California Legislature—2015–16 Regular Session

Assembly BillNo. 688


Introduced by Assembly Member Gomez

February 25, 2015


An act to amend Section 23695 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 688, as introduced, Gomez. Corporate income taxes: credits: qualified motion pictures.

The Corporation Tax Law allows various credits against the tax as imposed by that law, including a qualified motion picture credit for taxable years beginning on or after January 1, 2016, to be allocated by the California Film Commission on or after July 1, 2015, and before July 1, 2020. Existing law limits the aggregate amount of these new credits to be allocated in each fiscal year to up to $330 million, and subject to a computation and ranking of applicants based on the jobs ratio, as defined, requires the California Film Commission to allocate credit amounts subject to specified categories of qualified motion pictures, in an amount equal to 20% or 25%, with an additional credit amount available, as specified, for qualified expenditures for the production of a qualified motion picture in California.

This bill would make a nonsubstantive change to those provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 23695 of the Revenue and Taxation Code
2 is amended to read:

3

23695.  

(a) (1) For taxable years beginning on or after January
41, 2016, there shall be allowed to a qualified taxpayer a credit
5against the “tax,” as defined in Section 23036, subject to a
6computation and ranking by the California Film Commission in
7subdivision (g) and the allocation amount categories described in
8subdivision (i), in an amount equal to 20 percent or 25 percent,
9whichever is the applicable credit percentage described in
10paragraph (4), of the qualified expenditures for the production of
11a qualified motion picture in California. A credit shall not be
12allowed under this section for any qualified expenditures for the
13production of a motion picture in California if a credit has been
14claimed for those same expenditures under Section 23685.

15(2) Except as otherwise provided in this section, the credit shall
16be allowed for the taxable year in which the California Film
17Commission issues the credit certificate pursuant to subdivision
18(g) for the qualified motion picture, but in no instance prior to July
191, 2016, and shall be for the applicable percentage of all qualified
20expenditures paid or incurred by the qualified taxpayer in all
21taxable years for that qualified motion picture.

22(3) The amount of the credit allowed to a qualified taxpayer
23shall be limited to the amount specified in the credit certificate
24issued to the qualified taxpayer by the California Film Commission
25pursuant to subdivision (g).

26(4) For purposes of paragraphs (1) and (2), the applicable credit
27percentage shall be:

28(A) Twenty percent of the qualified expenditures attributable
29to the production of a qualified motion picture in California,
30including, but not limited to, a feature, up to one hundred million
31dollars ($100,000,000) in qualified expenditures, or a television
32series that relocated to California that is in its second or subsequent
33years of receiving a tax credit allocation pursuant to this section
34or Section 23685.

35(B) Twenty-five percent of the qualified expenditures
36attributable to the production of a qualified motion picture in
37California where the qualified motion picture is a television series
P3    1that relocated to California in its first year of receiving a tax credit
2allocation pursuant to this section.

3(C) Twenty-five percent of the qualified expenditures, up to ten
4million dollars ($10,000,000), attributable to the production of a
5qualified motion picture that is an independent film.

6(D) Additional credits shall be allowed to a qualified motion
7picture whose applicable credit percentage is determined pursuant
8to subparagraph (A), in an aggregate amount not to exceed 5
9percent of the qualified expenditures under that subparagraph, as
10follows:

11(i) (I) Five percent of qualified expenditures relating to original
12photography outside the Los Angeles zone.

13(II) For purposes of this clause:

14(ia) “Applicable period” means the period that commences with
15preproduction and ends when original photography concludes. The
16applicable period includes the time necessary to strike a remote
17location and return to the Los Angeles zone.

18(ib) “Los Angeles zone” means the area within a circle 30 miles
19in radius from Beverly Boulevard and La Cienega Boulevard, Los
20Angeles, California, and includes Agua Dulce, Castaic, including
21Lake Castaic, Leo Carillo State Beach, Ontario International
22Airport, Piru, and Pomona, including the Los Angeles County
23Fairgrounds. The Metro Goldwyn Mayer, Inc. Conejo Ranch
24property is within the Los Angeles zone.

25(ic) “Original photography” includes principal photography and
26reshooting original footage.

27(id) “Qualified expenditures relating to original photography
28outside the Los Angeles zone” means amounts paid or incurred
29during the applicable period for tangible personal property
30purchased or leased and used or consumed outside the Los Angeles
31zone and relating to original photography outside the Los Angeles
32zone and qualified wages paid for services performed outside the
33Los Angeles zone and relating to original photography outside the
34Los Angeles zone.

35(ii) Five percent of the qualified expenditures relating to music
36scoring and music track recording by musicians attributable to the
37production of a qualified motion picture in California.

38(iii) Five percent of the qualified expenditures relating to
39qualified visual effects attributable to the production of a qualified
40motion picture in California.

P4    1(b) For begin insertthe end insertpurposes of this sectionbegin insert, the following definitions
2shall applyend insert
:

3(1) “Ancillary product” means any article for sale to the public
4that contains a portion of, or any element of, the qualified motion
5picture.

6(2) “Budget” means an estimate of all expenses paid or incurred
7during the production period of a qualified motion picture. It shall
8be the same budget used by the qualified taxpayer and production
9company for all qualified motion picture purposes.

10(3) “Clip use” means a use of any portion of a motion picture,
11other than the qualified motion picture, used in the qualified motion
12picture.

13(4) “Credit certificate” means the certificate issued by the
14California Film Commission pursuant to subparagraph (C) of
15paragraph (3) of subdivision (g).

16(5) (A) “Employee fringe benefits” means the amount allowable
17as a deduction under this part to the qualified taxpayer involved
18in the production of the qualified motion picture, exclusive of any
19amounts contributed by employees, for any year during the
20production period with respect to any of the following:

21(i) Employer contributions under any pension, profit-sharing,
22annuity, or similar plan.

23(ii) Employer-provided coverage under any accident or health
24plan for employees.

25(iii) The employer’s cost of life or disability insurance provided
26to employees.

27(B) Any amount treated as wages under clause (i) of
28subparagraph (A) of paragraph (21) shall not be taken into account
29under this paragraph.

30(6) “Independent film” means a motion picture with a minimum
31budget of one million dollars ($1,000,000) that is produced by a
32company that is not publicly traded and publicly traded companies
33do not own, directly or indirectly, more than 25 percent of the
34producing company.

35(7) “Jobs ratio” means the amount of qualified wages paid to
36qualified individuals divided by the amount of tax credit, not
37including any additional credit allowed pursuant to subparagraph
38(D) of paragraph (4) of subdivision (a), as computed by the
39California Film Commission.

P5    1(8) “Licensing” means any grant of rights to distribute the
2qualified motion picture, in whole or in part.

3(9) “New use” means any use of a motion picture in a medium
4other than the medium for which it was initially created.

5(10) “Pilot for a new television series” means the initial episode
6produced for a proposed television series.

7(11) (A) “Postproduction” means the final activities in a
8qualified motion picture’s production, including editing, foley
9recording, automatic dialogue replacement, sound editing, scoring,
10music track recording by musicians and music editing, beginning
11and end credits, negative cutting, negative processing and
12duplication, the addition of sound and visual effects, sound mixing,
13film-to-tape transfers, encoding, and color correction.

14(B) “Postproduction” does not include the manufacture or
15shipping of release prints or their equivalent.

16(12) “Preproduction” means the process of preparation for actual
17physical production which begins after a qualified motion picture
18has received a firm agreement of financial commitment, or is
19greenlit, with, for example, the establishment of a dedicated
20production office, the hiring of key crew members, and includes,
21but is not limited to, activities that include location scouting and
22execution of contracts with vendors of equipment and stage space.

23(13) “Principal photography” means the phase of production
24during which the motion picture is actually shot, as distinguished
25from preproduction and postproduction.

26(14) “Production period” means the period beginning with
27preproduction and ending upon completion of postproduction.

28(15) “Qualified entity” means a personal service corporation as
29defined in Section 269A(b)(1) of the Internal Revenue Code, a
30payroll services corporation, or any entity receiving qualified wages
31with respect to services performed by a qualified individual.

32(16) “Qualified expenditures” means amounts paid or incurred
33for tangible personal property purchased or leased, and used, within
34this state in the production of a qualified motion picture and
35payments, including qualified wages, for services performed within
36this state in the production of a qualified motion picture.

