
line 10payroll services corporation, or any entity receiving qualied wages
line 11with respect to services performed by a qualied individual.
line 12(16) Qualied expenditures means amounts paid or incurred
line 13for tangible personal property purchased or leased, and used, within
line 14this state in the production of a qualied motion picture and
line 15payments, including qualied wages, for services performed within
line 16this state in the production of a qualied motion picture.
line 17(17) (A) Qualied individual means any individual who
line 18performs services during the production period in an activity related
line 19to the production of a qualied motion picture.
line 20(B) Qualied individual shall not include either of the
line 21following:
line 22(i) Any individual related to the qualied taxpayer as described
line 23in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
line 24Revenue Code.
line 25(ii) Any 5-percent owner, as dened in Section 416(i)(1)(B) of
line 26the Internal Revenue Code, of the qualied taxpayer.
line 27(18) (A) Qualied motion picture means a motion picture
line 28that is produced for distribution to the general public, regardless
line 29of medium, that is one of the following:
line 30(i) A feature with a minimum production budget of one million
line 31dollars ($1,000,000).
line 32(ii) A miniseries consisting of two or more episodes, each longer
line 33than 40 minutes of running time, exclusive of commercials, that
line 34is produced in California, with a minimum production budget of
line 35one million dollars ($1,000,000) per episode.
line 36(iii) A new television series of episodes longer than 40 minutes
line 37each of running time, exclusive of commercials, that is produced
line 38in California, with a minimum production budget of one million
line 39dollars ($1,000,000) per episode.
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40(iv) An independent lm.
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line 1(v) A television series that relocated to California.
line 2(vi) A pilot for a new television series that is longer than 40
line 3minutes of running time, exclusive of commercials, that is produced
line 4in California, and with a minimum production budget of one
line 5million dollars ($1,000,000).
line 6(B) To qualify as a qualied motion picture, all of the
line 7following conditions shall be satised:
line 8(i) At least 75 percent of the principal photography days occur
line 9wholly in California or 75 percent of the production budget is
line 10incurred for payment for services performed within the state and
line 11the purchase or rental of property used within the state.
line 12(ii) Production of the qualied motion picture is completed
line 13within 30 months from the date on which the qualied taxpayer's
line 14application is approved by the California Film Commission. For
line 15purposes of this section, a qualied motion picture is completed
line 16when the process of postproduction has been nished.
line 17(iii) The copyright for the motion picture is registered with the
line 18United States Copyright Ofce pursuant to Title 17 of the United
line 19States Code.
line 20(iv) Principal photography of the qualied motion picture
line 21commences after the date on which the application is approved by
line 22the California Film Commission, but no later than 180 days after
line 23the date of that approval if the qualied motion picture has a budget
line 24with qualied expenditures of less than one hundred million dollars
line 25($100,000,000), and no later than 240 days after the date of that
line 26approval in the case of a qualied motion picture with a budget
line 27of qualied expenditures with at least one hundred million dollars
line 28($100,000,000), unless death, disability, or disgurement of the
line 29director or of a principal cast member; an act of God, including,
line 30but not limited to, re, ood, earthquake, storm, hurricane, or other
line 31natural disaster; terrorist activities; or government sanction has
line 32directly prevented a production's ability to begin principal
line 33photography within the prescribed 180- or 240-day commencement
line 34period.
line 35(C) For the purposes of subparagraph (A), in computing the
line 36total wages paid or incurred for the production of a qualied
line 37motion picture, all amounts paid or incurred by all persons or
line 38entities that share in the costs of the qualied motion picture shall
line 39be aggregated.
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line 1(D) Qualied motion picture shall not include commercial
line 2advertising, music videos, a motion picture produced for private
line 3noncommercial use, such as weddings, graduations, or as part of
line 4an educational course and made by students, a news program,
line 5current events or public events program, talk show, game show,
line 6sporting event or activity, awards show, telethon or other
line 7production that solicits funds, reality television program, clip-based
line 8programming if more than 50 percent of the content is comprised
line 9of licensed footage, documentaries, variety programs, daytime
line 10dramas, strip shows, one-half hour (air time) episodic television
line 11shows, or any production that falls within the recordkeeping
line 12requirements of Section 2257 of Title 18 of the United States Code.
line 13(19) (A) Qualied taxpayer means a taxpayer who has paid
line 14or incurred qualied expenditures, participated in the Career
line 15Readiness requirement in Section 23695 and has been issued a
line 16credit certicate by the California Film Commission pursuant to
line 17subdivision (g).
line 18(B) (i) In the case of any pass-thru entity, the determination of
line 19whether a taxpayer is a qualied taxpayer under this section shall
line 20be made at the entity level and any credit under this section is not
line 21allowed to the pass-thru entity, but shall be passed through to the
line 22partners or shareholders in accordance with applicable provisions
line 23of Part 10 (commencing with Section 17001) or Part 11
line 24(commencing with Section 23001). For purposes of this paragraph,
line 25pass-thru entity means any entity taxed as a partnership or S
line 26corporation.
line 27(ii) In the case of an S corporation, the credit allowed under
line 28this section shall not be used by an S corporation as a credit
line 29against a tax imposed under Chapter 4.5 (commencing with Section
line 3023800) of Part 11 of Division 2.
line 31(20) Qualied visual effects means visual effects where at
line 32least 75 percent or a minimum of ten million dollars ($10,000,000)
line 33of the qualied expenditures for the visual effects is paid or
line 34incurred in California.
line 35(21) (A) Qualied wages means all of the following:
line 36(i) Any wages subject to withholding under Division 6
line 37(commencing with Section 13000) of the Unemployment Insurance
line 38Code that were paid or incurred by any taxpayer involved in the
line 39production of a qualied motion picture with respect to a qualied
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line 1individual for services performed on the qualied motion picture
line 2production within this state.
line 3(ii) The portion of any employee fringe benets paid or incurred
line 4by any taxpayer involved in the production of the qualied motion
line 5picture that are properly allocable to qualied wage amounts
line 6described in clauses (i), (iii), and (iv).
line 7(iii) Any payments made to a qualied entity for services
line 8performed in this state by qualied individuals within the meaning
line 9of paragraph (17).
line 10(iv) Remuneration paid to an independent contractor who is a
line 11qualied individual for services performed within this state by that
line 12qualied individual.
line 13(B) Qualied wages shall not include any of the following:
line 14(i) Expenses, including wages, related to new use, reuse, clip
line 15use, licensing, secondary markets, or residual compensation, or
line 16the creation of any ancillary product, including, but not limited to,
line 17a soundtrack album, toy, game, trailer, or teaser.
line 18(ii) Expenses, including wages, paid or incurred with respect to
line 19acquisition, development, turnaround, or any rights thereto.
line 20(iii) Expenses, including wages, related to nancing, overhead,
line 21marketing, promotion, or distribution of a qualied motion picture.
line 22(iv) Expenses, including wages, paid per person per qualied
line 23motion picture for writers, directors, music directors, music
line 24composers, music supervisors, producers, and performers, other
line 25than background actors with no scripted lines.
line 26(22) Residual compensation means supplemental
line 27compensation paid at the time that a motion picture is exhibited
line 28through new use, reuse, clip use, or in secondary markets, as
line 29distinguished from payments made during production.
line 30(23) Reuse means any use of a qualied motion picture in the
line 31same medium for which it was created, following the initial use
line 32in that medium.
line 33(24) Secondary markets means media in which a qualied
line 34motion picture is exhibited following the initial media in which it
line 35is exhibited.
line 36(25) Television series that relocated to California means a
line 37television series, without regard to episode length or initial media
line 38exhibition, with a minimum production budget of one million
line 39dollars ($1,000,000) per episode, that lmed at least 75 percent of
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40principal photography days in its most recent season outside of
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line 1California or has lmed all seasons outside of California and for
line 2which the taxpayer certies that the credit provided pursuant to
line 3this section is the primary reason for relocating to California.
