BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1069|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 1069
Author: Fuentes (D), et al.
Amended: 9/9/11 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 7/6/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/25/11
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Runner, Steinberg
ASSEMBLY FLOOR : 77-1, 5/31/11 - See last page for vote
SUBJECT : Income taxes: credits: film: extension
SOURCE : Author
DIGEST : This bill extends the applicability of the
California Film and Television Tax Credit (film tax credit)
authorizing the allocation of an additional $100 million
annually in tax credits to qualified productions to July 1,
2015.
ANALYSIS : In 1985, the Legislature established the
California Film Commission (CFC) to coordinate state and
local governments' efforts at providing an environment
conducive for the film industry. 21 members of the film
industry, private sector, and state and local governments
CONTINUED
AB 1069
Page
2
are appointed by the Governor, Senate Pro Tem, and Speaker
of the Assembly to sit on the CFC board.
In 2009, Governor Schwarzenegger signed the California Film
and Television Tax Credit Program (Film Tax Credit Program)
as a part of the 2009 Budget plan to promote film
production and create and retain jobs in California (SB
15X3 ÝCalderon], Chapter 17, Statutes of 2009, and AB 15X3
ÝKrekorian], Chapter 19, Statutes of 2009). Qualified
motion pictures, defined as: (1) feature films with
budgets between $1 million and $75 million; (2) movies of
the week with a minimum budget of $500,000; and (3) new
television series with a minimum $1 million budget, may
apply for the credit. Also, 75 percent of the motion
picture shooting days must take place in California, or 75
percent of the motion production budget pays for services
or the purchase or rental or property within the state.
This bill:
1. Authorizes the CFC to allocate $100 million film tax
credits annually until July 1, 2015.
2. Makes several clarifications to resolve the Franchise
Tax Board's (FTB) technical considerations.
A. Any unrelated party or parties to the film project
that purchases a tax credit must be treated as a
qualified taxpayer.
B. An affiliated corporation or corporations assigned
a credit must be treated as a qualified taxpayer.
C. Limitations on taxpayers' amount of credit or
carryforward credit do not apply to the film tax
credit. This exclusion applies for taxpayers that
that directly, or indirectly, own an interest in a
corporation.
D. Limitations on the amount of any credit, including
carryover credit from prior years, that may be
applied to reduce the taxpayer's "tax" - taxable
income, S-corporation taxes (a corporation that
elects to be taxed under the S chapter of the
CONTINUED
AB 1069
Page
3
Internal Revenue Code and passes along the
corporation's income gains or losses to its
shareholders), corporation franchise taxes, or
corporation income taxes -- also do not apply for the
film tax credit.
Comments
When 43 other United States states and overseas production
companies offer enticing tax subsidies for film and TV
productions, California loses big. A 2011 Los Angeles
Economic Development Council economic impact study puts
nearly 39 percent of national motion picture and video
industry employment and 60 percent of labor industry in
California. That amounts to around 20 million jobs. The
study further states that the industry purchased $6.4
billion in goods and service, $1.7 billion in advertising,
and $1.5 billion in rental or real estate services-an
aggregate amount of $15.4 billion spent on goods and
services in California. The productions that leave the
state to pursue other state or international incentives -
"runaway productions" -- translate to significant job and
economic losses. The same economic study found that in the
first two years of the California Motion Picture tax credit
program, the credit generated more than $3.8 billion in
economic output, supports 20, 040 union labor jobs in
California, and will return $200 million to state and local
governments. Film L.A., the permitting agency for Los
Angeles, reports that in 2010, feature film production
posted a 28.1 percent fourth quarter gain and a
year-over-year gain of 8.1 percent, which can be wholly
attributed to the film tax credit. California has a
historical comparative advantage over other states, because
of the long-established film industry and the high-paying
talent pool that resides in state. Coupling the state's
natural beauty, clement weather, and high-tech media
studios with the tax incentive retains and attracts
production to California. However, if the film credit is
left to expire next summer, proponents of this bill argue
that California's film industry will steadily become
uncompetitive, as other locations invest in and develop
their own infrastructure and talent pools. Moreover, the
state will no longer draw ancillary economic benefits from
tourism.
CONTINUED
AB 1069
Page
4
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Tax credit extension $11,000 $49,000
$83,000General*
Film Commission Approximately $200/yr in
ongoing staffing General
LAO study Unknown one-time costs General
* Additional aggregate revenue loss of $357 million over
future fiscal years.
SUPPORT : (Per Senate Governance and Finance Committee
analysis of 7/6/11 - unable to reverify at time of writing)
American Federation of Television and Radio Artists
California Labor Federation
California Taxpayers Association
California Teamsters Public Affairs Council
Cathy Anderson
City of Santa Clarita
County of Tulare
Directors Guild of America
Duncan Crabtree-Ireland
Film Liaisons in California Statewide
Film Musicians Secondary Markets Fund
International Alliance of Theatrical Stage Employees Local
44, 80, 600, 695, 700, 705, 706, 728, 729, 767, 800, 871,
884, 892
International Brotherhood of Teamsters, Local 399
Lucy Steffens, Sacramento Film Commission
Motion Picture Association of America, Inc.
Professional Musicians, Local 47
Recording Musicians Association
Screen Actors Guild
Sony Pictures Entertainment
CONTINUED
AB 1069
Page
5
Stu Segall Productions
Unite Here!
ASSEMBLY FLOOR : 77-1, 5/31/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Olsen, Pan, Perea, V. Manuel Pérez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. Pérez
NOES: Norby
NO VOTE RECORDED: Chesbro, Gorell
AGB:kc 9/9/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED