HomeMy WebLinkAbout2011-05-10 - AGENDA REPORTS - STATE LEGISLATION AB 1069 AB 4 (2)Agenda Item: 5
CITY OF SANTA CLARITA
AGENDA REPORT
CONSENT CALENDAR City Manager Approval:
Item to be presented by: .
DATE: May 10, 2011
SUBJECT: STATE LEGISLATION
DEPARTMENT: City Manager's Office
RECOMMENDED ACTION
P
City Council adopt the recommendation of the City Council Legislative Committee and adopt a
"support" position for Assembly Bill 1069 and an "oppose" position for Assembly Bill 438 and
transmit position statements to the bills' authors, Santa Clarita legislative delegation, Members .
of the Legislature and committee staff, Governor Brown and the League of California Cities.
BACKGROUND
On April 18, 2011, the City Council Legislative Committee met and considered two bills
currently pending before the California Legislature, AB 1069 and AB 438.
Assembly Bill 1069 (Fuentes)
AB 1069 was introduced by Assembly Member Felipe Fuentes (D -39 -Sylmar) on February 18,
2011. The principal co-authors of the bill are Assembly Members Gatto, Hall, and Smyth.
In February 2009, the California Film and Television Tax Credit Program was enacted as part of
a targeted economic stimulus package to increase production spending, jobs and tax revenues in
California. The program specifically targets productions that are most likely to leave the state due
to incentives being offered in other states and countries.
The California Film Commission (CFC) administers the current five year; $500 million
program which provides tax credits (beginning in tax year 2011) to eligible film and TV
productions that meet the program's criteria. One hundred million dollars is allocated by the
Legislature annually beginning fiscal year 2009/2010 through fiscal year 2013/2014 for the
film tax incentive program. Since 2009, just over 100 film projects have been approved for the
program statewide. Twenty two of the approved credit project projects were filmed or are
currently filming in the Santa Clarita Valley with 16 projects located in the City. Since the
program began in July 2009, $300 million in tax credits have been allocated resulting in $2.2
billion in direct production spending in California.
The tax credit is not available for commercial advertising, music videos, motion pictures for
non -commercial use, news and public events programs, talk shows, game shows, reality
programming, documentaries, and pornographic films.
If enacted into law, AB 1069 would extend the California Film and Television Tax Credit
Program by an additional five years from July 1, 2014 through June 30, 2019. This bill would
also extend the existing authority to allocate $100 million per fiscal year through FY 2018-1.9.
Assembly Bill 438 (Williams)
AB 438 was introduced by Assembly Member Das Williams (D -35 -Santa Barbara) to require that
the board of trustees, common council, or other legislative body of any city or the board of
trustees of any library district may notify the county board of supervisors that the city or library
district no longer desires to be a part of the county free library system, provided that a specified
two week published notice is given. In addition, only in the situation whereby the withdrawing
city's legislative body intend to contract library services through a private company, then voter
approval would be required at a regularly scheduled election.
The League of California Cities and many individual cities are opposing the measure based upon
the extraordinary noticing and election referendum requirements for a specific administrative
action of a City Council. The determination by a City Council regarding the operations of a
library system and any associated contracting for services with a private company is well within
the existing authority and established role of City Councils.
The bill, if enacted, will have no impact on the City of Santa Clarita. The Legislative Committee
is recommending that the City Council oppose the measure due, in part, to the precedent setting
nature of requiring extraordinary noticing requirements and referendum of City Council actions
related to library systems, while other similar administrative actions of the City Council do not
have these same requirements.
ALTERNATIVE ACTIONS
1. Take no position on AB 1069 and AB 438.
2. Other direction as determined by the City Council.
FISCAL IMPACT
No additional resources are required to implement the recommended action beyond those already
contained within the adopted 2010/11 City budget.
ATTACHMENTS
Assembly Bill 1069
Assembly Bill 438
CALIFORNIA LEGISLATURE -2011-12 REGULAR SESSION
ASSEMBLY BILL No. 1069
Introduced by Assembly Member Fuentes
(Principal coauthors: Assembly Members Gatto, Hall, and Smyth)
(Coauthors: Assembly Members Butler, Ma, and Portantino)
February 18, 2011
An act to repeal and amend Sections 17053.85 and 23685 of the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1069, as introduced, Fuentes. Income taxes: credits: film:
extension.
The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by laws, including a credit
against those taxes for taxable years beginning on or after January 1,
2011, in an amount equal to a specified percentage of the qualified
expenditures, as defined, attributable to the production of a qualified
motion picture in California, or, where the qualified motion picture has
relocated to California or is an independent film, as provided. Existing
law requires the California Film Commission to allocate the tax credits
until July 1, 2014, and limits the aggregate amount of qualified motion
pictures credits that may be allocated in any fiscal year to $100,000,000,
through the 2013-14 fiscal year.
This bill, under the Personal Income Tax Law andjhe Corporation
Tax Law, would extend the California Film Commission's requirement
to allocate the tax credits 5 additional years, until July 1, 2019. This
bill would also extend the limit on the aggregate amount of credits that
may be allocated through the 2018-19 fiscal year.
99
AB 1069
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:
SECTION•n 17053.85 of Revenue and Taxation
Code,.•• • by • of .. 1 of • Extraordinary
Sessionof of 11• is repealed.
allowed4 17053.85. (a) (1) For taxable years beginning on or after
5 4anuary 1, 2011, there shall be qttalified taxpayer
• o_ .
8 paragraph (4), of the qualified expenditures f;5r the prodtietion of.
•
1 (2) The eredit sh-11 be -110wed for the taxable
.:: -Malified :
13 the applieable pmentage of all qualified expenditures paid or
qualified14 ineurred by the ::
limitedyer in all taxable years for that
15 qualified motion pieture.
16 (3) The amount of the eredit allowed to a qualified taxpaye
17 shall be to the aniount
• issued to the qualified taxpayer;. the Galifornia Film Gommission
• pursuant to subdivision (g)-.
1 ::applieable
expenditures21 pereentage shall be.
22 (A) Tv�'enty pereent of the qualified :. : ;
23 to the preduetion of a qualified motion pieture in Galif;Drnia.
24 ' five pereent of the qualified
California25 attributable to the produetion of a qualified motion pieture in
26 Galif;.5rnia where the qua!-fied motion pieture is a television series
27 that reloeated to ;
' -
f this seetion:• (1) 'Aneillary produet" m 4e for sale to the ptiblie
1 that eentains a pertion: ;qualified
31 pieture.
32 (2) "Budget" means an estimate of all expenses paid or ineurred
33 during the produetion period of a qualified motion piettire. it shall.
99
-3—
AB 1069
be
2 eompany
the same
budget
for
all qualified
used by the
qualified
taxpayer and produetion
portionI
4 other
than
the
qualified
motion
pieture,
used
in the qualified mc)tion
. u..
•
; ;. the
to Subparagraph
paragraph
.::
:
1 as
a deduetion-
part
to the
qualified
taxpayer;
I I in
the produetion
of
the qualified
12 amounts
eontributed
by employees,
f;Dr
any year during th e
13 produetion
period
with
respeet:
Employer:
; ; fit sharing,
15 annuity,
or similar
plan.
•Employer;.eoverage
under
any aeeident or health
plan
for
employees.17
18
(iii) T-heetnplo�'er'set)stoflif�ordisabilit�,insuraneepret'ided
• to
employees.
1
C) Any
alll%jull,L
treated
as
wagesof.
21 subparagraph
.
paragraph
.
'
- -
. . . unt
22 under
this
paragraph.
23
(6) "Independent
film" means
a motion
pieture with a
24 budget
of
one
million
dollars ($1,000,000)
and a maxitnufn budget
25 of
ten million
dollars
($10,000,000)
that is
produeed by a pompany
26 that
is not
publiely
traded and
publiely
traded
eornpanies do not
27 own,
direetly
or indireetly,;
produeing
28
::
•
(7) "Heensing"
means any
grant
of
hts to distribute the
1 qualified
motion
:
part.31
-
•
of
-medium
33
(9) (A)
"Postproduetion"
means
the
-
- qualified
autornatie
dialogue35
;laeernent,
sound
editing,
seoring
. editing,
beginning
and end eredits,
_d
duplieation,:.
•
.
-
..
-
-
. ..
--
..
- -
.. . . n.
0 shipping
of release
prints.
99
IN
AB 1069
99
7
.
...
-
.
-
..
. preparation ..
-
.
produetion
whieh
beginsqua3
lified
has
reeeived
a firm
agreement
of
;
;.
is
• greenlit,
with, f;br
example,establishment
produetion
offiee,
the hiring
of
key
erew
members,des,
6 but
is not;
;.
;
vendorsafequipment
and
stage;:
•photography"of
-
-
9 during
whieh
the motion
distinguished
1
;
;:.
::
:
::
..-period"-
"Qualified-
- -
.. tionas
"Qualified
'
. .
-
.
during
....
.
. .-.
.-
•
"Qualified
1
(B)
individual"
not inelude eiLher
of
the
following.21
22
(i) Any,
individual
related
to
the
qualified
taxpayer
as deseribed
23 in
....
..
.
-
.
.
- -
. .
f the
internal
_
24 Revenue
God-e�.
26 the
Internal
Revenue
Gode,
of
the
qualified
taxpayer.
"Qualified
'
.
-
....
-
.
distribution
-
-
.
...
-
.
29 of
medium
that is one
of the
following.
1
::
: : =t of
one
tnillit�n
31 dollars
......
32 s eventy
five
million
dollars
......
movie
34 produetion
budget
of five
hundred
thousand
dollars ($500,000).
35
(iii) A
new television
series
::.
;
•
1 1
)duetion
budget
of
one
million
::
1,000,000)
distribution
basie
eable.
:-;--;--
•A
television
series that
reloeatedto
-
99
7
AB 1069
99
0
(B) To
as
a "qualified
all of the
qualif�,
motion
piettireT"
followingI
;
;
be satisfied.
3
(i) At least
75
pereent
of
the produetion
days
oeeur wholly in
::yment
f;jr
serviees
performed
purehase
or
rental of
property'6
:
7
(ii) Produetion
of
the qualified
motion
pieture
is eampleted
8 within
30
months
from
the
date on whieh
the
qttalified
taxpayer's
• applieation
1 purposesof
this seetion,
a qualified
12
(iii) The
;;.
for the
motion pieture
is registered
with the
13 United
States
Copyright'right
pursuant
States
Code.14
..of
..photograph"
the
qualified
17 the
.
-
.
-
. ..
.
.•. . day's
18 the
date ofthat
approval.
•-
.
purposes
.
subparagraph
-
. .. ting the
P- 0 total
wages
paid
or ineurred
for the
produetion
of a qualified
PC I motion
pieture,
all
amounts
paid or
ineurred
by,
aN persons or
t2 entities
that
share
in the
eostsof
the qualified
motion
3 be
aggregated-.
"Qualifiedf-
25 advertising,
musie
videos,
a motion pieture
produeed
for private
26
ial use,
stteh
as
weddings,
graduations,
or as part of.
27 an
edueational
eourse
and
made by,
students,
a
new's program-,
28 �ttrrent
events
or
publie
events
program,
talk
show,
game shov�-,
29 sporting
evelit
— ae—ity,
awards
show,
telethon
or othe
1
that solieits;
;:tm,
elip::
produetion
31
if more
than
• pereent
- --
programs,
dayti
33 dramas,
strip
shows,variety,
;
;.
::
34 shows,
or
any produetion
that f�lls
within
the
reeordkeeping
35 requirements
of Seetion
2257
of:Fitle
'-f the
United
States Gode.
"Qualified
:.
paid or ineurred
37 to
purehase
or leftse
tangible
personalproperty,
38 state
in the
produetion
of a qualified
motien
pieture
and payments,
• imeluding
qualified-
-- m,iees
performed
within this state
1 in
the produetionqualified
99
0
AB 1069
-6-
99
9
ii, -.
:.
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9
AB 1069
eomposers,isors,
:::.
2 than
::
:.
"Residual
-
-
;:
;tion
5 through
new
ttse,
reuse,
"'F
in seeondary
markets,
as,
6 distinguished
f�oim
payments
made
during produetioit-.
"Reuse"
7 (20)
means
any tise oftt
qualified motion
piettire in
the
' same
medium
f;Dr-
wimg
the initial
use
9 in that
:.
1
;
.:
qualified
-
I I motion
12 is exhibited.
piettire
is
exhibited
:.media
follow
in whieh
it
"Television
13 (22)
series
that reloeated
:
:
television
series,
without14
: ::
15 exhibition,
tht
-;
;
-:.
• Galifornia
and
for;;eredit
provided17
pursuant
18 reloeating
to Galifornitt.
•Notwithstanding
any
other !aw, a
qualified
taxpayer
20 may sell
any eredit
allowed
under
this seetion
that
is attributable_
21 to an
independent
film,
as defined
in paragraph
(6)
of subdivision
unrelated
party.
qualified
taxpayerreport
24 Board
prior
to
the
sale
off the
evedit,
■ oard, all required
information
• regarding
the
purehase
and sale
of the eredit,.:
seeurity
or
other
taxpayer27
- ;n number
of
the unrelated
. ..
'
-
.
.
-sold,
.
-
.. .
f the
• evedit
sold,-
of
--- -
n reeeived
by,
the
1 qualified
taxpayer
31 (3)
in
the ease
where
the eredit
allowed
under
"net
32 exeeeds
the
taxT"
the exeess
:
be earried
over
to
"net
33 ;.ee
the
tax"
in the
f6ilowingtaxable
34 five taxablebeen
exhausted.
35 (4)
A
eredit
shall
not
be Sold
pursuant to this
subdivision
to
• more
than
one
-
be
resold by,
37 unrelated
party,
to
another
taxpayer
or other party'.
38 (5)
A party,
that
has aequired
tax
eredits under
this
seetion
shall
• be subjeet
to the
requirements
of
this seetion.
99
10
AB 1069
1
2
—8-
3 on any
i.
tax return ol
4 (7)
In the event that both
the taxpayer;
:.
tt taxpayer
to whom the eredit
has been
sold both
elaim
the sa
amount6
of - on
- -
Board mery
8
• disallow
the eredit of
- long
as
the statute -
• limitations
upon
-
1
_ with
-vernment
Seetion
11340)
of Part 1 of.
-
Division
12 any, standard,
of
eriterion,
:.
Gode
does
guideline
established13 or
._.._
14 pursuant
to this subdivisioft-.
(d)
No eredit shall be
allowed15
pursuant
16 the qualified
taxpayer provides
the
f;Dllowing
to the
Galifornia
17 Film
Gornmission:
'
.
on of eaeh
qualified
individual.
• (2)
The apeeifie start and
end dates
of produetion.
1
paid.
amountqualified
wages
paid
toeaeh
qualified
22
:.:
(5)
The eopyright
registration23
d on the
24 eertifieate
of registration issued
under
the authority
of Title
17 of the United States
Code,25
. elaim
and issuanee:
;.
27 provided
28 (6)
The total amounts paid
or ineurred
to
purehase
or lease
29 tangible
personal property used
in the
produetion
oF a qualified
1 motion
pietttre-.
(7)
information to
substantiate31
32 ')
lnRwmation required
by, the Galifornia
under
regulations promulgated
pursuant
to
subdivision
-
34 neeessary
amount33
to verify the
;
;
35 (e)
The Galif;Drnia Film Gommissiott
may
preseribe
rules and
• regulafions
to earry out the purposes
rules37
=.establish
requirements,38
- rules identifiedor
requiredimplement
• seetion.
The regulations shall
inelude-
-set aside a
,11 pereentage
of annual -.44
I :
ident
films.
99
AB 1069
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
S if
registration
the qualified
number as
taxpayer
required
■
fails
paragraph
to provide the eopyright.
: subdivision
3
(d), the
eredit shall be
disallowed
:::
and assessed
and eoileeted under
4
Seetioi.
19051 until the
proeedures
are
satisfied.
5
(g)
For purposes of
this seetion,
the Galif;Dmia
Film Commission
•shall::thefollowing:
2009,
i
alloeate
,
•
(A)
Establish a proeedure
f;jr applieants
to file with the
": "- -t
Writtenapplieation,
on
fbrmjointlypreseribed by
12
the tax
eredit. " applieationshallin
elude,but
notbe mited to,
13
the fi5ilowing
infomiation-
14
(i) The
budget for the
motion
pieture
produetion.
15
(ii)
The number of
produetion
days.
16
(iii)
A finaneing plan
f;br
the
produetion-.
17
(iv)
The diversity:theworkfibree
employed by - iii -
18
ineluding,
but not limited
to,
the
ethnie
and raeial makeup of the
19
individuals
employed
by the
applieant
during the produetion o
20
the qualified
motion pieture,
to
the extent
possible.
21
(v)
Any other infimmation
deemed
relevant
by the eommission
22
or the
Franehise Tax
Board-.
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
99
■
"_REV.-
iii :•
:::
:-
'Wil- : NOW
99
AB 1069 --10
arnount alloeated
.
after qualified expenditures have
;n. The arnount of eredit shown;
been verified
-
o,tit of ef-edit alleeated
to that
taxpayer4 qualified
pursuant
(h) The Galifomia
Film Commission shall
provide5
6 Tax Board annually
with a list of qualified ;:
amounts::
by the
• Galift)rnitt Film
Gommission.and
applied
f;5r
in any partiettlar
fise
1 numbers of eaeh
partner or shareholder,applieable,
taxpayers.
eredits atithorized
to LL
qualified
12 (i) (1) The
aggregate atnottnt of eredits that may
be alloeated
13 'in any fiseal year
purstiant to this seetion and Seetion
23686
14
on the first
day
17
99
�3
- -
-
-
..ally,
- - -
• preeeding-
-
1 (G) The amottnt
of previously
21 (2) if the amount
of eredits
applied
f;5r
in any partiettlar
fise
22 year exeeeds the aggregate
amount
of tax
eredits atithorized
to LL
23 d under this
seetion, stteh
exeess shall
be treated
as havit_
24 been applied f;5r
on the first
day
of the
subsequent
---a
25 1 lowever, eredits
may not;
-
• than the fiseal year
in whieh
the eredit
was
originally
applied
27 or the immediately
sueeeeding
fiseal
ye-
. (3) Notwithstanding
the f;Dregoing,
the
Film Gomn.iisstion
29 set aside tip to ten
million ($1
fiasv-4
1 year for independent;neordanee
with rules an
developed31 regulations
pttrsuant
to
sttbd
32 (4) Any aet that
reduees
ft.m.-Runt
that fnay
be
33 purstiant to paragraph
(l'
a ehange
in state
taxes
34 the purpose
pass
• by not
houses37 two
:.
::
• eredits in aeeordanee
1 regulations preseribed
pursttant
to
subdivisionupon
adoptio
99
�3
-11— AB 1069
1 SEC. 2. Section 17053.85 of the Revenue and Taxation Code,
2 as added by Section 4 of Chapter 17 of the 3rd Extraordinary
3 Session of the Statutes of 2009, is amended to read:
4 17053.85. (a) (1) For taxable years beginning on or after
5 January 1, 2011, there shall be allowed to a qualified taxpayer a
6 credit against the "net tax," as defined in Section 17039, in an
7 amount equal to the applicable percentage, as specified in
8 paragraph (4), of the qualified expenditures for the production of
9 a qualified motion picture in California.
10 (2) The credit shall be allowed for the taxable year in which the
11 California Film Commission issues the credit certificate pursuant
12 to subdivision (g) for the qualified motion picture, and shall be for
13 the applicable percentage of all qualified expenditures paid or
14 incurred by the qualified taxpayer in all taxable years for that
15 qualified motion picture.
16 (3) The amount of the credit allowed to a qualified taxpayer
17 shall be limited to the amount specified in the credit certificate
18 issued to the qualified taxpayer by the California Film Commission
19 pursuant to subdivision (g).
20 (4) For purposes of paragraphs (1) and (2), the applicable
21 percentage shall be:
22 (A) Twenty percent of the qualified expenditures attributable
23 to the production of a qualified motion picture in California.