line 4(26) Visual effects means the creation, alteration, or
line 5enhancement of images that cannot be captured on a set or location
line 6during live action photography and therefore is accomplished in
line 7postproduction. It includes, but is not limited to, matte paintings,
line 8animation, set extensions, computer-generated objects, characters
line 9and environments, compositing (combining two or more elements
line 10in a nal image), and wire removals. Visual effects does not
line 11include fully animated projects, whether created by traditional or
line 12digital means.
line 13(c) (1) Notwithstanding subdivision (i) of Section 23036, in
line 14the case where the credit allowed by this section exceeds the
line 15taxpayer's tax liability computed under this part, a qualied
line 16taxpayer may elect to assign any portion of the credit allowed
line 17under this section to one or more afliated corporations for each
line 18taxable year in which the credit is allowed. For purposes of this
line 19subdivision, afliated corporation has the meaning provided in
line 20subdivision (b) of Section 25110, as that section was amended by
line 21Chapter 881 of the Statutes of 1993, as of the last day of the taxable
line 22year in which the credit is allowed, except that 100 percent is
line 23substituted for more than 50 percent wherever it appears in the
line 24section, and voting common stock is substituted for voting
line 25stock wherever it appears in the section.
line 26(2) The election provided in paragraph (1):
line 27(A) May be based on any method selected by the qualied
line 28taxpayer that originally receives the credit.
line 29(B) Shall be irrevocable for the taxable year the credit is allowed,
line 30once made.
line 31(C) May be changed for any subsequent taxable year if the
line 32election to make the assignment is expressly shown on each of the
line 33returns of the qualied taxpayer and the qualied taxpayer's
line 34afliated corporations that assign and receive the credits.
line 35(D) Shall be reported to the Franchise Tax Board, in the form
line 36and manner specied by the Franchise Tax Board, along with all
line 37required information regarding the assignment of the credit,
line 38including the corporation number, the federal employer
line 39identication number, or other taxpayer identication number of
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40the assignee, and the amount of the credit assigned.
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line 1(3) (A) Notwithstanding any other law, a qualied taxpayer
line 2may sell any credit allowed under this section that is attributable
line 3to an independent lm, as dened in paragraph (6) of subdivision
line 4(b), to an unrelated party.
line 5(B) The qualied taxpayer shall report to the Franchise Tax
line 6Board prior to the sale of the credit, in the form and manner
line 7specied by the Franchise Tax Board, all required information
line 8regarding the purchase and sale of the credit, including the social
line 9security or other taxpayer identication number of the unrelated
line 10party to whom the credit has been sold, the face amount of the
line 11credit sold, and the amount of consideration received by the
line 12qualied taxpayer for the sale of the credit.
line 13(4) In the case where the credit allowed under this section
line 14exceeds the tax, the excess credit may be carried over to reduce
line 15the tax in the following taxable year, and succeeding eight
line 16taxable years, if necessary, until the credit has been exhausted.
line 17(5) A credit shall not be sold pursuant to this subdivision to
line 18more than one taxpayer, nor may the credit be resold by the
line 19unrelated party to another taxpayer or other party.
line 20(6) A party that has been assigned or acquired tax credits under
line 21this subdivision shall be subject to the requirements of this section.
line 22(7) In no event may a qualied taxpayer assign or sell any tax
line 23credit to the extent the tax credit allowed by this section is claimed
line 24on any tax return of the qualied taxpayer.
line 25(8) In the event that both the taxpayer originally allocated a
line 26credit under this section by the California Film Commission and
line 27a taxpayer to whom the credit has been sold both claim the same
line 28amount of credit on their tax returns, the Franchise Tax Board may
line 29disallow the credit of either taxpayer, so long as the statute of
line 30limitations upon assessment remains open.
line 31(9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 32Division 3 of Title 2 of the Government Code does not apply to
line 33any standard, criterion, procedure, determination, rule, notice, or
line 34guideline established or issued by the Franchise Tax Board
line 35pursuant to this subdivision.
