BILL ANALYSIS �
AB 1413
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1413 (Committee on Revenue and Taxation) - As Introduced:
March 19, 2013
Policy Committee: Revenue and
Taxation Vote: 8-0
AESTIM 7-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill clarifies the scope of the California Motion Picture
Tax Credit utilization and simplifies the process by which
certain nonprofit organizations may obtain tax-exempt status in
California. Specifically, this bill:
1)Provides that the film tax credit may be used to reduce a
qualified corporate taxpayer's regular income tax beyond the
tentative minimum tax (TMT) for taxable years beginning on or
after January 1, 2011.
2)Permits organizations formed under Internal Revenue Code
Section 501(c)(4), (5), (6), or (7) that are tax-exempt for
federal tax purposes to be treated as tax-exempt organizations
for California tax purposes, without approval by the Franchise
Tax Board (FTB).
3)Declares that the retroactive application of amendments made
to the provisions relating to the film tax credit serves a
public purpose for specified reasons and does not constitute a
gift of public funds within the meaning of Section 6 of
Article XVI of the California Constitution.
FISCAL EFFECT
1)The FTB staff estimates that the provision simplifying the
process for certain nonprofit organizations to obtain
tax-exempt status in California would result in an annual
General Fund (GF) revenue loss of $9,000 in fiscal year (FY)
AB 1413
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2014-15 and $20,000 in every FY thereafter.
2)The FTB staff also estimates clarifying the scope of the film
tax credit utilization would result in an annual GF revenue
loss of $9.3 million in FY 2012-13, $800,000 in FY 2013-14,
$1.3 million in FY 2014-15, and $600,000 in FY 2016-17, and
would result in a GF revenue gain of $10,000 in FY 2015-16.
COMMENTS
1)Purpose. According to the author, AB 1413 will accomplish two
goals: To clarify that a taxpayer may use the film tax credit
to reduce its regular tax beyond the TMT, and to simplify the
process for applying for California tax-exempt status.
2)Arguments in Support . The proponents of this bill state that
AB 1413 corrects an oversight in the original legislation and
fulfills the original purpose of the film tax credit program,
which is to permit production companies to maximize the
utility of the credit. They assert that allowing the credit
to be used by film production companies to reduce their tax
liability below the otherwise applicable minimum tax is a
common treatment for similar tax programs. Finally, the
proponents argue that AB 1413 will protect jobs in
California's signature industry - the film industry.
3)Tax-Exempt Status in California. If a California charitable
nonprofit received federal tax-exempt 501(c)(4), (5), (6), or
(7) status from the IRS, it must apply separately for a state
tax exemption. The organization must complete and submit to
FTB an exemption application form and pay a filing fee of $25.
The exemption application must include the articles of
incorporation, by-laws of the organization, and financial
statements. To be exempt from tax, the organization must be
organized and operated for one or more exempt purposes listed
in the state law, which parallels those in the Internal
Revenue code.
4)Film Tax Credit . In February 2009, the film tax credit was
enacted as a part of an economic stimulus plan to promote
production spending, jobs, and tax revenues in California.
Originally, the program was scheduled to sunset in FY 2013-14,
but was extended by the Legislature in 2011 for one additional
year - until FY 2014-15 by AB 1069 (Fuentes) Chapter 731,
Statutes of 2011. In 2012, the operation of the film tax
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credit was extended for two additional years, thereby
authorizing the allocation of an additional $100 million
annually in tax credits to qualified productions from July 1,
2015, until July 1, 2017. AB 2026 (Fuentes) Chapter 841.
The enabling legislation, however, did not expressly add the
film tax credit to the list of tax credits that may be used to
reduce a corporate taxpayer's regular tax beyond the tentative
minimum tax (TMT) which is California's version of the
alternative minimum tax. This language is routinely included
in over almost all of the tax credits claimed by California
corporations. As a result, the film tax credit may be used to
reduce regular tax liability but only to the TMT level, which
prevents the taxpayer from realizing the full value of the
credit. In many cases, the credit is limited to about 25% of
the amount awarded. Because the use of the film tax credit is
similarly limited in future years, even carried over credits
may not be fully utilized.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081