37(17) (A) “Qualified individual” means any individual who
38performs services during the production period in an activity related
39to the production of a qualified motion picture.

P6    1(B) “Qualified individual” shall not include either of the
2following:

3(i) Any individual related to the qualified taxpayer as described
4in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
5Revenue Code.

6(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of
7the Internal Revenue Code, of the qualified taxpayer.

8(18) (A) “Qualified motion picture” means a motion picture
9that is produced for distribution to the general public, regardless
10of medium, that is one of the following:

11(i) A feature with a minimum production budget of one million
12dollars ($1,000,000).

13(ii) A movie of the week or miniseries with a minimum
14production budget of five hundred thousand dollars ($500,000).

15(iii) A new television series of episodes longer than 40 minutes
16each of running time, exclusive of commercials, that is produced
17in California, with a minimum production budget of one million
18dollars ($1,000,000) per episode.

19(iv) An independent film.

20(v) A television series that relocated to California.

21(vi) A pilot for a new television series that is longer than 40
22minutes of running time, exclusive of commercials, that is produced
23in California, and with a minimum production budget of one
24million dollars ($1,000,000).

25(B) To qualify as a “qualified motion picture,” all of the
26following conditions shall be satisfied:

27(i) At least 75 percent of the principal photography days occur
28wholly in California or 75 percent of the production budget is
29incurred for payment for services performed within the state and
30the purchase or rental of property used within the state.

31(ii) Production of the qualified motion picture is completed
32within 30 months from the date on which the qualified taxpayer’s
33application is approved by the California Film Commission. For
34purposes of this section, a qualified motion picture is “completed”
35when the process of postproduction has been finished.

36(iii) The copyright for the motion picture is registered with the
37United States Copyright Office pursuant to Title 17 of the United
38States Code.

39(iv) Principal photography of the qualified motion picture
40commences after the date on which the application is approved by
P7    1the California Film Commission, but no later than 180 days after
2the date of that approval unless death, disability, or disfigurement
3of the director or of a principal cast member, an act of God,
4including, but not limited to, fire, flood, earthquake, storm,
5hurricane, or other natural disaster, terrorist activities, or
6government sanction has directly prevented a production’s ability
7to begin principal photography within the prescribed 180-day
8commencement period.

9(C) For the purposes of subparagraph (A), in computing the
10total wages paid or incurred for the production of a qualified
11motion picture, all amounts paid or incurred by all persons or
12entities that share in the costs of the qualified motion picture shall
13be aggregated.

14(D) “Qualified motion picture” shall not include commercial
15advertising, music videos, a motion picture produced for private
16noncommercial use, such as weddings, graduations, or as part of
17an educational course and made by students, a news program,
18current events or public events program, talk show, game show,
19sporting event or activity, awards show, telethon or other
20production that solicits funds, reality television program, clip-based
21programming if more than 50 percent of the content is comprised
22of licensed footage, documentaries, variety programs, daytime
23dramas, strip shows, one-half hour (air time) episodic television
24shows, or any production that falls within the recordkeeping
25requirements of Section 2257 of Title 18 of the United States Code.

26(19) (A) “Qualified taxpayer” means a taxpayer who has paid
27or incurred qualified expenditures, participated in the Career
28Readiness requirement, and has been issued a credit certificate by
29the California Film Commission pursuant to subdivision (g).

30(B) (i) In the case of any pass-thru entity, the determination of
31whether a taxpayer is a qualified taxpayer under this section shall
32be made at the entity level and any credit under this section is not
33allowed to the pass-thru entity, but shall be passed through to the
34partners or shareholders in accordance with applicable provisions
35of Part 10 (commencing with Section 17001) or Part 11
36(commencing with Section 23001). For purposes of this paragraph,
37“pass-thru entity” means any entity taxed as a partnership or “S”
38corporation.

39(ii) In the case of an “S” corporation, the credit allowed under
40this section shall not be used by an “S” corporation as a credit
P8    1against a tax imposed under Chapter 4.5 (commencing with Section
223800) of Part 11 of Division 2.

3(20) “Qualified visual effects” means visual effects where at
4least 75 percent or a minimum of ten million dollars ($10,000,000)
5of the qualified expenditures for the visual effects is paid or
6incurred in California.

7(21) (A) “Qualified wages” means all of the following:

8(i) Any wages subject to withholding under Division 6
9(commencing with Section 13000) of the Unemployment Insurance
10Code that were paid or incurred by any taxpayer involved in the
11production of a qualified motion picture with respect to a qualified
12individual for services performed on the qualified motion picture
13production within this state.

14(ii) The portion of any employee fringe benefits paid or incurred
15by any taxpayer involved in the production of the qualified motion
16picture that are properly allocable to qualified wage amounts
17described in clauses (i), (iii), and (iv).

18(iii) Any payments made to a qualified entity for services
19performed in this state by qualified individuals within the meaning
20of paragraph (17).

21(iv) Remuneration paid to an independent contractor who is a
22qualified individual for services performed within this state by that
23qualified individual.

24(B) “Qualified wages” shall not include any of the following:

25(i) Expenses, including wages, related to new use, reuse, clip
26use, licensing, secondary markets, or residual compensation, or
27the creation of any ancillary product, including, but not limited to,
28a soundtrack album, toy, game, trailer, or teaser.

29(ii) Expenses, including wages, paid or incurred with respect to
30acquisition, development, turnaround, or any rights thereto.

31(iii) Expenses, including wages, related to financing, overhead,
32marketing, promotion, or distribution of a qualified motion picture.

33(iv) Expenses, including wages, paid per person per qualified
34motion picture for writers, directors, music directors, music
35composers, music supervisors, producers, and performers, other
36than background actors with no scripted lines.

37(22) “Residual compensation” means supplemental
38compensation paid at the time that a motion picture is exhibited
39through new use, reuse, clip use, or in secondary markets, as
40distinguished from payments made during production.

P9    1(23) “Reuse” means any use of a qualified motion picture in the
2same medium for which it was created, following the initial use
3in that medium.

4(24) “Secondary markets” means media in which a qualified
5motion picture is exhibited following the initial media in which it
6is exhibited.

7(25) “Television series that relocated to California” means a
8television series, without regard to episode length or initial media
9exhibition, with a minimum production budget of one million
10dollars ($1,000,000) per episode, that filmed its most recent season
11outside of California or has filmed all seasons outside of California
12and for which the taxpayer certifies that the credit provided
13pursuant to this section is the primary reason for relocating to
14California.

15(26) “Visual effects” means the creation, alteration, or
16enhancement of images that cannot be captured on a set or location
17during live action photography and therefore is accomplished in
18postproduction. It includes, but is not limited to, matte paintings,
19animation, set extensions, computer-generated objects, characters
20and environments, compositing (combining two or more elements
21in a final image), and wire removals. “Visual effects” does not
22include fully animated projects, whether created by traditional or
23digital means.

24(c) (1) Notwithstanding subdivision (i) of Section 23036, in
25the case where the credit allowed by this section exceeds the
26taxpayer’s tax liability computed under this part, a qualified
27taxpayer may elect to assign any portion of the credit allowed
28under this section to one or more affiliated corporations for each
29taxable year in which the credit is allowed. For purposes of this
30subdivision, “affiliated corporation” has the meaning provided in
31subdivision (b) of Section 25110, as that section was amended by
32Chapter 881 of the Statutes of 1993, as of the last day of the taxable
33year in which the credit is allowed, except that “100 percent” is
34substituted for “more than 50 percent” wherever it appears in the
35section, and “voting common stock” is substituted for “voting
36stock” wherever it appears in the section.

37(2) The election provided in paragraph (1):

38(A) May be based on any method selected by the qualified
39taxpayer that originally receives the credit.

P10   1(B) Shall be irrevocable for the taxable year the credit is allowed,
2once made.

3(C) May be changed for any subsequent taxable year if the
4election to make the assignment is expressly shown on each of the
5returns of the qualified taxpayer and the qualified taxpayer’s
6affiliated corporations that assign and receive the credits.