line 36(10) Subdivision (i) of Section 23036 shall not apply to any
line 37credit sold pursuant to this subdivision.
line 38(11) For purposes of this subdivision:
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line 1(A) An afliated corporation or corporations that are assigned
line 2a credit pursuant to paragraph (1) shall be treated as a qualied
line 3taxpayer pursuant to paragraph (1) of subdivision (a).
line 4(B) The unrelated party or parties that purchase a credit pursuant
line 5to paragraphs (3) to (10), inclusive, shall be treated as a qualied
line 6taxpayer pursuant to paragraph (1) of subdivision (a).
line 7(d) (1) No credit shall be allowed pursuant to this section unless
line 8the qualied taxpayer provides the following to the California
line 9Film Commission:
line 10(A) Identication of each qualied individual.
line 11(B) The specic start and end dates of production.
line 12(C) The total wages paid.
line 13(D) The total amount of qualied wages paid to qualied
line 14individuals.
line 15(E) The copyright registration number, as reected on the
line 16certicate of registration issued under the authority of Section 410
line 17ofTitle 17 of the United States Code, relating to registration of
line 18claim and issuance of certicate. The registration number shall be
line 19provided on the return claiming the credit.
line 20(F) The total amounts paid or incurred to purchase or lease
line 21tangible personal property used in the production of a qualied
line 22motion picture.
line 23(G) Information to substantiate its qualied expenditures.
line 24(H) Information required by the California Film Commission
line 25under regulations promulgated pursuant to subdivision (g)
line 26necessary to verify the amount of credit claimed.
line 27(I) Documentation verifying completion of the Career Readiness
line 28requirement.
line 29(J) Documentation verifying that the qualied taxpayer paid a
line 30fee as described in subdivision (e).
line 31(2) (A) Based on the information provided in paragraph (1),
line 32the California Film Commission shall recompute the jobs ratio
line 33previously computed in subdivision (g) and compare this
line 34recomputed jobs ratio to the jobs ratio that the qualied taxpayer
line 35previously listed on the application submitted pursuant to
line 36subdivision (g).
line 37(B) (i) If the California Film Commission determines that the
line 38jobs ratio has been reduced by more than 10 percent for a qualied
line 39motion picture, the California Film Commission shall reduce the
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40amount of credit allowed by an equal percentage, unless the
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line 1qualied taxpayer demonstrates, and the California Film
line 2Commission determines, that reasonable cause exists for the jobs
line 3ratio reduction.
line 4(ii) If the California Film Commission determines that the jobs
line 5ratio has been reduced by more than 20 percent for a qualied
line 6motion picture, the California Film Commission shall not accept
line 7an application described in subdivision (g) from that qualied
line 8taxpayer or any member of the qualied taxpayer's controlled
line 9group for a period of not less than one year from the date of that
line 10determination, unless the qualied taxpayer demonstrates, and the
line 11California Film Commission determines, that reasonable cause
line 12exists for the jobs ratio reduction.
line 13(C) For the purposes of this paragraph, reasonable cause
line 14means unforeseen circumstances beyond the control of the qualied
line 15taxpayer, such as, but not limited to, the cancellation of a television
line 16series prior to the completion of the scheduled number of episodes
line 17or other similar circumstances as determined by the California
line 18Film Commission in regulations to be adopted pursuant to
line 19subdivision (e).
line 20(e) (1) (A) Subject to 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), the California Film
line 23Commission shall adopt rules and regulations to implement a pilot
line 24Career PathwaysTraining program including a fee to be paid by
line 25the qualied taxpayer, if the qualied taxpayer receives a credit
line 26under this section, to fund technical skills training to individuals
line 27from underserved communities for entry into lm and television
line 28industry jobs. The California Film Commission shall (i) identify
line 29a not-for-prot scal agent with direct relationships to industry
line 30skills training programs to manage the funds; and (ii) engage
line 31labor-management jointly administered training programs with
line 32skills training focused on the entertainment industry to implement
line 33the program with California Film Commission approval and
line 34oversight.With regard to the Career Readiness requirement in
line 35Section 23695, the California Film Commission shall identify
line 36training and public service opportunities that may include, but not
line 37be limited to, hiring interns, public service announcements, and
line 38community outreach shall continue. The California Film
line 39Commission may prescribe rules and regulations to carry out the
Attachment: Senate Bill 951 - Bill Text (State Legislation: Senate Bill 951)
line 40purposes of this section, including, subparagraph (D) of paragraph
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line 1(4) of subdivision (a) and clause (iv) of subparagraph (D) of
line 2paragraph (2) of subdivision (g), and including any rules and
line 3regulations necessary to establish procedures, processes,
line 4requirements, application fee structure, and rules identied in or
line 5required to implement this section, including credit and logo
line 6requirements and credit allocation procedures over multiple scal
line 7years where the qualied taxpayer is producing a series of features
line 8that will be lmed concurrently.
line 9(B) Notwithstanding any other law, prior to preparing a notice
line 10of proposed action pursuant to Section 11346.4 of the Government
line 11Code and prior to making any revision to the proposed regulation
line 12other than a change that is nonsubstantial or solely grammatical
line 13in nature, the Governor's Ofce of Business and Economic
line 14Development shall rst approve the proposed regulation or
line 15proposed change to a proposed regulation regarding allocating the
line 16credit pursuant to subdivision (i), computing the jobs ratio as
line 17described in subdivisions (d) and (g), and dening reasonable
line 18cause pursuant to subparagraph (C) of paragraph (2) of subdivision
line 19(d).
line 20(2) (A) Implementation of this section for the 202021 scal
line 21year is deemed an emergency and necessary for the immediate
line 22preservation of the public peace, health, and safety, or general
line 23welfare and, therefore, the California Film Commission is hereby
line 24authorized to adopt emergency regulations to implement this
line 25section during the 202021 scal year in accordance with the
line 26rulemaking provisions of the Administrative Procedure Act
line 27(Chapter 3.5 (commencing with Section 11340) of Part 1 of
line 28Division 3 of Title 2 of the Government Code).
line 29(B) Nothing in this paragraph shall be construed to require the
line 30Governor's Ofce of Business and Economic Development to
line 31approve emergency regulations adopted pursuant to this paragraph.
line 32(3) The California Film Commission shall not be required to
line 33prepare an economic impact analysis pursuant to the Administrative
line 34ProcedureAct (Chapter 3.5 (commencing with Section 11340) of
line 35Part 1 of Division 3 of Title 2 of the Government Code) with regard
line 36to any rules and regulations adopted pursuant to this subdivision.
line 37(f) If the qualied taxpayer fails to provide the copyright
line 38registration number as required in subparagraph (E) of paragraph
line 39(1) of subdivision (d), the credit shall be disallowed and assessed
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line 1and collected under Section 19051 until the procedures are
line 2satised.
line 3(g) For purposes of this section, the California Film Commission
line 4shall do the following:
line 5(1) Subject to the requirements of subparagraphs (A) through
line 6(E), inclusive, of paragraph (2), on or after July 1, 2020, and before
line 7July 1, 2025, in two or more allocation periods per scal year,
line 8allocate tax credits to applicants.
line 9(2) (A) Establish a procedure for applicants to le with the
line 10California Film Commission a written application, on a form jointly
line 11prescribed by the California Film Commission and the Franchise
line 12Tax Board for the allocation of the tax credit. The application shall
line 13include, but not be limited to, the following information:
line 14(i) The budget for the motion picture production.
line 15(ii) The number of production days.
line 16(iii) A nancing plan for the production.
line 17(iv) The diversity of the workforce employed by the applicant,
line 18including, but not limited to, the ethnic and racial makeup of the
line 19individuals employed by the applicant during the production of
line 20the qualied motion picture, to the extent possible.
line 21(v) All members of a combined reporting group, if known at
line 22the time of the application.
