BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1069
                                                                  Page  1

          CORRECTED:  09/14/2011  

          (  Without Reference to File  )

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1069 (Fuentes)
          As Amended  September 9, 2011
          Majority vote.  Urgency
           
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          |ASSEMBLY:  |77-1 |(May 31, 2011)  |SENATE: |34-2 |(September 10, |
          |           |     |                |        |     |2011)          |
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           Original Committee Reference:    REV. & TAX.  

           SUMMARY  :  Extends the application of the California Motion 
          Picture Tax Credit (Film Tax Credit) program for one year, from 
          July 1, 2014, until July 1, 2015, thus authorizing the 
          allocation of an additional $100 million in tax credits to 
          qualified productions, provided certain conditions are met.   

           The Senate amendments   reduce the five-year extension of the 
          Film Tax Credit program to one year, from July 1, 2014 until 
          July 1, 2015. 

           AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Authorized the California Film Commission (CFC) to allocate 
            annually the motion picture tax credits, under both the 
            Personal Income Tax and the Corporation Tax Laws, to qualified 
            applicants for five additional FYs, from July 1, 2014, until 
            July 1, 2019. 

          2)Specified that the aggregate amount of motion picture tax 
            credits that may be allocated by the CFC in any FY is limited 
            to $100 million, through and including FY 2018-19. 

          3)Ensured that the film tax credit assigned to, or sold to, an 
            unrelated taxpayer may be claimed by that taxpayer as a 
            "qualified taxpayer."

          4)Clarified that the otherwise applicable limitation on the 
            utilization of credits by a disregarded entity does not apply 
            and that the disregarded entity may sell the film tax credit 








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            to an unrelated taxpayer. 

          5)Deleted duplicative sections of the R&TC. 

          6)Would take effect immediately as a tax levy. 

           FISCAL EFFECT :  Due to major amendments on August 31, 2011 and 
          September 10, 2011, of this bill, the fiscal effect is currently 
          unknown.  

          COMMENTS  :   

           Author's statement  .  The author states that, "California 
          suffered both job and financial losses as hundreds of 
          productions have left the state to seek incentives offered 
          elsewhere.  A phenomenon commonly referred to 'run-away 
          production.'  In addition to the international competition from 
          Canada, Australia and most EU nations, over 40 U.S. states offer 
          meaningful financial incentives to the film industry 
          successfully luring production and post-production jobs and 
          spending away from California.

          "In February 2009, the California Film & Television Tax Credit 
          Program was enacted as part of a targeted economic stimulus 
          package to increase production spending, jobs and tax revenues 
          in California.  AB 1069, in seeking a five-year extension to the 
          existing law, acknowledges that the Program has been successful 
          in its goal to retain and increase film and television 
          production occurring in California."

           California Motion Picture Tax Credit Program:  Background  .  In 
          February 2009, the Film Tax Credit program was enacted as a part 
          of an economic stimulus plan to promote production spending, 
          jobs, and tax revenues in California.  Although a bill creating 
          some sort of a tax incentive for the motion picture and 
          television production in California had been introduced almost 
          every legislative session long prior to 2009, the existing Film 
          Tax Credit program was initially recommended by then Governor 
          Schwarzenegger in his 2009-10 Budget proposal.  Unlike other 
          proposals in the past, the existing Film Tax Credit is targeted, 
          capped and allocated.  In many respects, it is similar to a 
          grant program.  It is effective only for five FYs, from FY 
          2009-10 until FY 2013-14, and only $500 million total is 
          allocated to this credit over the life of the program.  The CFC 
          is required to allocate and certify the credit on the first-come 








                                                                  AB 1069
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          first-serve basis, up to $100 million every FY.  The credit 
          cannot be used until January 1, 2011, and is not refundable.  

           Is the Film Tax Credit Program effective in achieving the stated 
          goal  ?  With the current financial state of the California 
          economy, all state programs affecting the General Fund are under 
          scrutiny to ensure that the programs are effectively achieving 
          desired results.  The main goal of the Film Tax Credit Program 
          is to prevent runaway production and retain production already 
          being filmed in California.  The Film Tax Credit Program is a 
          relatively new program, and whether the program has been 
          successful in achieving its main goal is up for debate.   The 
          film and television industry has been a large source of 
          employment and revenue for the state and losing the industry 
          could be detrimental to the California economy.  However, no 
          data is yet available to determine the extent of the film and 
          television production that would have occurred in the state in 
          the last two years in the absence of the Film Tax Credit.  Thus, 
          the question remains as to whether the value of the benefits 
          received by the state from providing the Film Tax Credit 
          outweighs the costs of the tax subsidy.  


           Analysis Prepared by  :   Oksana Jaffe / REV. & TAX. / (916) 
          319-2098 

                                                                FN: 0002916