7(D) Shall be reported to the Franchise Tax Board, in the form
8and manner specified by the Franchise Tax Board, along with all
9required information regarding the assignment of the credit,
10including the corporation number, the federal employer
11identification number, or other taxpayer identification number of
12the assignee, and the amount of the credit assigned.

13(3) (A) Notwithstanding any other law, a qualified taxpayer
14may sell any credit allowed under this section that is attributable
15to an independent film, as defined in paragraph (6) of subdivision
16(b), to an unrelated party.

17(B) The qualified taxpayer shall report to the Franchise Tax
18Board prior to the sale of the credit, in the form and manner
19specified by the Franchise Tax Board, all required information
20regarding the purchase and sale of the credit, including the social
21security or other taxpayer identification number of the unrelated
22party to whom the credit has been sold, the face amount of the
23credit sold, and the amount of consideration received by the
24qualified taxpayer for the sale of the credit.

25(4) In the case where the credit allowed under this section
26exceeds the “tax,” the excess credit may be carried over to reduce
27the “tax” in the following taxable year, and succeeding five taxable
28years, if necessary, until the credit has been exhausted.

29(5) A credit shall not be sold pursuant to this subdivision to
30more than one taxpayer, nor may the credit be resold by the
31unrelated party to another taxpayer or other party.

32(6) A party that has been assigned or acquired tax credits under
33this subdivision shall be subject to the requirements of this section.

34(7) In no event may a qualified taxpayer assign or sell any tax
35credit to the extent the tax credit allowed by this section is claimed
36on any tax return of the qualified taxpayer.

37(8) In the event that both the taxpayer originally allocated a
38credit under this section by the California Film Commission and
39a taxpayer to whom the credit has been sold both claim the same
40amount of credit on their tax returns, the Franchise Tax Board may
P11   1disallow the credit of either taxpayer, so long as the statute of
2limitations upon assessment remains open.

3(9) Chapter 3.5 (commencing with Section 11340) of Part 1 of
4Division 3 of Title 2 of the Government Code does not apply to
5any standard, criterion, procedure, determination, rule, notice, or
6guideline established or issued by the Franchise Tax Board
7pursuant to this subdivision.

8(10) Subdivision (i) of Section 23036 shall not apply to any
9credit sold pursuant to this subdivision.

10(11) For purposes of this subdivision:

11(A) An affiliated corporation or corporations that are assigned
12a credit pursuant to paragraph (1) shall be treated as a qualified
13taxpayer pursuant to paragraph (1) of subdivision (a).

14(B) The unrelated party or parties that purchase a credit pursuant
15to paragraphs (3) to (10), inclusive, shall be treated as a qualified
16taxpayer pursuant to paragraph (1) of subdivision (a).

17(d) (1) No credit shall be allowed pursuant to this section unless
18the qualified taxpayer provides the following to the California
19Film Commission:

20(A) Identification of each qualified individual.

21(B) The specific start and end dates of production.

22(C) The total wages paid.

23(D) The total amount of qualified wages paid to qualified
24individuals.

25(E) The copyright registration number, as reflected on the
26certificate of registration issued under the authority of Section 410
27of Title 17 of the United States Code, relating to registration of
28claim and issuance of certificate. The registration number shall be
29provided on the return claiming the credit.

30(F) The total amounts paid or incurred to purchase or lease
31tangible personal property used in the production of a qualified
32motion picture.

33(G) Information to substantiate its qualified expenditures.

34(H) Information required by the California Film Commission
35under regulations promulgated pursuant to subdivision (g)
36necessary to verify the amount of credit claimed.

37(I) Provides documentation verifying completion of the Career
38Readiness requirement.

39(2) (A) Based on the information provided in paragraph (1),
40the California Film Commission shall recompute the jobs ratio
P12   1previously computed in subdivision (g) and compare this
2recomputed jobs ratio to the jobs ratio that the qualified taxpayer
3previously listed on the application submitted pursuant to
4subdivision (g).

5(B) (i) If the California Film Commission determines that the
6jobs ratio has been reduced by more than 10 percent for a qualified
7motion picture other than an independent film, the California Film
8Commission shall reduce the amount of credit allowed by an equal
9percentage, unless the qualified taxpayer demonstrates, and the
10California Film Commission determines, that reasonable cause
11exists for the jobs ratio reduction.

12(ii) If the California Film Commission determines that the jobs
13ratio has been reduced by more than 20 percent for a qualified
14motion picture other than an independent film, the California Film
15Commission shall not accept an application described in
16subdivision (g) from that qualified taxpayer or any member of the
17qualified taxpayer’s controlled group for a period of not less than
18one year from the date of that determination, unless the qualified
19taxpayer demonstrates, and the California Film Commission
20determines, that reasonable cause exists for the jobs ratio reduction.

21(C) If the California Film Commission determines that the jobs
22ratio has been reduced by more than 30 percent for an independent
23film, the California Film Commission shall reduce the amount of
24credit allowed by an equal percentage, plus 10 percent of the
25amount of credit that would otherwise have been allowed, unless
26the qualified taxpayer demonstrates, and the California Film
27Commission determines, that reasonable cause exists for the jobs
28ratio reduction.

29(D) For the purposes of this paragraph, “reasonable cause”
30means unforeseen circumstances beyond the control of the qualified
31taxpayer, such as, but not limited to, the cancellation of a television
32series prior to the completion of the scheduled number of episodes
33or other similar circumstances as determined by the California
34Film Commission in regulations to be adopted pursuant to
35subdivision (e).

36(e) (1) (A) Subject to the Administrative Procedure Act
37(Chapter 3.5 (commencing with Section 11340) of Part 1 of
38Division 3 of Title 2 of the Government Code), the California Film
39Commission shall adopt rules and regulations to implement a
40Career Readiness requirement by which the California Film
P13   1Commission shall identify training and public service opportunities
2that may include, but not be limited to, hiring interns, public service
3announcements, and community outreach and may prescribe rules
4and regulations to carry out the purposes of this section, including,
5subparagraph (D) of paragraph (4) of subdivision (a) and clause
6(iv) of subparagraph (D) of paragraph (2) of subdivision (g), and
7including any rules and regulations necessary to establish
8procedures, processes, requirements, application fee structure, and
9rules identified in or required to implement this section, including
10credit and logo requirements and credit allocation procedures over
11multiple fiscal years where the qualified taxpayer is producing a
12series of features that will be filmed concurrently.

13(B) Notwithstanding any other law, prior to preparing a notice
14of proposed action pursuant to Section 11346.4 of the Government
15Code and prior to making any revision to the proposed regulation
16other than a change that is nonsubstantial or solely grammatical
17in nature, the Governor’s Office of Business and Economic
18Development shall first approve the proposed regulation or
19proposed change to a proposed regulation regarding allocating the
20credit pursuant to subdivision (i), computing the jobs ratio as
21described in subdivisions (d) and (g), and defining “reasonable
22cause” pursuant to subparagraph (E) of paragraph (2) of subdivision
23(d).

24(2) (A) Implementation of this section for the 2015-16 fiscal
25year is deemed an emergency and necessary for the immediate
26preservation of the public peace, health, and safety, or general
27welfare and, therefore, the California Film Commission is hereby
28authorized to adopt emergency regulations to implement this
29section during the 2015-16 fiscal year in accordance with the
30rulemaking provisions of the Administrative Procedure Act
31(Chapter 3.5 (commencing with Section 11340) of Part 1 of
32Division 3 of Title 2 of the Government Code).

33(B) Nothing in this paragraph shall be construed to require the
34Governor’s Office of Business and Economic Development to
35approve emergency regulations adopted pursuant to this paragraph.

36(3) The California Film Commission shall not be required to
37prepare an economic impact analysis pursuant to the Administrative
38Procedure Act (Chapter 3.5 (commencing with Section 11340) of
39Part 1 of Division 3 of Title 2 of the Government Code) with regard
40to any rules and regulations adopted pursuant to this subdivision.

P14   1(f) If the qualified taxpayer fails to provide the copyright
2registration number as required in subparagraph (E) of paragraph
3(1) of subdivision (d), the credit shall be disallowed and assessed
4and collected under Section 19051 until the procedures are
5satisfied.

6(g) For purposes of this section, the California Film Commission
7shall do the following:

8(1) Subject to the requirements of subparagraphs (A) through
9(E), inclusive, of paragraph (2), on or after July 1, 2015, and before
10July 1, 2016, in one or more allocation periods per fiscal year,
11allocate tax credits to applicants.

12(2) On or after July 1, 2016, and before July 1, 2020, in two or
13more allocation periods per fiscal year, allocate tax credits to
14applicants.

15(A) Establish a procedure for applicants to file with the
16California Film Commission a written application, on a form jointly
17 prescribed by the California Film Commission and the Franchise
18Tax Board for the allocation of the tax credit. The application shall
19include, but not be limited to, the following information:

20(i) The budget for the motion picture production.

21(ii) The number of production days.

22(iii) A financing plan for the production.

23(iv) The diversity of the workforce employed by the applicant,
24including, but not limited to, the ethnic and racial makeup of the
25individuals employed by the applicant during the production of
26the qualified motion picture, to the extent possible.

27(v) All members of a combined reporting group, if known at
28the time of the application.

29(vi) Financial information, if available, including, but not limited
30to, the most recently produced balance sheets, annual statements
31of profits and losses, audited or unaudited financial statements,
32summary budget projections or results, or the functional equivalent
33of these documents of a partnership or owner of a single member
34limited liability company that is disregarded pursuant to Section
3523038. The information provided pursuant to this clause shall be
36confidential and shall not be subject to public disclosure.

37(vii) The names of all partners in a partnership not publicly
38traded or the names of all members of a limited liability company
39classified as a partnership not publicly traded for California income
40tax purposes that have a financial interest in the applicant’s
P15   1qualified motion picture. The information provided pursuant to
2this clause shall be confidential and shall not be subject to public
3disclosure.

4(viii) The amount of qualified wages the applicant expects to
5pay to qualified individuals.

6(ix) The amount of tax credit the applicant computes the
7qualified motion picture will receive, applying the applicable credit
8percentages described in paragraph (4) of subdivision (a).

9(x) A statement establishing that the tax credit described in this
10section is a significant factor in the applicant’s choice of location
11for the qualified motion picture. The statement shall include
12information about whether the qualified motion picture is at risk
13of not being filmed or specify the jurisdiction or jurisdictions in
14which the qualified motion picture will be located in the absence
15of the tax credit. The statement shall be signed by an officer or
16executive of the applicant.

17(xi) Any other information deemed relevant by the California
18Film Commission or the Franchise Tax Board.

19(B) Establish criteria, consistent with the requirements of this
20section, for allocating tax credits.

21(C) Determine and designate applicants who meet the
22requirements of this section.

23(D) (i) For purposes of allocating the credit amounts subject to
24the categories described in subdivision (i) in any fiscal year, the
25California Film Commission shall do all of the following:

26(ii) For each allocation date and for each category, list each
27applicant from highest to lowest according to the jobs ratio as
28computed by the California Film Commission.

29(iii) Subject to the applicable credit percentage, allocate the
30credit to each applicant according to the highest jobs ratio, working
31down the list, until the credit amount is exhausted.

32(iv) Pursuant to regulations adopted pursuant to subdivision (e),
33the California Film Commission may increase the jobs ratio by up
34to 25 percent if a qualified motion picture increases economic
35activity in California according to criteria developed by the
36California Film Commission that would include, but not be limited
37to, such factors as, the amount of the production and postproduction
38spending in California, the utilization of production facilities in
39California, and other criteria measuring economic impact in
40California as determined by the Film Commission.

P16   1(v) Notwithstanding any other provision, any television series,
2relocating television series, or any new television series based on
3a pilot for a new television series that has been approved and issued
4a credit allocation by the California Film Commission under this
5section, Section 17053.95, 17053.85, or 23685 shall be issued a
6credit for each subsequent year, for the life of that television series
7whenever credits are allocated within a fiscal year.

8(E) Subject to the annual cap and the allocation credit amounts
9based on categories described in subdivision (i), allocate an
10aggregate amount of credits under this section and Section
1117053.95, and allocate any carryover of unallocated credits from
12prior years and the amount of any credits reduced pursuant to
13paragraph (2) of subdivision (d).

14(3) Certify tax credits allocated to qualified taxpayers.