24 (B) Twenty-five percent of the qualified expenditures
25 attributable to the production of a qualified motion picture in
26 California where the qualified motion picture is a television series
27 that relocated to California or an independent film.
28 (b) For purposes of this section:
29 (1) "Ancillary product" means any article for sale to the public
30 that contains a portion of, or any element of, the qualified motion
31 picture.
32 (2) "Budget" means an estimate of all expenses paid or incurred
33 during the production period of a qualified motion picture. It shall
34 be the same budget used by the qualified taxpayer and production
35 company for all qualified motion picture purposes. .
36 (3) "Clip use" means a use of any portion of a motion picture,
37 other than the qualified motion picture, used in the qualified motion
38 picture.
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AB 1069 —12-
1
12-
1 (4) "Credit certificate" means the certificate issued by the
2 California Film Commission pursuant to subparagraph (C) of
3 paragraph (2) of subdivision (g).
4 (5) (A) "Employee fringe benefits" means the amount allowable
5 as a deduction under this part to the qualified taxpayer involved
6 in the production of the qualified motion picture, exclusive of any
7 amounts contributed by employees, for any year during the
8 production period with respect to any of the following:
9 (i) Employer contributions under any pension, profit-sharing,
10 annuity, or similar plan.
11 (ii) Employer-provided coverage under any accident or health
12 plan for employees.
13 (iii) The employer's cost of life or disability insurance provided
14 to employees.
15 (B) Any amount treated as wages under clause (i) of
16 subparagraph (A).of paragraph (18) shall not be taken into account
17 under this paragraph.
18 (6) "Independent film" means a motion picture with a minimum
19 budget of one million dollars ($1,000,000) and a maximum budget
20 often million dollars ($10,000,000) that is produced by a company
21 that is not publicly traded and publicly traded companies do not
22 own, directly or indirectly, more than 25 percent of the producing
23 company.
24 (7) "Licensing" means any grant of rights to distribute the
25 qualified motion picture, in whole or in part.
26 (8) "New use" means any use of a motion picture in a medium
27 other than the medium for which it was initially created.
28 (9) (A) "Postproduction" means the final activities in a qualified
29 motion picture's production, including editing, foley recording,
30 automatic dialogue replacement, sound editing, scoring and music
31 editing, beginning and end credits, negative cutting, negative
32 processing and duplication, the addition of sound and visual effects,
33 soundmixing, film -to -tape transfers, encoding, and color correction.
34 (B) "Postproduction" does not include the manufacture or
35 shipping of release prints.
36 (10) "Preproduction" means the process of preparation for actual
37 physical production which begins after a qualified motion picture
38 has received a firm agreement of financial commitment, or is
39 greenlit, with, for example, the establishment of a dedicated
40 production office, the hiring of key crew members, and includes,
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13— AB 1069
1 but is not limited to, activities that include location scouting and
2 execution of contracts with vendors of equipment and stage space.
3 (11) "Principal photography" means the phase of production
4 during which the motion picture is actually shot, as distinguished
5 from preproduction and postproduction.
6 (12) "Production period" means the period beginning with
7 preproduction and ending upon completion of postproduction.
8 (13) "Qualified entity" means a personal service corporation as
9 defined in Section 269A(b)(1) of the Internal Revenue Code, a
10 payroll services corporation, or any entity receiving qualified wages
11 with respect to services performed by a qualified individual.
12 (14) (A) "Qualified individual" means any individual who
13 performs services during the production period in an activity related
14 to the production of a qualified motion picture.
15 (B) "Qualified individual" shall not include either of the
16 following:
17 (i) Any individual related to the qualified taxpayer as described
18 in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
19 Revenue Code.
20 (ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
21 the Internal Revenue Code, of the qualified taxpayer.
22 (15) (A) "Qualified motion picture" means a motion picture
23 that is produced for distribution to the general public, regardless
24 of medium that is one of the following:
25 (i) A feature with a minimum production budget of one million
26 dollars ($1,000,000) and a maximum production budget of
27 seventy-five million dollars ($75,000,000).
28 (ii) A movie of the week or miniseries with a minimum
29 production budget of five hundred thousand dollars ($500,000).
30 (iii) A new television series produced in California with a
31 minimum production budget of one million dollars ($1,000,000)
32 licensed for original distribution on basic cable.
33 (iv) An independent film.
34 (v) A television series that relocated to California.
35 (B) To qualify as a "qualified motion picture," all of the
36 following conditions shall be satisfied:
37 (i) At least 75 percent of the production days occur wholly in
38 California or 75 percent of the production budget is incurred for
39 payment for services performed within the state and the purchase
40 or rental of property used within the state.
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(ii) Production of the qualified motion picture is completed
within 30 months from the date on which the qualified taxpayer's
application is approved by the California Film Commission. For
purposes of this section, a qualified motion picture is "completed"
when the process of postproduction has been finished.
(iii) The copyright for the motion picture is registered with the
United States Copyright Office pursuant to Title 17 of the United
States Code.
(iv) Principal photography of the qualified motion picture
commences after the date on which the application is approved by
the California Film Commission, but no later than 180 days after
the date of that approval.
(C) For the purposes of subparagraph (A), in computing the
total wages paid or incurred for the production of a qualified
motion picture, all amounts paid or incurred by all persons or
entities that share in the costs of the qualified motion picture shall
be aggregated.
(D) "Qualified motion picture" shall not include commercial
advertising, music videos, a motion picture produced for private
noncommercial use, such as weddings, graduations, or as part of
an educational course and made by students, a news program,
current events or public events program, talk show, game show,
sporting event or activity, awards show, telethon or other
production that solicits funds, reality television program, clip -based
programming if more than 50 percent of the content is comprised
of licensed footage, documentaries, variety programs, daytime
dramas, strip shows, one-half hour (air time) episodic television
shows, or any production that falls within the recordkeeping
requirements of Section 2257 of Title 18 of the United States Code.
(16) "Qualified expenditure" means amounts paid or incurred
to purchase or lease tangible personal property used within this
state in the production of a qualified motion picture and payments,
including qualified wages, for services performed within this state
in the production of a qualified motion picture.
(17) (A) "Qualified taxpayer" means a taxpayer who has paid
or incurred qualified expenditures and has been issued a credit
certificate by the California Film Commission pursuant to
subdivision (g).
(B) In the case of any passthrough entity, the determination of
whether a taxpayer is a qualified taxpayer under this section shall
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1 be made at the entity level and any credit under this section is not
2 allowed to the passthrough entity, but shall be passed through to.
3 the partners or shareholders in accordance with applicable
4 provisions of Part 10 (commencing with Section 17001) or Part
5 11 (commencing with Section 23001). For purposes of this
6 paragraph, "passthrough entity" means any entity taxed as a
7 partnership or "S" corporation.
8 (18) (A) "Qualified wages" means all of the following:
9 (i) Any wages required to be reported under Section 13050 of
10 the Unemployment Insurance Code that were paid or incurred by
I l any taxpayer involved in the production of a qualified motion
12 picture with respect to a qualified individual for services performed
13 on the qualified motion picture production within this state.
14 (ii) The portion of any employee fringe benefits paid or incurred
15 by any taxpayer involved in the production of the qualified motion
16 picture that are properly allocable to qualified wage amounts
17 described in clause (i).
18 (iii) Any paymentsr wade to a qualified entity for services
19 performed in this state by qualified individuals within the meaning
20 of paragraph (14).
21 (iv) Remuneration paid to an independent contractor who is a
22 qualified individual for services performed within this state by that
23 qualified individual.
24 (B) "Qualified wages" shall not include any of the following:
25 (i) Expenses, including wages, related to new use, reuse, clip
26 use, licensing, secondary markets, or residual compensation, or
27 the creation of any ancillary product, including, but not limited to,
28 a soundtrack album, toy, game, trailer, or teaser.
29 (ii) Expenses, including wages, paid or incurred with respect to
30 acquisition, development, turnaround, or any rights thereto.
31 (iii) Expenses, including wages, related to financing, overhead,
32 marketing, promotion, or distribution of a qualified motion picture.
33 (iv) Expenses, including wages, paid per person per qualified
34 motion picture for writers, directors, music directors, music
35 composers, music supervisors, producers, and performers, other
36 than background actors with no scripted lines.
37 (19) "Residual compensation" means supplemental
38 compensation paid at the time that a motion picture is exhibited
39 through new use, reuse, clip use, or in secondary markets, as
40 distinguished from payments made during production.
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(20) "Reuse" means any use of a qualified motion picture in the
same medium for which it was created, following the initial use
in that medium.
(21) "Secondary markets" means media in which a qualified
motion picture is exhibited following the initial media in which it
is exhibited.
(22) "Television series that relocated to California" means a
television series, without regard to episode length or initial media
exhibition, that filmed all of its prior season or seasons outside of
California and for which the taxpayer certifies that the credit
provided pursuant to this section is the primary reason for
relocating to California.
(c) (1) Notwithstanding any other law, a qualified taxpayer
may sell any credit allowed under this section that is attributable
to an independent film, as defined in paragraph (6) of subdivision
(b), to an unrelated party.
(2) The qualified taxpayer shall report to the Franchise Tax
Board prior to the sale of the credit, in the form and manner
specified by the Franchise Tax Board, all required information
regarding the purchase and sale of the credit, including the social
security or other taxpayer identification number of the unrelated
party to whom the credit has been sold, the face amount of the
credit sold, and the amount of consideration received by the
qualified taxpayer for the sale of the credit.
(3) In the case where the credit allowed under this section
exceeds the "net tax," the excess credit may be carried over to
reduce the "net tax" in the following taxable year, and succeeding
five taxable years, if necessary, until the credit has been exhausted.
(4) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the
unrelated party to another taxpayer or other party.
(5) A party that has acquired tax credits under this section shall
be subject to the requirements of this section.
(6) In no event may a qualified taxpayer assign or sell any tax
credit to the extent the tax credit allowed by this section is claimed
on any tax return of the qualified taxpayer.
(7) In the event that both the taxpayer originally allocated a
credit under this section by the California Film Commission and
a taxpayer to whom the credit has been sold both claim the same
amount of credit on their tax returns, the Franchise Tax Board may
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17— AB 1069
1 disallow the credit of either taxpayer, so long as the statute of
2 limitations upon assessment remains open.
