BILL NUMBER: SB 370 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 3, 2013
AMENDED IN SENATE APRIL 8, 2013
INTRODUCED BY Senator Lieu
FEBRUARY 20, 2013
An act to add Sections 17053.89, 17053.90, 23680, and 23681 to the
Revenue and Taxation Code, relating to taxation, and making an
appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 370, as amended, Lieu. Income tax: credits: qualified
commercial production.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws.
This bill would, for each taxable year beginning on or after
January 1, 2013, allow credits under both laws in an amount equal to
15% of a specified amount paid or incurred by a qualified taxpayer,
as defined, for the production of a qualified commercial, as defined,
inside or outside of the studio zone, not to exceed $13,000,000
annually for credits for qualified commercials produced within a
studio zone and not to exceed $2,000,000 annually for credits for
qualified commercials produced outside of a studio zone in
California, as specified. This bill would give the qualified taxpayer
the option to carry over the credit or receive a refund, as
specified. This bill would make a continuous appropriation from the
General Fund to the Franchise Tax Board in the amount allowed for
refunds for the purpose of making those refunds.
This bill would provide that specified information provided to the
California Film Commission shall constitute confidential taxpayer
information, and would impose specified criminal penalties on the
disclosure of that information. By expanding the crime of knowingly
and wrongfully accessing, using, or disclosing specified information,
this bill would impose a state-mandated local program.
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 no reimbursement is required by this
act for a specified reason.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17053.89 is added to the Revenue and Taxation
Code, to read:
17053.89. (a) For taxable years beginning on or after January 1,
2013, there shall be allowed to a qualified taxpayer a credit against
the "net tax," as defined in Section 17039, an amount equal to 15
percent, except as otherwise provided, of the qualified expenditures
credit base for the production of a qualified commercial within the
studio zone.
(b) For purposes of this section:
(1) (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 commercial, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
(i) Qualified taxpayer contributions under any pension,
profit-sharing, annuity, or similar plan.
(ii) Qualified taxpayer-provided coverage under any accident or
health plan for employees.
(iii) The qualified taxpayer's cost of life or disability
insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (7) shall not be taken into account under this
paragraph.
(C) For the purposes of this paragraph, "employee" means a
qualified individual.
(2) (A) "Qualified commercial" means a commercial or advertisement
composed of moving images and sounds that is recorded on film,
videotape, or other digital medium, created for display on a network,
regional channel, cable, or interactive media, including, but not
limited to, the Internet, mobile devices, in-game advertising, and
experiential advertising where at least 75 percent of the total
qualified expenditures occur wholly within the
studio zone. For purposes of this paragraph, mobile devices include
cellphones, cellular telephones,
smartphones, personal digital assistants, and other portable devices
with a screen.
(B) "Qualified commercial" shall not include any program-length
production with an advertising component in excess of five minutes,
including an infomercial, news, or current affairs program, interview
or talk program, network promotion (short-form content intended to
promote other programming), feature film promotion (trailers and
teasers), sporting event, game show, award ceremony, daytime drama,
reality entertainment program, program intended primarily for
industrial, corporate, or institutional end users, public service
announcements, fundraising commercial or commercial promoting a
political candidate or political issue, a program consisting of more
than one-half of the screen time of stock footage, a program produced
by an organization described in Section 527 of the Internal Revenue
Code, or any production that falls within to
which the recordkeeping requirements of Section 2257 of Title
18 of the United States Code apply .
(3) "Qualified expenditures" means the amount paid or incurred
during the taxable year to purchase or lease tangible personal
property within the studio zone in the production of a qualified
commercial, and to pay for services, including qualified
wages, services performed within the studio zone
in the production of a qualified commercial.
(4) "Qualified expenditures credit base" means the amount over
five hundred thousand dollars ($500,000) paid or incurred during the
taxable year within the studio zone in qualified expenditures.
(5) (A) "Qualified individual" means an individual who performs
services during the production period in an activity related to the
production of a qualified commercial.
(B) "Qualified individual" shall not include either of the
following:
(i) Any individual related to the qualified taxpayer as described
in Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
(6) (A) "Qualified taxpayer" means a taxpayer that is principally
engaged in the production of a qualified commercial, has control over
the selection of production location, deployment, or management of
the production equipment, directly employs the production crew as the
person that has control over the hiring and firing of the crew on
the qualified commercial, and paid or incurred at least five hundred
thousand dollars ($500,000) in qualified expenditures within the
studio zone during the taxable year. All members of a
commonly controlled group, as defined by subdivision (b) of Section
25105, shall be treated as a single qualified taxpayer for the
purposes of computing qualified expenditures.
(B) In the case of a pass-thru 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 shall
not be allowed to the pass-thru entity, but shall be passed through
and allowed to the partners or shareholders in accordance with Part
10 (commencing with Section 17001). For purposes of this paragraph,
"pass-thru entity" means any entity taxed as a partnership or "S"
corporation.
(7) (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 a qualified
taxpayer involved in the production of a qualified commercial with
respect to a qualified individual for services performed on the
qualified commercial produced within the studio zone.
(ii) Any payments made to a qualified taxpayer for services
performed in the studio zone by a qualified individual.
(iii) Remuneration paid to an independent contractor who is a
qualified individual for services performed within the studio zone by
that qualified individual.
(iv) The portion of any employee fringe benefits paid or incurred
by a qualified taxpayer involved in the production of the qualified
commercial that are properly allocable to qualified wage amounts
described in clauses (i), (ii), and (iii).
(B) "Qualified wages" shall not include expenses, including wages,
paid per person per qualified commercial for writers, directors,
music directors, music composers, music supervisors, producers, and
performers, other than background actors with no scripted lines.
(8) "Studio zone" means the area within a circle of 30 miles in
radius from the intersection of Beverly Boulevard and La Cienega
Boulevard in Los Angeles, California.
(c) In the case where the credit allowed under this section
exceeds the "net tax," either of the following
may shall occur:
(1) The Fifty percent of the
excess credit may shall 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 year .
(2) (A) For the taxable year, 50 percent of the excess credit
shall be refunded to the qualified taxpayer, and 50 percent of the
excess credit shall be carried over to reduce the "net tax" in the
following taxable year.
(B) For the following taxable year, if the credit remaining
exceeds the "net tax" for that taxable year, the excess credit shall
be refunded.
(2) With regard to the remaining 50 percent of the excess credit,
the qualified taxpayer shall elect to do either of the following:
(A) Receive a refund of the excess credit amount.
(B) Carry over the excess credit to reduce the "net tax" in the
following taxable year, and succeeding six taxable years, if
necessary, until the credit has been exhausted.
(3) There shall be continuously appropriated from the General Fund
to the Franchise Tax Board an amount equal to the refunds allowed by
this section for the purpose of making those refunds.
(d) A credit shall be allowed pursuant to this section only if the
qualified taxpayer provides the following to the California Film
Commission:
(1) The production schedule for each commercial produced in a
taxable year.
(2) Total qualified expenditures.
(3) Total qualified wages paid.
(4) Total nonqualified expenditures incurred in California.
(5) Agreed upon procedures as prescribed by the California Film
Commission and performed by a licensed certified public accountant
who performs attest services in California and who has attended a
certified public accountant orientation meeting conducted by the
California Film Commission.
(6) Number of cast and crew members hired for each commercial.
(7) Number of days worked by each cast and crew member for each
commercial.
(8) Number of vendors used during the taxable year.
(9) Any other information as requested by the California Film
Commission.
(e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in, or required to, implement this
section.
(f) For purposes of this section, the California Film Commission
shall do the following:
(1) Establish a procedure for applicants to file with the
commission a written application due on or before April 1, 2014, and
each April 1 thereafter, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit.
(2) Subject to the annual cap established as provided in
subdivision (h), allocate and certify an aggregate
amount of credits to qualified taxpayers under this section and
Section 23680.
(3) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
(4) Establish audit requirements that must
shall be satisfied before a credit certificate may be issued
by the California Film Commission.
(5) Provide the Legislative Analyst's Office, upon request, any or
all application materials or any other materials received from, or
submitted by, the applicants, in electronic format when available,
including, but not limited to, information provided pursuant to
subdivision (d).
(6) The information provided to the California Film Commission
pursuant to this section shall constitute confidential tax
information for purposes of Article 2 (commencing with Section 19542)
of Chapter 7 of Part 10.2.
(g) (1) The California Film Commission shall
provide the Legislative Analyst's Office and the
Franchise Tax 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 taxpayers.
(2) (A) Notwithstanding subparagraph (B), the California Film
Commission shall annually post on its Internet Web site and make
available for public release the following:
(i) A table which includes all of the following information:
(I) A list of qualified taxpayers and the tax credit amounts
allocated to each qualified taxpayer by the California Film
Commission.
(II) The total number of production days in California reported by
the qualified taxpayers in its application.
(III) The number of California jobs directly created by the
production as reported by the qualified taxpayer in its application.
(IV) The total amount of qualified expenditures that were spent on
submitted productions.
(ii) A summary describing the qualified taxpayer's production and
background information regarding the qualified taxpayer contained in
the qualified taxpayer's application for the credit.
(B) This subdivision shall not be construed to make the
information submitted by an applicant for a tax credit under this
section a public record.
(h) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 23680 shall be
an amount equal to the sum of all both
of the following:
(A) Thirteen million dollars ($13,000,000) in credits for the
2012-13 fiscal year and each fiscal year thereafter.
(B) The unused allocation credit amount, if any, for the preceding
fiscal year.
(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 and Section 23680, the aggregate amount
of tax credits shall be allocated to each qualified taxpayer on a pro
rata basis.
(3) If the amount of credits allocated in a fiscal year is less
than the aggregate amount of tax credits authorized to be allocated
under this section and Section 23680, the remaining amount shall be
allocated to qualified taxpayers outside of the studio zone and
within the state pursuant to Section 17053.90 or 23681 on a pro
rata basis, not to exceed 15 percent of the amount of the qualified
expenditures credit base.
(i) The California 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.
(j) The credit allowed by this section shall be in lieu of any
other deduction that the taxpayer may otherwise claim pursuant to
this part with respect to qualified expenditures.
SEC. 2. Section 17053.90 is added to the Revenue and Taxation
Code, to read:
17053.90. (a) For taxable years beginning on or after January 1,
2013, there shall be allowed to a qualified taxpayer a credit against
the "net tax," as defined in Section 17039, an amount equal to 15
percent, except as otherwise provided, of the qualified expenditures
credit base for the production of a qualified commercial outside of
the studio zone and within the state.
(b) For purposes of this section:
(1) (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 commercial, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
(i) Qualified taxpayer contributions under any pension,
profit-sharing, annuity, or similar plan.
(ii) Qualified taxpayer-provided coverage under any accident or
health plan for employees.
(iii) The qualified taxpayer's cost of life or disability
insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (7) shall not be taken into account under this
paragraph.
(C) For the purposes of this paragraph, "employee" means a
qualified individual.
(2) (A) "Qualified commercial" means a commercial or advertisement
composed of moving images and sounds that is recorded on film,
videotape, or other digital medium, created for display on a network,
regional channel, cable, or interactive media, including, but not
limited to, the Internet, mobile devices, in-game advertising, and
experiential advertising where at least 75 percent of the total
qualified expenditures occur wholly outside of the
studio zone and within the state. For purposes of this paragraph,
mobile devices include cellphones, cellular
telephones, smartphones, personal digital assistants, and other
portable devices with a screen.
(B) "Qualified commercial" shall not include any program-length
production with an advertising component in excess of five minutes,
including an infomercial, news, or current affairs program, interview
or talk program, network promotion (short-form content intended to
promote other programming), feature film promotion (trailers and
teasers), sporting event, game show, award ceremony, daytime drama,
reality entertainment program, program intended primarily for
industrial, corporate, or institutional end users, public service
announcements, fundraising commercial or commercial promoting a
political candidate or political issue, a program consisting of more
than one-half of the screen time of stock footage, a program produced
by an organization described in Section 527 of the Internal Revenue
Code, or any production that falls within to
which the recordkeeping requirements of Section 2257 of Title
18 of the United States Code apply .
(3) "Qualified expenditures" means the amount paid or incurred
during the taxable year to purchase or lease tangible personal
property outside of the studio zone and within the state in the
production of a qualified commercial, and to pay for
services, including qualified wages, services
performed outside of the studio zone and within the state in the
production of a qualified commercial.
(4) "Qualified expenditures credit base" means the amount over two
hundred fifty thousand dollars ($250,000) paid or incurred during
the taxable year outside the studio zone in qualified expenditures.
(5) (A) "Qualified individual" means an individual who performs
services during the production period in an activity related to the
production of a qualified commercial.
(B) "Qualified individual" shall not include either of the
following:
(i) Any individual related to the qualified taxpayer as described
in Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
(6) (A) "Qualified taxpayer" means a taxpayer that is principally
engaged in the production of a qualified commercial, has control over
the selection of production location, deployment, or management of
the production equipment, directly employs the production crew as the
person that has control over the hiring and firing of the crew on
the qualified commercial, and paid or incurred at least two hundred
fifty thousand dollars ($250,000) in qualified expenditures outside
of the studio zone and within the state during the taxable year.
All members of a commonly controlled group, as defined by
subdivision (b) of Section 25105, shall be treated as a single
qualified taxpayer for the purposes of computing qualified
expenditures.
(B) In the case of a pass-thru 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 shall
not be allowed to the pass-thru entity, but shall be passed through
and allowed to the partners or shareholders in accordance with Part
10 (commencing with Section 17001). For purposes of this paragraph,
"pass-thru entity" means any entity taxed as a partnership or "S"
corporation.
(7) (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 a qualified
taxpayer involved in the production of a qualified commercial with
respect to a qualified individual for services performed on the
qualified commercial produced outside of the studio zone and within
the state.
(ii) Any payments made to a qualified entity for services
performed outside of the studio zone and within the state by
qualified individuals.
(iii) Remuneration paid to an independent contractor who is a
qualified individual for services performed outside of the studio
zone and within the state by that qualified individual.
(iv) The portion of any employee fringe benefits paid or incurred
by a qualified taxpayer involved in the production of the qualified
commercial that are properly allocable to qualified wage amounts
described in clauses (i), (ii), and (iii).
(B) "Qualified wages" shall not include expenses, including wages,
paid per person per qualified commercial for writers, directors,
music directors, music composers, music supervisors, producers, and
performers, other than background actors with no scripted lines.
(8) "Studio zone" means the area within a circle of 30 miles in
radius from the intersection of Beverly Boulevard and La Cienega
Boulevard in Los Angeles, California.
(c) In the case where the credit allowed under this section
exceeds the "net tax," either of the following
may shall occur:
(1) The Fifty percent of 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 year
.
(2) (A) For the taxable year, 50 percent of the excess credit
shall be refunded to the qualified taxpayer, and 50 percent of the
excess credit shall be carried over to reduce the "net tax" in the
following taxable year.
(B) For the following taxable year, if the credit remaining
exceeds the "net tax" for that taxable year, the excess credit shall
be refunded.
(2) With regard to the remaining 50 percent of the excess credit,
the qualified taxpayer shall elect to do either of the following:
(A) Receive a refund of the excess credit amount.
(B) Carry over the excess credit to reduce the "net tax" in the
following taxable year, and succeeding six taxable years, if
necessary, until the credit has been exhausted.
(3) There shall be continuously appropriated from the General Fund
to the Franchise Tax Board an amount equal to the refunds allowed by
this section for the purpose of making those refunds.
(d) A credit shall be allowed pursuant to this section only if the
qualified taxpayer provides the following to the California Film
Commission:
(1) The production schedule for each commercial produced in a
taxable year.
(2) Total qualified expenditures.
(3) Total qualified wages paid.
(4) Total nonqualified expenditures incurred in California.
(5) Agreed upon procedures as prescribed by the California Film
Commission and performed by a licensed certified public accountant
to who performs attest services in California and
who has attended a certified public accountant orientation meeting
conducted by the California Film Commission.
(6) Number of cast and crew members hired for each commercial.
(7) Number of days worked by each cast and crew member for each
commercial.
(8) Number of vendors used during the taxable year.
(9) Any other information as requested by the California Film
Commission.
(e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in or required to implement this
section.
(f) For purposes of this section, the California Film Commission
shall do the following:
(1) Establish a procedure for applicants to file with the
commission a written application due on or before April 1, 2014, and
each April 1 thereafter, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit.
(2) Subject to the annual cap established as provided in
subdivision (h), allocate and certify an aggregate
amount of credits to qualified taxpayers under this section and
Section 23681.
(3) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
(4) Establish audit requirements that must
shall be satisfied before a credit certificate may be issued
by the California Film Commission.
(5) Provide the Legislative Analyst's Office, upon request, any or
all application materials or any other materials received from, or
submitted by, the applicants, in electronic format when available,
including, but not limited to, information provided pursuant to
subdivision (d).
(6) The information provided to the California Film Commission
pursuant to this section shall constitute confidential tax
information for purposes of Article 2 (commencing with Section 19542)
of Chapter 7 of Part 10.2.
(g) (1) The California Film Commission shall
provide the Legislative Analyst's Office and the
Franchise Tax 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 taxpayers.
(2) (A) Notwithstanding subparagraph (B), the California Film
Commission shall annually post on its Internet Web site and make
available for public release the following:
(i) A table which includes all of the following information:
(I) A list of qualified taxpayers and the tax credit amounts
allocated to each qualified taxpayer by the California Film
Commission.
(II) The total number of production days in California reported
by the qualified taxpayers in its application.
(III) The number of California jobs directly created by the
production as reported by the qualified taxpayer in its application.
(IV) The total amount of qualified expenditures that were spent
on submitted productions.
(ii) A summary describing the qualified taxpayer's production and
background information regarding the qualified taxpayer contained in
the qualified taxpayer's application for the credit.
(B) This subdivision shall not be construed to make the
information submitted by an applicant for a tax credit under this
section a public record.
(h) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 23681 shall be
an amount equal to the sum of all of the following:
(A) Two million dollars ($2,000,000) in credits for the 2012-13
fiscal year and each fiscal year thereafter.
(B) The unused allocation credit amount, if any, for the preceding
fiscal year.
(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 and Section 23681, the aggregate amount
of tax credits
shall be allocated to each qualified taxpayer on a pro rata basis.
(3) If the amount of credits allocated in a fiscal year is less
than the aggregate amount of tax credits authorized to be allocated
under this section and Section 23681, the remaining amount shall be
allocated to qualified taxpayers within the studio zone pursuant
to Section 17053.89 or 23680 on a pro rata basis, not to
exceed 15 percent of the amount of the qualified expenditures credit
base.
(i) The California 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.
(j) The credit allowed by this section shall be in lieu of any
other deduction that the taxpayer may otherwise claim pursuant to
this part with respect to qualified expenditures.
SEC. 3. Section 23680 is added to the Revenue and Taxation Code,
to read:
23680. (a) For taxable years beginning on or after January 1,
2013, there shall be allowed to a qualified taxpayer a credit against
the "tax," as defined in Section 23036, an amount equal to 15
percent, except as otherwise provided, of the qualified expenditures
credit base for the production of a qualified commercial within the
studio zone.
(b) For purposes of this section:
(1) (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 commercial, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
(i) Qualified taxpayer contributions under any pension,
profit-sharing, annuity, or similar plan.
(ii) Qualified taxpayer-provided coverage under any accident or
health plan for employees.
(iii) The qualified taxpayer's cost of life or disability
insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (7) shall not be taken into account under this
paragraph.
(C) For the purposes of this paragraph, "employee" means a
qualified individual.
(2) (A) "Qualified commercial" means a commercial or advertisement
composed of moving images and sounds that is recorded on film,
videotape, or other digital medium, created for display on a network,
regional channel, cable, or interactive media, including, but not
limited to, the Internet, mobile devices, in-game advertising, and
experiential advertising where at least 75 percent of the total
qualified expenditures occur wholly within the
studio zone. For purposes of this paragraph, mobile devices include
cellphones, cellular telephones,
smartphones, personal digital assistants, and other portable devices
with a screen.
(B) "Qualified commercial" shall not include any program-length
production with an advertising component in excess of five minutes,
including an infomercial, news, or current affairs program, interview
or talk program, network promotion (short-form content intended to
promote other programming), feature film promotion (trailers and
teasers), sporting event, game show, award ceremony, daytime drama,
reality entertainment program, program intended primarily for
industrial, corporate, or institutional end users, public service
announcements, fundraising commercial or commercial promoting a
political candidate or political issue, a program consisting of more
than one-half of the screen time of stock footage, a program produced
by an organization described in Section 527 of the Internal Revenue
Code, or any production that falls within to
which the recordkeeping requirements of Section 2257 of Title
18 of the United States Code apply .
(3) "Qualified expenditures" means the amount paid or incurred
during the taxable year to purchase or lease tangible personal
property within the studio zone in the production of a qualified
commercial, and to pay for services, including qualified
wages, services performed within the studio zone
in the production of a qualified commercial.
(4) "Qualified expenditures credit base" means the amount over
five hundred thousand dollars ($500,000) paid or incurred during the
taxable year within the studio zone in qualified expenditures.
(5) (A) "Qualified individual" means an individual who performs
services during the production period in an activity related to the
production of a qualified commercial.
(B) "Qualified individual" shall not include either of the
following:
(i) Any individual related to the qualified taxpayer as described
in Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
(6) (A) "Qualified taxpayer" means a taxpayer that is principally
engaged in the production of a qualified commercial, has control over
the selection of production location, deployment, or management of
the production equipment, directly employs the production crew as the
person that has control over the hiring and firing of the crew on
the qualified commercial, and paid or incurred at least five hundred
thousand dollars ($500,000) in qualified expenditures within the
studio zone during the taxable year. All members of a commonly
controlled group, as defined by subdivision (b) of Section 25105,
shall be treated as a single qualified taxpayer for the purposes of
computing qualified expenditures.
(B) (i) In the case of a pass-thru 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 shall
not be allowed to the pass-thru entity, but shall be passed through
and allowed to the partners or shareholders in accordance with Part
11 (commencing with Section 23001). For purposes of this paragraph,
"pass-thru 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.
(7) (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 a qualified
taxpayer involved in the production of a qualified commercial with
respect to a qualified individual for services performed on the
qualified commercial produced within the studio zone.
(ii) Any payments made to a qualified taxpayer for services
performed in the studio zone by a qualified individual.
(iii) Remuneration paid to an independent contractor who is a
qualified individual for services performed within the studio zone by
that qualified individual.
(iv) The portion of any employee fringe benefits paid or incurred
by a qualified taxpayer involved in the production of the qualified
commercial that are properly allocable to qualified wage amounts
described in clauses (i), (ii), and (iii).
(B) "Qualified wages" shall not include expenses, including wages,
paid per person per qualified commercial for writers, directors,
music directors, music composers, music supervisors, producers, and
performers, other than background actors with no scripted lines.
(8) "Studio zone" means the area within a circle of 30 miles in
radius from the intersection of Beverly Boulevard and La Cienega
Boulevard in Los Angeles, California.
(c) In the case where the credit allowed under this section
exceeds the "tax," either of the following
may shall occur:
(1) The Fifty percent of the excess
credit may shall 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 year .
(2) (A) For the taxable year, 50 percent of the excess credit
shall be refunded to the qualified taxpayer, and 50 percent of the
excess credit shall be carried over to reduce the "tax" in the
following taxable year.
(B) For the following taxable year, if the credit remaining
exceeds the "tax" for that taxable year, the excess credit shall be
refunded.
(2) With regard to the remaining 50 percent of the excess credit,
the qualified taxpayer shall elect to do either of the following:
(A) Receive a refund of the excess credit amount.
(B) Carry over the excess credit to reduce the "tax" in the
following taxable year, and succeeding six taxable years, if
necessary, until the credit has been exhausted.
(3) There shall be continuously appropriated from the General Fund
to the Franchise Tax Board an amount equal to the refunds allowed by
this section for the purpose of making those refunds.
(d) A credit shall be allowed pursuant to this section only if the
qualified taxpayer provides the following to the California Film
Commission:
(1) The production schedule for each commercial produced in a
taxable year.
(2) Total qualified expenditures.
(3) Total qualified wages paid.
(4) Total nonqualified expenditures incurred in California.
(5) Agreed upon procedures as prescribed by the California Film
Commission and performed by a licensed certified public accountant
to perform who performs attest services
in California and who has attended a certified public accountant
orientation meeting conducted by the California Film Commission.
(6) Number of cast and crew members hired for each commercial.
(7) Number of days worked by each cast and crew member for each
commercial.
(8) Number of vendors used during the taxable year.
(9) Any other information as requested by the California Film
Commission.
(e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in or required to implement this
section.
(f) For purposes of this section, the California Film Commission
shall do the following:
(1) Establish a procedure for applicants to file with the
commission a written application due on or before April 1, 2014, and
each April 1 thereafter, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit.
(2) Subject to the annual cap established as provided in
subdivision (h), allocate and certify an aggregate
amount of credits to qualified taxpayers under this section and
Section 17053.89.
(3) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
(4) Establish audit requirements that must
shall be satisfied before a credit certificate may be issued
by the California Film Commission.
(5) Provide the Legislative Analyst's Office, upon request, any or
all application materials or any other materials received from, or
submitted by, the applications, in electronic format when available,
including, but not limited to, information provided pursuant to
subdivision (d).
(6) The information provided to the California Film Commission
pursuant to this section shall constitute confidential tax
information for purposes of Article 2 (commencing with Section 19542)
of Chapter 7 of Part 10.2.
(g) (1) The California Film Commission shall
provide the Legislative Analyst's Office and the
Franchise Tax 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 taxpayers.
(2) (A) Notwithstanding subparagraph (B), the California Film
Commission shall annually post on its Internet Web site and make
available for public release the following:
(i) A table which includes all of the following information.
(I) A list of qualified taxpayers and the tax credit amounts
allocated to each qualified taxpayer by the California Film
Commission.
(II) The total number of production days in California reported by
the qualified taxpayers in its application.
(III) The number of California jobs directly created by the
production as reported by the qualified taxpayer in its application.
(IV) The total amount of qualified expenditures that were spent on
submitted productions.
(ii) A summary describing the qualified taxpayer's production and
background information regarding the qualified taxpayer contained in
the qualified taxpayer's application for the credit.
(B) This subdivision shall not be construed to make the
information submitted by an applicant for a tax credit under this
section a public record.
(h) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 17053.89 shall
be an amount equal to the sum of all of the following:
(A) Two Thirteen million
dollars ($2,000,000) ($13,000,000) in
credits for the 2012-13 fiscal year and each fiscal year thereafter.
(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 and Section 17053.89, the aggregate
amount of tax credits shall be allocated to each qualified taxpayer
on a pro rata basis.
(3) If the amount of credits allocated in a fiscal year is less
than the aggregate amount of tax credits authorized to be allocated
under this section and Section 17053.89, the remaining amount shall
be allocated to qualified taxpayers outside the studio zone
pursuant to Section 17053.90 or 23681 on a pro rata basis, not
to exceed 15 percent of the amount of the qualified expenditures
credit base.
(i) The California 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.
(j) The credit allowed by this section shall be in lieu of any
other deduction that the taxpayer may otherwise claim pursuant to
this part with respect to qualified expenditures.
SEC. 4. Section 23681 is added to the Revenue and Taxation Code,
to read:
23681. (a) For taxable years beginning on or after January 1,
2013, there shall be allowed to a qualified taxpayer a credit against
the "tax," as defined in Section 23036, an amount equal to 15
percent, except as otherwise provided, of the qualified expenditures
credit base for the production of a qualified commercial outside of
the studio zone and within this the
state.
(b) For purposes of this section:
(1) (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 commercial, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
(i) Qualified taxpayer contributions under any pension,
profit-sharing, annuity, or similar plan.
(ii) Qualified taxpayer-provided coverage under any accident or
health plan for employees.
(iii) The qualified taxpayer's cost of life or disability
insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (7) shall not be taken into account under this
paragraph.
(C) For the purposes of this paragraph, "employee" means a
qualified individual.
(2) (A) "Qualified commercial" means a commercial or advertisement
composed of moving images and sounds that is recorded on film,
videotape, or other digital medium, created for display on a network,
regional channel, cable, or interactive media, including, but not
limited to, the Internet, mobile devices, in-game advertising, and
experiential advertising where at least 75 percent of the total
qualified expenditures occur wholly outside of the
studio zone and within the state. For purposes of this paragraph,
mobile devices include cellphones, cellular
telephones, smartphones, personal digital assistants, and other
portable devices with a screen.
(B) "Qualified commercial" shall not include any program-length
production with an advertising component in excess of five minutes,
including an infomercial, news, or current affairs program, interview
or talk program, network promotion (short-form content intended to
promote other programming), feature film promotion (trailers and
teasers), sporting event, game show, award ceremony, daytime drama,
reality entertainment program, program intended primarily for
industrial, corporate, or institutional end users, public service
announcements, fundraising commercial or commercial promoting a
political candidate or political issue, a program consisting of more
than one-half of the screen time of stock footage, a program produced
by an organization described in Section 527 of the Internal Revenue
Code, or any production that falls within to
which the recordkeeping requirements of Section 2257 of Title
18 of the United States Code apply .
(3) "Qualified expenditures" means the amount paid or incurred
during the taxable year to purchase or lease tangible personal
property outside of the studio zone and within the state in the
production of a qualified commercial, and to pay for
services, including qualified wages, services
performed outside of the studio zone and within the state in the
production of a qualified commercial.
(4) "Qualified expenditures credit base" means the amount over two
hundred fifty thousand dollars ($250,000) paid or incurred during
the taxable year outside of the studio zone in qualified
expenditures.
(5) (A) "Qualified individual" means an individual who performs
services during the production period in an activity related to the
production of a qualified commercial.
(B) "Qualified individual" shall not include either of the
following:
(i) Any individual related to the qualified taxpayer as described
in Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5 percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
(6) (A) "Qualified taxpayer" means a taxpayer that is principally
engaged in the production of a qualified commercial, has control over
the selection of production location, deployment, or management of
the production equipment, directly employs the production crew as the
person that has control over the hiring and firing of the crew on
the qualified commercial, and paid or incurred at least two hundred
fifty thousand dollars ($250,000) in qualified expenditures outside
of the studio zone and within the state during the taxable year. All
members of a commonly controlled group, as defined by subdivision (b)
of Section 25105, shall be treated as a single qualified taxpayer
for the purposes of computing qualified expenditures.
(B) (i) In the case of a pass-thru 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 shall
not be allowed to the pass-thru entity, but shall be passed through
and allowed to the partners or shareholders in accordance with Part
11 (commencing with Section 23001). For purposes of this paragraph,
"pass-thru 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.
(7) (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 a qualified
taxpayer involved in the production of a qualified commercial with
respect to a qualified individual for services performed on the
qualified commercial produced outside of the studio zone and within
the state.
(ii) Any payments made to a qualified entity
taxpayer for services performed outside of the studio zone
and within the state by qualified individuals
a qualified individual .
(iii) Remuneration paid to an independent contractor who is a
qualified individual for services performed outside of the studio
zone and within the state by that qualified individual.
(iv) The portion of any employee fringe benefits paid or incurred
by a qualified taxpayer involved in the production of the qualified
commercial that are properly allocable to qualified wage amounts
described in clauses (i), (ii), and (iii).
(B) "Qualified wages" shall not include expenses, including wages,
paid per person per qualified commercial for writers, directors,
music directors, music composers, music supervisors, producers, and
performers, other than background actors with no scripted lines.
(8) "Studio zone" means the area within a circle of 30 miles in
radius from the intersection of Beverly Boulevard and La Cienega
Boulevard in Los Angeles, California.
(c) In the case where the credit allowed under this section
exceeds the "tax," either of the following
may shall occur:
(1) The Fifty percent of the excess
credit may shall 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 year .
(2) (A) For the taxable year, 50 percent of the excess credit
shall be refunded to the qualified taxpayer, and 50 percent of the
excess credit shall be carried over to reduce the "tax" in the
following taxable year.
(B) For the following taxable year, if the credit remaining
exceeds the "tax" for that taxable year, the excess credit shall be
refunded.
(2) With regard to the remaining 50 percent of the excess credit,
the qualified taxpayer shall elect to do either of the following:
(A) Receive a refund of the excess credit amount.
(B) Carry over the excess credit to reduce the "tax" in the
following taxable year, and succeeding six taxable years, if
necessary, until the credit has been exhausted.
(3) There shall be continuously appropriated from the General Fund
to the Franchise Tax Board an amount equal to the refunds allowed by
this section for the purpose of making those refunds.
(d) A credit shall be allowed pursuant to this section only if the
qualified taxpayer provides the following to the California Film
Commission:
(1) The production schedule for each commercial produced in a
taxable year.
(2) Total qualified expenditures.
(3) Total qualified wages paid.
(4) Total nonqualified expenditures incurred in California.
(5) Agreed upon procedures as prescribed by the California Film
Commission and performed by a licensed certified public accountant
to perform who performs attest services
in California and who has attended a certified public accountant
orientation meeting conducted by the California Film Commission.
(6) Number of cast and crew members hired for each commercial.
(7) Number of days worked by each cast and crew member for each
commercial.
(8) Number of vendors used during the taxable year.
(9) Any other information as requested by the California Film
Commission.
(e) The California Film Commission may prescribe rules and
regulations to carry out the purposes of this section including any
rules and regulations necessary to establish procedures, processes,
requirements, and rules identified in or required to implement this
section.
(f) For purposes of this section, the California Film Commission
shall do the following:
(1) Establish a procedure for applicants to file with the
commission a written application due on or before April 1, 2014, and
each April 1 thereafter, on a form jointly prescribed by the
commission and the Franchise Tax Board for the allocation of the tax
credit.
(2) Subject to the annual cap established as provided in
subdivision (h), allocate and certify an aggregate
amount of credits to qualified taxpayers under this section and
Section 23686 17053.90 .
(3) Establish a verification procedure for the amount of qualified
expenditures paid or incurred by the applicant.
(4) Establish audit requirements that must
shall be satisfied before a credit certificate may be issued
by the California Film Commission.
(5) Provide the Legislative Analyst's Office, upon request, any or
all application materials or any other materials received from, or
submitted by, the applicants, in electronic format when available,
including, but not limited to, information provided pursuant to
subdivision (d).
(6) The information provided to the California Film Commission
pursuant to this section shall constitute confidential tax
information for purposes of Article 2 (commencing with Section 19542)
of Chapter 7 of Part 10.2.
(g) (1) The California Film Commission shall
provide the Legislative Analyst's Office and the
Franchise Tax 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 taxpayers.
(2) (A) Notwithstanding subparagraph (B), the California Film
Commission shall annually post on its Internet Web site and make
available for public release the following:
(i) A table which includes all of the following information:
(I) A list of qualified taxpayers and the tax credit amounts
allocated to each qualified taxpayer by the California Film
Commission.
(II) The total number of production days in California reported
by the qualified taxpayers in its application.
(III) The number of California jobs directly created by the
production as reported by the qualified taxpayer in its application.
(IV) The total amount of qualified expenditures that were spent
on submitted productions.
(ii) A summary describing the qualified taxpayer's production and
background information regarding the qualified taxpayer contained in
the qualified taxpayer's application for the credit.
(B) This subdivision shall not be construed to make the
information submitted by an applicant for a tax credit under this
section a public record.
(h) (1) The aggregate amount of credits that may be allocated in
any fiscal year pursuant to this section and Section 17053.90 shall
be an amount equal to the sum of all of the following:
(A) Two million dollars ($2,000,000) in credits for the 2012-13
fiscal year and each fiscal year thereafter.
(B) The unused allocation credit amount, if any, for the preceding
fiscal year.
(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 and Section 17053.90, the aggregate
amount of tax credits shall be allocated to each qualified taxpayer
on a pro rata basis.
(3) If the amount of credits allocated in a fiscal year is less
than the aggregate amount of tax credits authorized to be allocated
under this section and Section 17053.90, the remaining amount shall
be allocated to qualified taxpayers within the studio zone
pursuant to Section 17053.89 or 23680 on a pro rata basis, not
to exceed 15 percent of the amount of the qualified expenditures
credit base.
(i) The California 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.
(j) The credit allowed by this section shall be in lieu of any
other deduction that the taxpayer may otherwise claim pursuant to
this part with respect to qualified expenditures.
SEC. 5. The Legislature finds and declares that a special law is
necessary and that a general law cannot be made applicable within the
meaning of Section 16 of Article IV of the California Constitution
because of the unique need to support the commercial industry in Los
Angeles.
SEC. 6. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.