line 23(vi) Financial information, if available, including, but not limited
line 24to, the most recently produced balance sheets, annual statements
line 25of prots and losses, audited or unaudited nancial statements,
line 26summary budget projections or results, or the functional equivalent
line 27of these documents of a partnership or owner of a single member
line 28limited liability company that is disregarded pursuant to Section
line 2923038.The information provided pursuant to this clause shall be
line 30condential and shall not be subject to public disclosure.
line 31(vii) The names of all partners in a partnership not publicly
line 32traded or the names of all members of a limited liability company
line 33classied as a partnership not publicly traded for California income
line 34tax purposes that have a nancial interest in the applicant's
line 35qualied motion picture. The information provided pursuant to
line 36this clause shall be condential and shall not be subject to public
line 37disclosure.
line 38(viii) The amount of qualied wages the applicant expects to
line 39pay to qualied individuals.
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line 1(ix) The amount of tax credit the applicant computes the
line 2qualied motion picture will receive, applying the applicable credit
line 3percentages described in paragraph (4) of subdivision (a).
line 4(x) A statement establishing that the tax credit described in this
line 5section is a signicant factor in the applicant's choice of location
line 6for the qualied motion picture. The statement shall include
line 7information about whether the qualied motion picture is at risk
line 8of not being lmed or specify the jurisdiction or jurisdictions in
line 9which the qualied motion picture will be located in the absence
line 10of the tax credit. The statement shall be signed by an ofcer or
line 11executive of the applicant.
line 12(xi) Any other information deemed relevant by the California
line 13Film Commission or the Franchise Tax Board.
line 14(B) Establish criteria, consistent with the requirements of this
line 15section, for allocating tax credits.
line 16(C) Determine and designate applicants who meet the
line 17requirements of this section.
line 18(D) (i) For purposes of allocating the credit amounts subject to
line 19the categories described in subdivision (i) in any scal year, the
line 20California Film Commission shall do all of the following:
line 21(ii) For each allocation date and for each category, list each
line 22applicant from highest to lowest according to the jobs ratio as
line 23computed by the California Film Commission.
line 24(iii) Subject to the applicable credit percentage, allocate the
line 25credit to each applicant according to the highest jobs ratio, working
line 26down the list, until the credit amount is exhausted.
line 27(iv) Pursuant to regulations adopted pursuant to subdivision (e),
line 28the California Film Commission may increase the jobs ratio by up
line 29to 25 percent if a qualied motion picture increases economic
line 30activity in California according to criteria developed by the
line 31California Film Commission that would include, but not be limited
line 32to, such factors as as, the amount of the production and
line 33postproduction spending in California California, the utilization
line 34 of scoring musicians in California, and other criteria measuring
line 35economic impact in California as determined by the California
line 36Film Commission.
line 37(v) Notwithstanding any other provision, any television series,
line 38relocating television series, or any new television series based on
line 39a pilot for a new television series that has been approved and issued
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line 40a credit allocation by the California Film Commission under this
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line 1section, Section 17053.98, 17053.85, 17053.95, 23685, or 23695
line 2shall be issued a credit for each subsequent season, for the life of
line 3that television series whenever credits are allocated within a scal
line 4year.
line 5(E) Subject to the annual cap and the allocation credit amounts
line 6based on categories described in subdivision (i), allocate an
line 7aggregate amount of credits under this section and Section
line 817053.98, and allocate any carryover of unallocated or unused
line 9credits from prior years and Sections 17053.85, 17053.95, 23685,
line 10and 23695, and the amount of any credits reduced pursuant to
line 11paragraph (2) of subdivision (d).
line 12(3) Certify tax credits allocated to qualied taxpayers.
line 13(A) Establish a verication procedure for the amount of qualied
line 14expenditures paid or incurred by the applicant, including, but not
line 15limited to, updates to the information in subparagraph (A) of
line 16paragraph (2) of subdivision (g).
line 17(B) Establish audit requirements that shall be satised before a
line 18credit certicate may be issued by the California Film Commission.
line 19(C) (i) Establish a procedure for a qualied taxpayer to report
line 20to the California Film Commission, prior to the issuance of a credit
line 21certicate, the following information:
line 22(I) If readily available, a list of the states, provinces, or other
line 23jurisdictions in which any member of the applicant's combined
line 24reporting group in the same business unit as the qualied taxpayer
line 25that, in the preceding calendar year, has produced a qualied
line 26motion picture intended for release in the United States market.
line 27For purposes of this clause, qualied motion picture shall not
line 28include any episodes of a television series that were complete or
line 29in production prior to July 1, 2020.
line 30(II) Whether a qualied motion picture described in subclause
line 31(I) was awarded any nancial incentive by the state, province, or
line 32other jurisdiction that was predicated on the performance of
line 33primary principal photography or postproduction in that location.
line 34(ii) The California Film Commission may provide that the report
line 35required by this subparagraph be led in a single report provided
line 36on a calendar year basis for those qualied taxpayers that receive
line 37multiple credit certicates in a calendar year.
line 38(D) Issue a credit certicate to a qualied taxpayer upon
line 39completion of the qualied motion picture reecting the credit
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line 1and the jobs ratio computed under this section. The amount of
line 2credit shown on the credit certicate shall not exceed the amount
line 3of credit allocated to that qualied taxpayer pursuant to this section.
line 4(4) Obtain, when possible, the following information from
line 5applicants that do not receive an allocation of credit:
line 6(A) Whether the qualied motion picture that was the subject
line 7of the application was completed.
line 8(B) If completed, in which state or foreign jurisdiction was the
line 9primary principal photography completed.
line 10(C) Whether the applicant received any nancial incentives
line 11from the state or foreign jurisdiction to make the qualied motion
line 12picture in that location.
line 13(5) Provide the LegislativeAnalyst's Ofce, upon request, any
line 14or all application materials or any other materials received from,
line 15or submitted by, the applicants, in electronic format when available,
line 16including, but not limited to, information provided pursuant to
line 17clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).
line 18(6) The information provided to the California Film Commission
line 19pursuant to this section shall constitute condential tax information
line 20for purposes of Article 2 (commencing with Section 19542) of
line 21Chapter 7 of Part 10.2.
line 22(7) Notwithstanding any other provision, if on July 1, 2025, the
line 23California Film Commission determines that credits allocated
line 24under this section and Section 17053.98 remain unused and have
line 25not been added to credit amounts available for allocation under a
line 26successor section or sections, the California Film Commission
line 27may continue to make allocations of the unused credits pursuant
line 28to the terms of this section and Section 17053.98 until such time
line 29as the unused credits are fully utilized.
line 30(h) (1) The California Film Commission shall annually provide
line 31the LegislativeAnalyst's Ofce, the Franchise Tax Board, and the
line 32board California Department of Tax and FeeAdministration with
line 33a list of qualied taxpayers and the tax credit amounts allocated
line 34to each qualied taxpayer by the California Film Commission.
line 35The list shall include the names and taxpayer identication
line 36numbers, including taxpayer identication numbers of each partner
line 37or shareholder, as applicable, of the qualied taxpayer.
line 38(2) (A) Notwithstanding paragraph (6) of subdivision (g), the
line 39California Film Commission shall annually post on its Internet
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line 40Web site and make available for public release the following:
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line 1(i) A table which includes all of the following information: a
line 2list of qualied taxpayers and the tax credit amounts allocated to
line 3each qualied taxpayer by the California Film Commission, the
line 4number of production days in California the qualied taxpayer
line 5represented in its application would occur, the number of California
line 6jobs that the qualied taxpayer represented in its application would
line 7be directly created by the production, and the total amount of
line 8qualied expenditures expected to be spent by the production.
line 9(ii) A narrative staff summary describing the production of the
line 10qualied taxpayer as well as background information regarding
line 11the qualied taxpayer contained in the qualied taxpayer's
line 12application for the credit.
line 13(B) Nothing in this subdivision shall be construed to make the
line 14information submitted by an applicant for a tax credit under this
line 15section a public record.