3 (8) Chapter 3.5 (commencing with Section 11340) of Part 1 of
4 Division 3 of Title 2 of the Government Code does not apply to
5 any standard, criterion, procedure, determination, rule, notice, or
6 guideline established or issued by the Franchise Tax Board
7 pursuant to this subdivision.
8 (d) No credit shall be allowed pursuant to this section unless
9 the qualified taxpayer provides the. following to the California
10 Film Commission:
1 1 (1) Identification of each qualified individual.
12 (2) The specific start and end dates of production.
13 (3) The total wages paid.
14 (4) The amount of qualified wages paid to each qualified
15 individual.
16 (5) The copyright registration number, as reflected on the
17 certificate of registration issued under the authority of Section 410
18 of Title 17 of the United States Code, relating to registration of
19 claim and issuance of certificate. The registration number shall be
20 provided on the return claiming the credit.
21 (6) The total amounts paid or incurred to purchase or lease
22 tangible personal property used in the production of a qualified
23 motion picture.
24 (7) Information to substantiate its qualified expenditures.
25 (8) Information required by the California Film Commission
26 under regulations promulgated pursuant to subdivision (g)
27 necessary to verify the amount of credit claimed.
28 (e) The California Film Commission may prescribe rules and
29 regulations to carry out the purposes of this section including any
30 rules and regulations necessary to establish procedures, processes,
31 requirements, and rules identified in or required to implement this
32 section. The regulations shall include provisions to set aside a
33 percentage of annual credit allocations for independent films.
34 (f) If the qualified taxpayer fails to provide the copyright
35 registration number as required in paragraph (5) of subdivision
36 (d), the credit shall be disallowed and assessed and collected under
37 Section 19051 until the procedures are satisfied.
38 (g) For purposes of this section, the California Film Commission
39 shall do the following:
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AB 1069 —18-
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1 (1) On, or after, July 1, 2009, and before July 1,-2044 2019,
2 allocate tax credits to applicants.
3 (A) Establish a procedure for applicants to file with the
4 commission a written application, on a form jointly prescribed by
5 the commission and the Franchise Tax Board for the allocation of
6 the tax credit. The application shall include, but not be limited to,
7 the following information:
8 (i) The budget for the motion picture production.
9 (ii) The number of production days.
10 (iii) A financing plan for the production.
I 1 (iv) The diversity of the workforce employed by the applicant,
12 including, but not limited to, the ethnic and racial makeup of the
13 individuals employed by the applicant during the production of
14 the qualified motion picture, to the extent possible.
15 (v) Any other information deemed relevant by the commission
16 or the Franchise Tax Board.
17 (B) Establish criteria, consistent with the requirements of this
18 section, for allocating tax credits.
19 (C) Determine and designate applicants who meet the
20 requirements of this section.
21 (D) Process and approve, or reject, all applications on a
22 first -come -first-served basis.
23 (E) Subject to the annual cap established as provided in
24 subdivision (i), allocate an aggregate amount of credits under this
25 section and Section 23685, and allocate any carryover of
26 unallocated credits from prior years.
27 (2) Certify tax credits allocated to qualified taxpayers.
28 (A) Establish a verification procedure for the amount of qualified
29 expenditures paid or incurred by the applicant.
30 (B) Establish audit requirements that must be satisfied before
31 a credit certificate may be issued by the California Film
32 Commission.
33 (C) Issue a credit certificate to a qualified taxpayer upon
34 completion of the qualified motion picture reflecting the credit
35 amount allocated after qualified expenditures have been verified
36 under this section. The amount of credit shown in the credit
37 certificate shall not exceed the amount of credit allocated to that
38 qualified taxpayer pursuant to this section.
39 (h) The California Film Commission shall provide the Franchise
40 Tax Board annually with a list of qualified taxpayers and the tax
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19— AB 1069
1 credit amounts allocated to each qualified taxpayer by the
2 California Film Commission. The list shall include the names and
3 taxpayer identification numbers, including taxpayer identification
4 numbers of each partner or shareholder, as applicable, of the
5 qualified taxpayers.
6 (i) (1) The aggregate amount of credits that may be allocated
7 in any fiscal year pursuant to this section and Section 23686 shall
8 be an amount equal to the sum of all of the following:
9 (A) One hundred million dollars ($100,000,000) in credits for
10 the 2009-10 fiscal year and each fiscal year thereafter, through
11 and including the11n�g 2018-19 fiscal year.
12 (B) The unused allocation credit amount, if any, for the
13 preceding fiscal year.
14 (C) The amount of previously allocated credits not certified.
15 (2) If the amount of credits applied for in any particular fiscal
16 year exceeds the aggregate amount of tax credits authorized to be
17 allocated under this section, such excess shall be treated as having
18 been applied for on the first day of the subsequent fiscal year.
19 However, credits may not be allocated from a fiscal year other
20 than the fiscal year in which the credit was originally applied for
21 or the immediately succeeding fiscal year.
22 (3) Notwithstanding the foregoing, the Film Commission shall
23 set aside up to ten million ($10,000,000) of tax credits each fiscal
24 year for independent films allocated in accordance with rules and
25 regulations developed pursuant to subdivision (e).
26 (4) Any act that reduces the amount that may be allocated
27 pursuant to paragraph (1) constitutes a change in state taxes for
28 the purpose of increasing revenues within the meaning of Section
29 3 of Article XIII A of the California Constitution and may be passed
30 by not less than two-thirds of all Members elected to each of the
31 two houses of the Legislature.
32 0) The film commission shall have the authority to allocate tax
33 credits in accordance with this section and in accordance with any
34 regulations prescribed pursuant to subdivision (e) upon adoption.
35 SEC. 3. Section 23685 of the Revenue and Taxation Code, as
36 added by Section 9 of Chapter 10 of the 3rd Extraordinary Session
37 of the Statutes of 2009, is repealed.
38 23685. (a) (1) For taxable years beginning on or after 4antiary
39 1, 2011, there shall be allowed te) a qualified taxpayer a eredit
40 " as defined in Seetion 23036, in an arnount eqttal
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AB 1069
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I to
the applieable
pereentage,
as
speeified in paragraph
(4), of the
2 qualified
expenditures
f;5r the produetion
of
a qualified
motion
3 pieture
in
Galif6rnia.
4
(2) The
eredit
shall
be allowed;
:;
pttrsuant
6 to
subdivision
(g) for
the qualified
motion pieture,
and
shall be for
7 the
applieable
pereentagepaid
or
•
-
_.
that•
1
(3) The
amottnt
limited
of
the eredit
allowedqualified
::
I shall
12 isstted
be
to
the
to the
qualified
amountI
taxpayer by
; ; in the
the Galif;jmia
eredit
Film Commission
eertifieate
13 pursuant
.::
14
(4) For
purposes
of paragraphs
(1) and
(2), the
applieable
15 pereentage
shall
be.
•attributable
17 to
the produetion
of
a qualified
18
(B) Twenty
five
pereent of
the qualified
expenditures
•-
....
. .
--
... . .
...
-
. .
. . -
0Galifornia
where
the
qualified motion
pieture is
a television
series
21 that
-
;
; ;
purposes
"Aneillary
23
(1)
:::.
pttblie
24 that
eontains
a ::
:
qualified
25 pieture.
•
:.:=
paid
or ineurred
27 during
the
prodtietion
period of a
qualified motion
pieture.
it shall..
• be
the same
budget-
by the qualified
-
produeti-
• eot-opany
f -or
all qualified
motion
pietttre purposes.
1
:
portion of
a motion
pietttre,
31 other
than
the
qualified
motion pieture,
used in the
qualified
motion
32 pieture.
-
- by the
34 Galifornia
Film
Commission
ptirsuant
to subparagraph
(G) 0
35 paragraph
.::
"Employee.fringe
36
(5) (A)
benefits"
means the
amount
allowable
37 as
a deduetion
under
this part to
the qualified
taxpayer
itwolved
. in
the produetion
of the
qualified
motioi11 F"Itum,
.
.
• amounts
eontributed
by, employeel!,-
Year
during
1 produetion
period
with
respeet:
:
:.
99
— 21— AB 1069
99
....
_
Employer;.
;.
-
-
or health
4 :
;
;
;.
5
(iii) The
emrloyer's
eost
of life
or
disability
insuranee
provided
. to
employees.
7
(B) A
y amount
treated
as
wages under
elause
(i) of
8 sitbparagraph
(A) of
paragraph
(18)
shall not be
taken
into
aeeottttt
9 under
this
paragraph.
1
:
;
12 often
million
dollars
.......
)
that is produeed
by, a eompany,
13 that
is not
publiely
traded
and
publiely,
traded
eompanies
do not
14 ;.
pereent
of
the produeing
15
_p;_ y.
•distribute
17 qualified
motion
pietttre,
in whele
or
in part.
.
.
.
use
.
.
motion -
pietttre
in a
medium
• other
than
the
medium
ft)r
whieh
it
was initially
ereated-.
':
1
:::.
21
foley
motion pietwe's
produetion,ding
editing,
reeording,.
22 automatie
dialogue
replaeement,;.
;muste
editing,
beginning
and
end evedits,
negative23
-
24
d dupheation,
the
addition
of sound
and
_
vistial
effeets,
25 �oumdtni"ig,
film to
tape
transfers,
eneoding,
and
eolor eorreetion.
•
:::.
::
27 shipping
of release
prints.
•
. ..
-
•
..
-
. .
. _
...
-
. .
motion
pieture
1 has
reeeived
a firm
agreement
of
finaneial
eommitinent,
o. is
greenlit,
with,
f;jr example,
the
establishment31
32 produetion
offiee,
the
hiring
of
key
erew members,
and ineludes,
33 but
is not
limited
to,
aetivities
that
inelude;
; ;.
exeetition
of eontraets
with
vendors34
;ment
and stage
spaee�-.
..
means
ase
of
-
• during
whieh
the motion
piettire
is
aetttallyr shot,
as distinguished
•
..
oduetion
period"
means
the period
beginning
with
39 preproduetion
and ending
upon
tompletion
of
postproduetion.
99
AB 1069
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30
31
32
33
34
35
36
37
38
22
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-----------------
C.......
...
--
..
...
...
_
;.
- ;
...
INIT
;
...
-
.....
:.
•E
1, 1
1-
All LEA
ANSI
SAM II
vim a : Ill
A--
-
- :.
:
FEW
99
-23— AB 1069
1
2
•
.
-
.
purposes
-
.
....
..
- _ the
. ..
.
..
.
-
.
_
-
....
.
- --
. ...
1 motion
piettire,
all
amottnts:::
o ineutted
bypersons;
It.
12 be
ttggregated-.
"Qualified
13
(9)
motion
pieture"
shall not
inelude
eommereial
14 advertising,
musie
videos,
a motion
pietttre
produeed
for private
noneornfnereial
use,
sueh
as
weddings,15
:.:
part of.
16 an
edueational
eourse
and
made by
students,
a
nevvls program,
17 etirrent
events
or
events
program,;.
publie
18 sporting
event or
aetivity,
awards
shovt,telethon
19 produetion
1
if more
than
50 pereent
of the
%,,,Lent
is eompriseed'
21
lieensed
footage,doeumentaries,
variety
programs,
dramas,
strip
shows,22
:.tr
(air time)
episodie
shows,23
or
any ;
::.
24
-
- States Gode.
25
. ...
-
.
-
..
-. _.
.. . .
26 to
purehase
or lease
tangiblepersonal
property
27 state
in the
produetion
of
a
qualifiedpayments,
' ineluding
qualified
wages,
forbrrned
within this state
29 in
the produetion
of a qualified
30
(17) (A)
"Qualified
taxpayer"
means
a
taxpayer
who has paid
31 or
inetirred
qualified
expenditures
and has
beeii
issued a eredif
32 eerti4ieate
;. the
Galifornia;
:.
subdivision33
_
34
(B) (i)
in the ease
of
any
passthrough
entity,
the
determination
qualified
taxpayer
• shall
be made
at the
entity
level and
any eredit
under
this seetion
37 is
not allowed
to the
passthrough
entity,
but
shall be
passed through
. to
the partners
or
shareholders.
applieable
39 provisions
of Part
10 (eotnmeneing
with
Seetion
1700 1) or Patil
4123001).
For purposes
of this
99
AB 1069 —24
paragraph,"passthrough
partnership o :::
allowed3 (ii) in the ease of an "S" eorporation, the eredit
4 this seetion shall not be ttsed ;.eredit
against;; ::
• ::: Part 11 of Division 2.
•"Qualified
8 (i) Any wages required to be reported under Seetion 13050
• the �4netnployment insuranee Code
1 any taxpayer involved in the produetion of a qualified motion
:.:
amounts12 on the qualified motion pieture produetion within Galif-ormia.
13 (ii) The portion of any employee f�inge benefits paid or inetirred
14 by any taxpayer involved in the produetion ofthe qualified motion.
15 pieture that are properly alloeable to qualified wage
• deseribed in elause (i).
17 (iii) Any payments made
performed18 qualified
of paragraph (14).
1 -
21 qualified individual :r serviees perf;Drmed within Galifornia;
individual.22 that qualified
23 (B) "Qualified wages" shall not -
residual24 (i) Expenses, ineluding wages, related to new use, reuse, elip
; ;
26 the ereation of any aneillary produet, ineluding, but not limited to
27 a soundtraek alburn,;.
, game, trailer, or teaser.
I. (ii) Expenses, ineltiding wages, paid or ineurred with respeet to
/• aequisition,development,- or any rights
1Expenses,.:overhead,
31 marketing, promotion, or distribution of a qualified motion pieture.
32 (iv) Expenses, ineluding wages, paid per person per qualified
34 :: performers, other
-
35 than _ :. - aetors with no seripted
9. ;supplernental
37 i paid at the time that a motion pieture is exhibited
• as,
99
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AB 1069
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20
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. -:
- --
.. ..
. ::
99
mm
same
fnediurn
•
• R)Ilowi
3 in
that rnediurn.
"Seeondary
4 (21)
markets"
means media in
whieh a qualifi
5 tpotion
piettive
is exhibited
fiDilowing the initial
media i M.—
•
exhibited.
7 (22)
"Television
series
that reloeated to California"
means
8 television
series,
without
regard to episode length
or initial rne
exhibition,
that
filmed
allofitsprior or
seasonsoutside •
' California
I I provided
._
pursuant
_ : whieh
t�
i _
_ taxpayer
this seetion is the primary
_ ti
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Nam •
-
WWI
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IF
v
:.
VA Ill ;.
;;
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SPIPI-
;.poll.
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3�
eopyright
registrationnumber,on
the
2
eertifieate
of registration
issued
under the
authority
of Seetion
410
3
of Title
17 of the
United
States
Go e,
4
elaim
and issuanee
of eertifieate.
The registration
-number
shall ;.
provided
•
:)
The total amounts
paid
or ineurred
to
purehase
or lease
tangible
personal
property7
::
.
motion
pieture.
•
(7)
information
to substantiate
its qualified
expenditures.
1
I I
(8)
information
reqttired
by
the Galif-ornia
Film Gommission
12
tinder
neeessary
regulations
to verify
promulgated
the
:.
pursuant
to
subdivision
(e)
The Galif;jrnia
Film
Gommission
may preseribe
rules and
14
regulations
to earry
out the
purposes
of this
seetion
imeluding
any
15
rules and
regulations13
::
:.
•
and rules
identifiedrequired
17
seetion.
The
shall
inelude provisions
;
•
pereentage
_regulations
of annual
eredit
alloeations-
r independent
films.•
(f) if
the qualified
taxpayer
f�ils to
provide
the
eopyright.
1
registration
number
as required
in paragraph
subdivision
(d), the
eredit shall
disallowed21
be
22
Seetion
19051 ttntil
the proeedures
are satisfied.
purposes
_
24
shall ::
the fiDilowing.
On or after 4uly
1, 2009,
•
tax eredits
to:::
27
(A)
Establish a
proeedure
f;5r applieants
to file
with the
•
eommission-
-r-
jointly
29
the eommission
and
the Franehise
Tax Board
for
the alloeation
of.
1
:::I.. 'ion
shall inelude,
but
not be limited
to,
following31 the
;rmati:
budget for
the motion
pieture
:::.
3�
(ii)
The number
of produetion
days.
34
(iii)
A finaneing
plan f;5r
the
:::.
(iv,)
The diversity
ofthe
workforee
employed
by the
applieant,
36
ineluding,
but not limited
to,
the ethnie and
raeial
makeup35
of the
37
individuals
employed
by
the
applieant during
the produetion
6
.38
the qualified
motion
pietttre,
to
the extent
possible.
•
(v)
Any other infiDrmation
deemed relevant
by, the e-
41
or the
Framehise Tax
Boare�
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28—
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_ tax eredits.
3 (G) Determine
and designate
applieants
who
meet the
4 requirements
of this
seetiotir
.._..
ss
approve,
-
Ull
. first eome;;
Subjeet
to the
annual
eap established
as
provided
.
• subdivision .
.eate
an aggregate
at-nount
of ereditsttnder
this
earryover
off
1 unalloeated
-
11 (2) Gertif�
12 (A) Establish
tax
a verifieation
;taxpayers.
proeedtive
f6r the
amount
of qualified
13 expenditures
paid or
ineurred
by, the applieant.
14 •satisfied;.Galif;omia
Film
16 Gommission.
17 (G) issue
a eredit
eertifieate
to a qualified
taxpayer
upon
' - -
. . . .
-
.
-
... motion
pieture,_
the eredit,
• amount
. .
-
...lified
expendituies
have been
verified
1 under this
seetion.
The aniotintshown
21 eertifieate shall
not
exeeed the
amotititd
to that
22 qualified taxpayer
pursuant
(h) The
Gajifi)rnia
Film Gornmission
shall
provide23
24 Tax Board
and the board
annually
with a list 4qualified
taxpayers
25 and the tax
eredit amounts
alloeated
to eaeh qualified
taxpayer by
• the Galifornia
Film
Gommission..:
taxpayer27 and
taxpayer
28 identifieation
numbersof
eaeh partner
or shareholder,applieable,
_
• of the qualified
taxpayer.
1 (i) (1) The
aggregate
amount
of evedits that
may
be alloeated
31 in any, fiseal
year pursuant
shall be an
amount32
:•
33 (A) One
hundred
million dollars
($100,000,009)
in
eredits f;b
34 the ... 10
fiseal
year and eaeh
fiseal year
thereafter,
through
35 and ineluding
the 2013
14 fiseal
year.
36 (B) The
unused
alloeatiOn
eredit amottnt,
if any,
f;jr the
37 preeeding fiseal
year.
. (G) The
amount
of previously
. . eredits
mot
•-
amount.-
-
... .
..
. __..
1 year exeeeds
the aggregate
amountauthorized
: be
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29— AB 1069
alloeated for under this seetion, sueh exeess shall be treated as
having been applied ft)r on the first day of the subsequent fiseal
other than the fiseal year in whieh the eredit was originally applied
for or the immediately sueeeeding fiseal year.
(3) Notwithstanding the fi5regoing, the Film Gommission shall
set aside up to ten million ($40,000,090) of tax evedits eaeh fiseal
year for independent films alloeated in aeeordanee with rules and
regulations developed p�rsuant to subdivision (e).
(4) Any aet that reduees the atnount that may be alloeated
pursuant to paragraph (1) eonstitutes a ehange in state taxes f;or
the purpose of inereasing revenues within the meaning of Seetiojfl.
3 f A mail. XH4A of the Galifi)mia Gonstitution and may be passed
by not less than two thirds of all Members eleeted to eaeh of t
two houses of the fzegislatuie.
The film eommission hall have the a�thority to alloeate fa -x
eredits in aeeordanee with this seetion and in aeeordanee with any
regulations preseribed pursuant to subdivision (e) upon adoption.
SEC. 4. Section 23685 of the Revenue and Taxation Code, as
added by Section 9 of Chapter 17 of the 3rd Extraordinary Session
of the Statutes of 2009, is amended to read:
23685. (a) (1) For taxable years beginning on or after January
1, 2011, there shall be allowed to a qualified taxpayer a credit
against the "tax," as defined in Section 23036, in an amount equal
to the applicable percentage, as specified in paragraph (4), of the
qualified expenditures for the production of a qualified motion
picture in California.
(2) The credit shall be allowed for the taxable year in which the
California Film Commission issues the credit certificate pursuant
to subdivision (g) for the qualified motion picture, and shall be for
the applicable percentage of all qualified expenditures paid or
incurred by the qualified taxpayer in all taxable years for that
qualified motion picture.
(3) The amount of the credit allowed to a qualified taxpayer
shall be limited to the amount specified in the credit certificate
issued to the qualified taxpayer by the California Film Commission
pursuant to subdivision (g).
(4) For purposes of paragraphs (1) and (2), the applicable
percentage shall be:
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(A)
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(A) Twenty percent of the qualified expenditures attributable
to the production of a qualified motion picture in California.
(B) Twenty-five percent of the qualified expenditures
attributable to the production of a qualified motion picture in
California where the qualified motion picture is a television series
that relocated to California or an independent film.
(b) For purposes of this section:
(1) "Ancillary product" means any article for sale to the public
that contains a portion of, or any element of, the qualified motion
picture.
(2) "Budget" means an estimate of all expenses paid or incurred
during the production period of a qualified motion picture. It shall
be the same budget used by the qualified taxpayer and production
company for all qualified motion picture purposes.
(3) "Clip use" means a use of any portion of a motion picture,
other than the qualified motion picture, used in the qualified motion
picture.
(4) "Credit certificate" means the certificate issued by the
California Film Commission pursuant to subparagraph (C) of
paragraph (2) of subdivision (g).
(5) (A) "Employee fringe benefits" means the amount allowable
as a deduction under this part to the qualified taxpayer involved
in the production of the qualified motion picture, exclusive of any
amounts contributed by employees, for any year during the
production period with respect to any of the following:
(i) Employer contributions under any pension, profit-sharing,
annuity, or similar plan.
(ii) Employer-provided coverage under any accident or health
plan for employees.
(iii) The employer's cost of life or disability insurance provided
to employees.
(B) Any amount treated as wages under clause (i) of
subparagraph (A) of paragraph (18) shall not be taken into account
under this paragraph.
(6) "Independent film" means a motion picture with a minimum
budget of one million dollars ($1,000,000) and a maximum budget
often million dollars ($10,000,000) that is produced by a company
that is not publicly traded and publicly traded companies do not
own, directly or indirectly, more than 25 percent of the producing
company.
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-31— AB 1069
1 (7) "Licensing" means any grant of rights to distribute the
2 qualified motion picture, in whole or in part.
3 (8) "New use" means any use of a motion picture in a medium
4 other than the medium for which it was initially created.
5 (9) (A) "Postproduction" means the final activities in a qualified
6 motion picture's production, including editing, foley recording,
7 automatic dialogue replacement,_ sound editing, scoring and music
8 editing, beginning and end credits, negative cutting, negative
9 processing and duplication, the addition of sound and visual effects,
10 soundmixing, film -to -tape transfers, encoding, and color correction.
11 (B) "Postproduction" does not include the manufacture or
12 shipping of release prints.
13 (10) "Preproduction" means the process of preparation for actual
14 physical production which begins after a qualified motion picture
15 has received a firm agreement of financial commitment, or is
16 greenlit, with, for example, the establishment of a dedicated
17 production office, the hiring of key crew members, and includes,
18 but is not limited to, activities that include location scouting and
19 execution of contracts with vendors of equipment and stage space.
20 (11) "Principal photography" means the phase of production
21 during which the motion picture is actually shot, as distinguished
22 from preproduction and postproduction.
23 (12) "Production period" means the period beginning with
24 preproduction and ending upon completion of postproduction.
25 (13) "Qualified entity" means a personal service corporation as
26 defined in Section 269A(b)(1) of the Internal Revenue Code, a
27 payroll services corporation, or any entity receiving qualified wages
28 with respect to services performed by a qualified individual.
29 (14) (A) "Qualified individual" means any individual who
30 performs services during the production period in an activity related
31 to the production of a qualified motion picture.
32 • (B) "Qualified individual" shall not include either of the
33 following:
34 (i) Any individual related to the qualified taxpayer as described
35 in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
36 Revenue Code.
37 (ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
38 the Internal Revenue Code, of the qualified taxpayer.
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AB 1069 —32
1 (15) (A) "Qualified motion picture" means a motion picture
2 that is produced for distribution to the general public, regardless
3 of medium that is one of the following:
4 (i) A feature with a minimum production budget of one million
5 dollars ($1,000,000) and a maximum production budget of
6 seventy-five million dollars ($75,000,000).
7 (ii) A movie of the week or miniseries with a minimum
8 production budget of five hundred thousand dollars ($500,000).
9 (iii) A new television series produced in California with a
10 minimum production budget of one million dollars ($1,000,000)
11 licensed for original distribution on basic cable.
12 (iv) An independent film.
13 (v) A television series that relocated to California.
14 (B) To qualify as a "qualified motion picture," all of the
15 following conditions shall be satisfied:
16 (i) At least 75 percent of the production days occur wholly in
17 California or 75 percent of the production budget is incurred for
18 payment for services performed within the state and the purchase
19 or rental of property used within the state.
20 (ii) 'Production of the qualified motion picture is completed
21 within 30 months from the date on which the qualified taxpayer's
22 application is approved by the California Film Commission. For
23 purposes of this section, a qualified motion picture is "completed"
24 when the process of postproduction has been finished.
25 (iii) The copyright for the motion picture is registered with the
26 United States Copyright Office pursuant to Title 17 of the United
27 States Code.
28 (iv) Principal photography of the qualified motion picture
29 commences after the date on which the application is approved by
30 the California Film Commission, but no later than 180 days after
31 the date of that approval.
32 (C) For the purposes of subparagraph (A), in computing the
33 total wages paid or incurred for the production of a qualified
34 motion picture, all amounts paid or incurred by all persons or
35 entities that share in the costs of the qualified motion picture shall
36 be aggregated.
37 (D) "Qualified motion picture" shall not include commercial
38 advertising, music videos, a motion picture produced for private
39 noncommercial use, such as weddings, graduations, or as part of
40 an educational course and made by students, a news program,
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33— AB 1069
current events or public events program, talk show, game show,
sporting event or activity, awards show, telethon or other
production that solicits funds, reality television program, clip -based
programming if more than 50 percent of the content is comprised
of licensed footage, documentaries, variety programs, daytime
dramas, strip shows, one-half hour (air time) episodic television
shows, or any production that falls within the recordkeeping
requirements of Section 2257 of Title 18 of the United States Code.
(16) "Qualified expenditures" means amounts paid or incurred
to purchase or lease tangible personal property used within this
state in the production of a qualified motion picture and payments,
including qualified wages, for services performed within this state
in the production of a qualified motion picture.
(17) (A) "Qualified taxpayer" means a taxpayer who has paid
or incurred qualified expenditures and has been issued a credit
certificate by the California Film Commission pursuant to
subdivision (g).
(B) (i) In the case of any passthrough entity, the determination
of whether a taxpayer is a qualified taxpayer under this section
shall be made at the entity level and any credit under this section
is not allowed to the passthrough entity, but shall be passed through
to the partners or shareholders in accordance with applicable
provisions of Part 10 (commencing with Section 17001) or Part
11 (commencing with Section 23001). For purposes of this
paragraph, "passthrough entity" means any entity taxed as a
partnership or "S" corporation.
(ii) In the case of an "S" corporation, the credit allowed under
this section shall not be used by an "S" corporation as a credit
against a tax imposed under Chapter 4.5 (commencing with Section
23800) of Part 11 of Division 2.
(18) (A) "Qualified wages" means all of the following:
(i) Any wages required to be reported under Section 13050 of
the Unemployment Insurance Code that were paid or incurred by
any taxpayer involved in the production of a qualified motion
picture with respect to a qualified individual for services performed
on the qualified motion picture production within California.
(ii) The portion of any employee fringe benefits paid or incurred
by any taxpayer involved in the production of the qualified motion
picture that are properly allocable to qualified wage amounts
described in clause (i).
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(iii) Any payments made to a qualified entity for services
performed in California by qualified individuals within the meaning
of paragraph (14).
(iv) Remuneration paid to an independent contractor who is a
qualified individual for services performed within California by
that qualified individual.
(B) "Qualified wages" shall not include any of the following:
(i) Expenses, including wages, related to new use, reuse, clip
use, licensing, secondary markets, or residual compensation, or
the creation of any ancillary product, including, but not limited to,
a soundtrack album, toy, game, trailer, or teaser.
(ii) Expenses, including wages, paid or incurred with respect to
acquisition, development, turnaround, or any rights thereto.
(iii) Expenses, including wages, related to financing, overhead,
marketing, promotion, or distribution of a qualified motion picture.
(iv) Expenses, including wages, paid per person per qualified
motion picture for writers, directors, music directors, music
composers, music supervisors, producers, and performers, other
than background actors with no scripted lines.
(19) "Residual compensation" means supplemental
compensation paid at the time that a motion picture is exhibited
through new use, reuse, clip use, or in secondary markets, .as
distinguished from payments made during production.
(20) "Reuse" means any use of a qualified motion picture in the
same medium for which it was created, following the initial use
in that medium.
(21) "Secondary markets" means media in which a qualified
motion picture is exhibited following the initial media in which it
is exhibited.
(22) "Television series that relocated to California" means a
television series, without regard to episode length or initial media
exhibition, that filmed all'of its prior season or seasons outside of
California and for which the taxpayer certifies that the credit
provided pursuant to this section is the primary reason for
relocating to California.
(c) (1) Notwithstanding subdivision (i) of Section 23036,
relating to credits attributable to a passthrough business entity, in
the case where the credit allowed by this section exceeds the
taxpayer's tax liability computed under this part, a qualified
taxpayer may elect to assign any portion of the credit allowed
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—35— AB 1069
under this section to one or more affiliated corporations for each
taxable year in which the credit is allowed. For purposes of this
subdivision, "affiliated corporation" has the meaning provided in
subdivision (b) of Section 25110, as that section was amended by
Chapter 881 of the Statutes of 1993, as of the last day of the taxable
year in which the credit is allowed, except that "100 percent" is
substituted for "more than 50 percent" wherever it appears in the
section, and "voting common stock" is substituted for "voting
stock" wherever it appears in the section.
(2) The election provided in paragraph (1):
(A) May be based on any method selected by the qualified
taxpayer that originally receives the credit.
(B) Shall be irrevocable for the taxable year the credit is allowed,
once made.
(C) May be changed for any subsequent taxable year if the
election to make the assignment is expressly shown on each of the
returns of qualified taxpayer and a qualified taxpayer's affiliated
corporations that assign and receive the credits.
(3) (A) Notwithstanding any other law, a qualified taxpayer,
may sell any credit allowed under this section that is attributable
to an independent film, as defined in paragraph (6) of subdivision
(b), to an unrelated party.
(B) The qualified taxpayer shall report to the Franchise Tax
Board prior to the sale of the credit, in the form and manner
specified by the Franchise Tax Board, all required information
regarding the purchase and sale of the credit, including the social
security or other taxpayer identification number of the unrelated
party to whom the credit has been sold, the face amount of the
credit sold, and the amount of consideration received by the
qualified taxpayer for the sale of the credit.
(4) In the case where the credit allowed under this section
exceeds the "tax," the excess credit may be carried over to reduce
the "tax" in the following taxable year, and succeeding five taxable
years, if necessary, until the credit has been exhausted.
(5) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the
unrelated party to another taxpayer or other party.
(6) A party that has been assigned or acquired tax credits under
this paragraph shall be subject to the requirements of this section.
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AB 1069 —36
1 (7) In no event may a qualified taxpayer assign or sell any tax
2 credit to the extent the tax credit allowed by this section is claimed
3 on any tax return of the qualified taxpayer.
4 (8) In the event that both the taxpayer originally allocated a
5 credit under this section by the California Film Commission and
6 a taxpayer to whom the credit has been sold both claim the same
7 amount of credit on their tax returns, the Franchise Tax Board may
8 disallow the credit of either taxpayer, so long as the statute of
9 limitations upon assessment remains open.
10 (9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
11 Division 3 of Title 2 of the Government Code does not apply to
12 any standard, criterion, procedure, determination, rule, notice, or
13 guideline established or issued by the Franchise Tax Board
14 pursuant to this subdivision.
15 (d) No credit shall be allowed pursuant to this section unless
16 the qualified taxpayer provides the following to the California
17 Film Commission:
18 (1) Identification of each qualified individual.
19 (2) The specific start and end dates of production.
20 (3) The total wages paid.
21 (4) The amount of qualified wages paid to each qualified
22 individual.
23 (5) The copyright registration number, as reflected on the
24 certificate of registration issued under the authority of Section 410
25 of Title 17 of the United States Code, relating to registration of
26 claim and issuance of certificate. The registration number shall be
27 provided on the return claiming the credit.
28 (6) The total amounts paid or incurred to purchase or lease
29 tangible personal property used in the production of a qualified
30 motion picture.
31 (7) Information to substantiate its qualified expenditures.
32 (8) Information required by the California Film Commission
33 under regulations promulgated pursuant to subdivision (g)
34 necessary to verify the amount of credit claimed.
35 (e) The California Film Commission may prescribe rules and
36 regulations to carry out the purposes of this section including any
37 rules and regulations necessary to establish procedures, processes,
38 requirements, and rules identified in or required to implement this
39 section. The regulations shall include provisions to set aside a
40 percentage of annual credit allocations for independent films.
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37— AB 1069
(f) If the qualified taxpayer fails to provide the copyright
registration number as required in paragraph (5) of subdivision
(d), the credit shall be disallowed and assessed and collected under
Section 19051 until the procedures are satisfied.
(g) For purposes of this section, the California Film Commission
shall do the following:
(1) On or after July 1, 2009, and before July 1,-2$14 2019,
allocate tax credits to applicants.
(A) Establish a procedure for applicants to file with the
commission a written application, on a form jointly prescribed by
the commission and the Franchise Tax Board for the allocation of
the tax credit. The application shall include, but not be limited to,
the following information:
(i) The budget for the motion picture production.
(ii) The number of production days.
(iii) A financing plan for the production.
(iv) The diversity of the workforce employed by the applicant,
including, but not limited to, the ethnic and racial makeup of the
individuals employed by the applicant during the production of
the qualified motion picture, to the extent possible.
(v) Any other information deemed relevant by the commission
or the Franchise Tax Board.
(B) Establish criteria, consistent with the requirements of this
section, for allocating tax credits.
(C) Determine and designate applicants who meet the
requirements of this section.
(D) Process and approve, or reject, ,all applications on a
first -come -first-served basis.
(E) Subject to the annual cap established as provided in
subdivision (i), allocate an aggregate amount of credits under this
section and Section 17053.85, and allocate any carryover of
unallocated credits from prior years.
(2) Certify tax credits allocated to qualified taxpayers.
(A) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
(B) Establish audit requirements that must be satisfied before
a credit certificate maybe issued by. the California Film
Commission.
(C) Issue a credit certificate to a qualified taxpayer upon
completion of the qualified motion picture, reflecting the credit
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amount allocated after qualified expenditures have been verified
under this section. The amount of a credit shown in the credit
certificate shall not exceed the amount of credit allocated to that
qualified taxpayer pursuant to this section.
(h) The California Film Commission shall provide the Franchise
Tax Board and the board annually with a list of qualified taxpayers
and the tax credit amounts allocated to each qualified taxpayer by
the California Film Commission. The list shall include the names
and taxpayer identification numbers, including taxpayer
identification numbers of each partner or shareholder, as applicable,
of the qualified taxpayer.
(i) (1) The aggregate amount of credits that may be allocated
in any fiscal year pursuant to this section and Section 17053.85
shall be an amount equal to the sum of all of the following:
(A) One hundred million dollars ($100,000,000) in credits for
the 2009-10 fiscal year and each fiscal year thereafter, through
and including the 2013 14 2018-19 fiscal year.
(B) The unused allocation credit amount, if any, for the
preceding fiscal year.
(C) The amount of previously allocated credits not certified.
(2) If the amount of credits applied for in any particular fiscal
year exceeds the aggregate amount of tax credits authorized to be
allocated under this section, such excess shall be treated as having
been applied for on the first day of the subsequent fiscal year.
However, credits may not be allocated from a fiscal year other
than the fiscal year in which the credit was originally applied for
or the immediately succeeding fiscal year.
(3) Notwithstanding the foregoing, the Film Commission shall
set aside up to ten million ($10,000,000) of tax credits each fiscal
year for independent films allocated in accordance with rules and
regulations developed pursuant to subdivision (e).
(4) Any act that reduces the amount that may be allocated
pursuant to paragraph (1) constitutes a change in state taxes for
the purpose of increasing revenues within the meaning of Section
3 of Article XIII A of the California Constitution and may be passed
by not less than two-thirds of all Members elected to each of the
two houses of the Legislature.
0) The film commission shall have the authority to allocate tax
credits in accordance with this section and in accordance with any
regulations prescribed pursuant to subdivision (e) upon adoption.
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1 SEC. 5. This act provides for a tax levy within the meaning of
2 Article IV of the Constitution and shall go into immediate effect.
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AMENDED IN ASSEMBLY APRIL 4, 2011
AMENDED IN ASSEMBLY MARCH 29, 2011
AMENDED IN ASSEMBLY MARCH 16, 2011
CALIFORNIA LEGISLATURE -2011-12 REGULAR SESSION
ASSEMBLY BILL No. 438
Introduced by Assembly Member Williams
February 14, 2011
An act to amend Sections 19104 and 19116 of, and to add Section
19104.5 to, the Education Code, relating to libraries.
LEGISLATIVE COUNSEL'S DIGEST
AB 438, as amended, Williams. County free libraries: withdrawal.
Existing law provides that the county boards of supervisors may
establish and maintain, within their respective counties, county free
libraries pursuant to specified provisions of law. Existing law provides
that the board of trustees, common council, or other legislative body of
any city or the board of trustees of any library district may, on or before
January 1 st of any year, notify the county board of supervisors that the
city or library district no longer desires to be a part of the county free
library system, as specified.
This bill would instead provide that the board of trustees, common
council, or other legislative body of a city or the board of trustees of a
library district may, on or before January 1st of any year, notify the
county board of supervisors that it no longer desires to be part of the
county free library system, unless the board of trustees, common council,
or other legislative body of a city or the board of trustees of a library
district intends to operate the city's or the district's library or libraries
with the help of a private contractor that will employ library staff. The
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bill would require that if the board of trustees, common council, or other
legislative body of a city or the board of trustees of a library district
intends to operate the city's or the district's library or libraries, with
the help of a private contractor that will employ library staff, it must
publish notice of the contemplated action, submit the question for voter
approval, and, if the withdrawal is approved by the voters, notify the
county board of supervisors, as specified. The bill would provide that
the notice to withdraw shall not be operative until the next succeeding
year, as speeified. The bill would require the eity or library distriet to
eease to paffieipate in the benefits of the eottnty ftee library system,
t4-om being liable for taxes for eotinty f�ee library . To the
extent the bill would impose additional duties on local agencies, the
bill would impose a state -mandated local program.
This bill would make other conforming changes.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these statutory
provisions.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: yes.
The people of the State of California do enact as follows:
1 SECTION 1. Section 19104 of the Education Code is amended
2 to read:
3 19104. (a) The board of trustees, common council, or other
4 legislative body of a city or the board of trustees of a library district
5 may, on or before January 1 st of any year, notify the county board
6 of supervisors that the city or library district no longer desires to
7 be a part of the county free library system, unless the board of
8 trustees, common council, or other legislative body of a city or the
9 board of trustees of a library district intends to operate the city's
10 or the district's library or libraries with the help of a private
11 contractor that will employ library staff. The notice shall be
12 accompanied by a statement complying with the requirements of
13 Chapter 8 (commencing with Section 54900) of Part 1 of Division
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1 2 of Title 5 of the Government Code. The clerk of the county board
2 of supervisors shall file the statement with the county assessor and
3 the State Board of Equalization. Thereafter the city or library
4 district shall cease to participate in the benefits of the county free
5 library system, and the property situated in the city or library
6 district shall not be liable for taxes for county free library purposes.
7 (b) If the board of trustees, common council, or other legislative
8 body of a city or the board of trustees of a library district intends
9 to operate the city's or the district's library or libraries, with the
10 help of a private contractor that will employ library staff, the
11 requirements of Section 19104.5 shall apply.
12 SEC. 2. Section 19104.5 is added to the Education Code, to
13 read:
14 19104.5. (a) If the board of trustees, common council, or other
15 legislative body of a city or the board of trustees of a library district
16 intends to operate the city's or the district's library or libraries,
17 with the help of a private contractor that will employ library staff,
18 the following requirements shall apply:
19 (1) At least once a week for two consecutive weeks prior to
20 taking any action, the board of trustees, common council, or other
21 legislative body of the city or the board of trustees of the library
22 district shall publish, in a newspaper designated by it and circulated
23 throughout the city or library district, notice of the contemplated
24 action, giving the date and place of the meeting at which the
25 contemplated action is proposed to be taken.
26 (2) Upon approval of the intent to withdraw by the board of
27 trustees, common council, or other legislative body of the city, or
28 the board of trustees of the library district, the question of the
29 decision to withdraw from the county free library system and to
30 use a private contractor that will employ library staff to operate
31 the city's or the district's library or libraries shall be submitted for
32 voter approval at a regularly scheduled election.
33 (3) If a majority of voters approve the withdrawal, the board of
34 trustees, common council, or other legislative body of the city or
35 the board of trustees of the library district shall notify the county
36 board of supervisors of approval by the voters to withdraw from
37 the county free library system. The notice shall be accompanied
38 by a statement complying with the requirements of Chapter 8
39 (commencing with Section 54900) of Part 1 of Division 2 of Title
40 5 of the Government Code. The clerk of the county board of
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supervisors shall file the statement with the county assessor and
the State Board of Equalization.
(b) The notice to withdraw shall not be effective until the
succeeding year
the benefits of the eounty free library system, and the property
SEC. 3. Section 19116 of the Education Code is amended to
read:
19116. (a) (1) Sections 19104 and 19105 are not applicable
to the withdrawal of a city or library district from the county free
library system in Los Angeles County or Riverside County. The
legislative body of any city or the board of trustees of any library
district, whose jurisdiction is within the County of Los Angeles
or the County of Riverside, may notify the board of supervisors
for Los Angeles County or Riverside County, as appropriate, that
the city or library district no longer desires to be a part of the
county free library system, unless the city's legislative body or the
library district's board of trustees intends to operate the city's or
the district's library or libraries with the help of a private contractor
that will employ library staff. The notice shall state whether the
city or library district intends to acquire property pursuant to
subdivision (c). The board of supervisors shall transmit a copy of
the notice to the Los Angeles County Assessor or Riverside County
Assessor, as appropriate, the Los Angeles County Auditor or
Riverside County Auditor, as appropriate, and the State Board of
Equalization.
(2) If the city's legislative body or the library district's board
of trustees intends to operate the city's or the district's library or
libraries, with the help of a private contractor that will employ
library staff, the requirements of Section 19104.5 shall also apply.
(b) When a city or library district files a notice pursuant to
subdivision (a), it shall remain a member of the county free library
system until July 1 of the base year or the date on which property
is transferred pursuant to subdivision (c), whichever date is later.
Upon ceasing to be a member of the county free library system,
the city or library district shall not participate in any benefits of
the county free library system, and shall assume the responsibility
for the provision of library services within its jurisdiction. Unless
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otherwise agreed by July 1 of the base year in writing by the Board
of Supervisors of Los Angeles County or the Board of Supervisors
of Riverside County, as appropriate, and the withdrawing city or
library district, an amount of property tax revenue equal to the
property tax revenues allocated to the county free library system
pursuant to Article 2 (commencing with Section 96) of Chapter 6
of Part 0.5 of Division 1 of the Revenue and Taxation Code in the
fiscal year prior to the base year and that were derived from
property situated within the boundaries of the withdrawing entity
shall be allocated to and used to maintain library services by the
withdrawing entity in the base year and, adjusted forward, in each
fiscal year thereafter at the same time allocations are made pursuant
to Article 2 (commencing with Section 96) of Chapter 6 of Part
0.5 of Division 1 of the Revenue and Taxation Code. This
subdivision shall not apply to property tax revenues that have been
pledged to repay bonded indebtedness of the county free library
system.
(c) If there are one or more county library facilities within the
territorial boundaries of the withdrawing entity at the time the
withdrawing entity provides notice pursuant to subdivision (a),
the withdrawing entity shall have the right to acquire any or all of
those facilities from the county and the county shall, no later than
July 1 of the base year, transfer to the withdrawing entity each
facility to be acquired and the personal property therein related to
the provision of library services. If the facility or personal property
was purchased with bond proceeds or other forms of indebtedness,
acquisition shall only take place if the withdrawing entity assumes
any remaining indebtedness and in no way impairs the repayment
thereof. If the withdrawing entity opts not to acquire any facilities
or personal property, the county at its discretion may dispose of
the facilities or personal property or convert the use of those
facilities or personal property, including transferring collections
and other personal property to other sites and converting facilities
to other purposes. If the withdrawing entity opts to acquire any
facilities or personal property, the acquisition prices shall be as
follows unless otherwise provided for by statute or contract:
(1) Each county library facility which, for the purposes of this
section, shall include the real property upon which the facility is
located and any fixtures therein and shall not include computer
systems and software, shall be transferred for the lesser of:
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(A) No cost, if the facility was donated to the county by the
withdrawing entity.
(B) The price paid to the withdrawing entity by the county for
the facility, if the county bought the facility from the withdrawing
entity. However, if the county constructed capital improvements
to the facility after it was bought from the withdrawing entity, the
county's total out-of-pocket costs for the capital improvement
excluding any costs for routine repairs, restoration or maintenance,
shall be added to the price.
(C) The fair market value of the facility. However, if any portion
of the facility was donated to the county by the withdrawing entity
or if any moneys were donated by the withdrawing entity towards
the county's construction or acquisition of the facility, or any
portion thereof, the value of the donation shall be subtracted from
the fair market value.
(2) Any personal property within the facility related to the
provision of library services, including books and resource
materials, computer systems and software, furniture, and
furnishings, shall be transferred for the lesser of:
(A) No cost, if the property was donated to the county by the
withdrawing entity.
(B) The fair market value of the personal property. However,
on or before the March 1 preceding the July 1 of the base year, the
county librarian may designate collections bf resource books and
materials that are unique in, and integral to, the county free library
system to be special collections. The special collections shall be
acquired by the withdrawing entity only upon mutually agreeable
terms and conditions.
(d) If a facility transferred pursuant to subdivision (c) serves
residents of surrounding jurisdictions, the board of supervisors
governing the county free library system may require, as a
condition of transferring the facility, that the library services
provided by the withdrawing entity to its residents also be available
on the same basis to the residents of the surrounding jurisdictions.
However, if the withdrawing entity contributes to the provision of
library services from other city funds, or through taxes,
assessments, or fees of its residents, the withdrawing entity may
provide additional services to its residents. If the requirement to
provide regional services is imposed and, unless otherwise agreed
in writing by the county and the withdrawing entity by July 1 of
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1 the base year, an amount of property tax revenues equal to the
2 property tax revenues derived from property situated in the
3 surrounding jurisdictions which were, in the fiscal year prior to
4 the base year, allocated to the county free library system pursuant
5 to Article 2 (commencing with Section 96) of Chapter 6 of Part
6 0.5 of Division 1 of the Revenue and Taxation Code shall be
7 allocated to and used to maintain library services by the
8 withdrawing entity in the base year and, adjusted forward, in each
9 fiscal year thereafter at the same time other allocations are made
10 pursuant to Article 2 (commencing with Section 96) of Chapter 6
11 of Part 0.5 of Division 1 of the Revenue and Taxation Code. This
12 subdivision shall not apply to property tax revenues that have been
13 pledged to repay bonded indebtedness. If a surrounding jurisdiction
14 subsequently provides notice of its intent to withdraw from the
15 county free library system pursuant to subdivision (a), on the date
16 the surrounding jurisdiction ceases to participate in the benefits of
17 the county free library system pursuant to subdivision (b), the
18 withdrawing entity shall no longer be required to make library
19 services available to the residents of the surrounding jurisdiction
20 and property tax revenues derived from property situated in the
21 surrounding jurisdiction shall no longer be allocated to the
22 withdrawing entity pursuant to this subdivision.
23 (e) For purposes of this section, the following terms are defined
24 as follows:
25 (1) "Base year" means the fiscal year commencing on the July
26 1 following the December 2 following the date of the notice given
27 pursuant to subdivision (a) of this section.
28 (2) "Fair market value" means:
29 (A) Any value agreed upon by the withdrawing entity and the
30 county.
31 (B) If no agreement as to value is reached by the March 1
32 preceding the July 1 of the base year, the value assigned by an
33 appraiser agreed upon by the withdrawing entity and the county.
34 (C) If no agreement as to the appointment of an appraiser is
35 reached pursuant to subparagraph (B) by the April 1 preceding the
36 July 1 of the base year, the value assigned by an appraiser agreed
37 upon between the withdrawing entity's appraiser and the county's
38 appraiser.
39 (D) If no agreement as to the appointment of an appraiser is
40 reached pursuant to subparagraph (C) by the May 1 preceding the
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July I of the base year, the value assigned by a state certified
appraiser designated by the withdrawing entity. The designated
appraiser shall provide the appraisal in writing to the county no
later than the June 1 preceding the July 1 of the base year.
(E) The withdrawing entity shall reimburse the county for any
appraisal costs the county incurs in determining the fair market
value pursuant to this section.
(3) "Surrounding jurisdictions" means cities and library districts
that are adjacent to the withdrawing entity and tax rate areas in
unincorporated areas of the county that are wholly or partially
within the withdrawing entity's sphere of influence, that are within
the county free library system and have no facility within their
territorial boundaries providing library services at the time the
withdrawing entity provides notice pursuant to subdivision (a).
SEC. 4. If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.
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