line 16(3) The California Film Commission shall provide each city
line 17and county in California with an instructional guide that includes,
line 18but is not limited to, a review of best practices for facilitating
line 19motion picture production in local jurisdictions, resources on
line 20hosting and encouraging motion picture production, and the
line 21California Film Commissions' Commission's Model Film Filming
line 22Ordinance.The California Film Commission shall maintain on its
line 23InternetWeb site a list of initiatives by locality that encourage
line 24motion picture production in regions across the state. The list shall
line 25be distributed to each approved applicant for the program to
line 26highlight local jurisdictions that offer incentives to facilitate lm
line 27production.
line 28(i) (1) (A) The aggregate amount of credits that may be
line 29allocated for a scal year pursuant to this section and Section
line 3017053.98 is three hundred thirty million dollars ($330,000,000),
line 31plus any amount described in subparagraph (B), (C), (D), or (E)
line 32in credits for the 202021 scal year and each scal year thereafter,
line 33through and including the 202425 scal year, except as provided
line 34in paragraph (7) of subdivision (g).
line 35(B) The unused allocation credit amount, if any, for the
line 36preceding scal year.
line 37(C) The amount of previously allocated credits not certied.
line 38(D) The amount of any credits reduced pursuant to paragraph
line 39(2) of subdivision (d).
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line 1(E) That portion of any unused allocation credit amount, if any,
line 2attributable to Section 17053.85, 17053.95, 23685, or 23695
line 3available for that scal year in a manner as determined by
line 4regulations promulgated by the California Film Commission.
line 5(2) (A) Notwithstanding the foregoing, the California Film
line 6Commission shall allocate the credit amounts subject to the
line 7following categories:
line 8(i) Independent lms with qualied expenditures of ten million
line 9dollars ($10,000,000) or less shall be allocated 4.8 percent of the
line 10amount specied in paragraph (1). Independent lms with qualied
line 11expenditures in excess of ten million dollars ($10,000,000) shall
line 12be allocated 3.2 percent of the amount specied in paragraph (1).
line 13(ii) Features shall be allocated 35 percent of the amount specied
line 14in paragraph (1).
line 15(iii) A relocating television series shall be allocated 17 percent
line 16of the amount specied in paragraph (1).
line 17(iv) A new television series, pilots for a new television series,
line 18miniseries, and recurring television series shall be allocated 40
line 19percent of the amount specied in paragraph (1).
line 20(B) (i) Within any allocation period for credits to a relocating
line 21television series, any unused amount shall be reallocated to the
line 22category described in clause (iv) of subparagraph (A) and, if any
line 23unused amount remains, reallocated in the next allocation period
line 24for credits to a relocating television series.
line 25(ii) Notwithstanding clause (i), within any scal year, any
line 26unused amount within any category in any allocation period may
line 27be reallocated to another category in a subsequent allocation period
line 28as may be determined by regulations promulgated by the California
line 29Film Commission.
line 30(C) With respect to a relocating television series issued a credit
line 31in a subsequent year pursuant to clause (v) of subparagraph (D)
line 32of paragraph (2) of subdivision (g), that subsequent credit amount
line 33shall be allowed from the allocation amount described in clause
line 34(iv) of subparagraph (A).
line 35(3) Any act that reduces the amount that may be allocated
line 36pursuant to paragraph (1) constitutes a change in state taxes for
line 37the purpose of increasing revenues within the meaning of Section
line 383 of Article XIIIA of the California Constitution and may be passed
line 39by not less than two-thirds of all Members elected to each of the
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line 40two houses of the Legislature.
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line 1(j) The California Film Commission shall have the authority to
line 2allocate tax credits in accordance with this section and in
line 3accordance with any regulations prescribed pursuant to subdivision
line 4(e) upon adoption.
line 5(k) Section 41 shall not apply to the credit allowed by this
line 6section.
line 7SEC. 3.
line 8 SEC. 4.This act provides for a tax levy within the meaning of
line 9Article IV of the California Constitution and shall go into
line 10immediate effect.
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