15(A) Establish a verification procedure for the amount of qualified
16expenditures paid or incurred by the applicant, including, but not
17limited to, updates to the information in subparagraph (A) of
18paragraph (2) of subdivision (g).

19(B) Establish audit requirements that must be satisfied before
20a credit certificate may be issued by the California Film
21Commission.

22(C) (i) Establish a procedure for a qualified taxpayer to report
23to the California Film Commission, prior to the issuance of a credit
24certificate, the following information:

25(I) If readily available, a list of the states, provinces, or other
26jurisdictions in which any member of the applicant’s combined
27reporting group in the same business unit as the qualified taxpayer
28that, in the preceding calendar year, has produced a qualified
29motion picture intended for release in the United States market.
30For purposes of this clause, “qualified motion picture” shall not
31include any episodes of a television series that were complete or
32in production prior to July 1, 2016.

33(II) Whether a qualified motion picture described in subclause
34(I) was awarded any financial incentive by the state, province, or
35other jurisdiction that was predicated on the performance of
36primary principal photography or postproduction in that location.

37(ii) The California Film Commission may provide that the report
38required by this subparagraph be filed in a single report provided
39on a calendar year basis for those qualified taxpayers that receive
40multiple credit certificates in a calendar year.

P17   1(D) Issue a credit certificate to a qualified taxpayer upon
2completion of the qualified motion picture reflecting the credit
3amount allocated after qualified expenditures have been verified
4and the jobs ratio computed under this section. The amount of
5credit shown in the credit certificate shall not exceed the amount
6of credit allocated to that qualified taxpayer pursuant to this section.

7(4) Obtain, when possible, the following information from
8applicants that do not receive an allocation of credit:

9(A) Whether the qualified motion picture that was the subject
10of the application was completed.

11(B) If completed, in which state or foreign jurisdiction was the
12primary principal photography completed.

13(C) Whether the applicant received any financial incentives
14from the state or foreign jurisdiction to make the qualified motion
15picture in that location.

16(5) Provide the Legislative Analyst’s Office, upon request, any
17or all application materials or any other materials received from,
18or submitted by, the applicants, in electronic format when available,
19including, but not limited to, information provided pursuant to
20clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).

21(6) The information provided to the California Film Commission
22pursuant to this section shall constitute confidential tax information
23for purposes of Article 2 (commencing with Section 19542) of
24Chapter 7 of Part 10.2.

25(h) (1) The California Film Commission shall annually provide
26the Legislative Analyst’s Office, the Franchise Tax Board, and the
27board with a list of qualified taxpayers and the tax credit amounts
28allocated to each qualified taxpayer by the California Film
29 Commission. The list shall include the names and taxpayer
30identification numbers, including taxpayer identification numbers
31of each partner or shareholder, as applicable, of the qualified
32taxpayer.

33(2) (A) Notwithstanding paragraph (6) of subdivision (g), the
34California Film Commission shall annually post on its Internet
35Web site and make available for public release the following:

36(i) A table which includes all of the following information: a
37list of qualified taxpayers and the tax credit amounts allocated to
38each qualified taxpayer by the California Film Commission, the
39number of production days in California the qualified taxpayer
40represented in its application would occur, the number of California
P18   1jobs that the qualified taxpayer represented in its application would
2be directly created by the production, and the total amount of
3qualified expenditures expected to be spent by the production.

4(ii) A narrative staff summary describing the production of the
5qualified taxpayer as well as background information regarding
6the qualified taxpayer contained in the qualified taxpayer’s
7application for the credit.

8(B) Nothing in this subdivision shall be construed to make the
9information submitted by an applicant for a tax credit under this
10section a public record.

11(3) The California Film Commission shall provide each city
12and county in California with an instructional guide that includes,
13but is not limited to, a review of best practices for facilitating
14motion picture production in local jurisdictions, resources on
15hosting and encouraging motion picture production, and the
16California Film Commissions’ Model Film Ordinance. The
17California Film Commission shall maintain on its Internet Web
18site a list of initiatives by locality that encourage motion picture
19production in regions across the state. The list shall be distributed
20to each approved applicant for the program to highlight local
21jurisdictions that offer incentives to facilitate film production.

22(i) (1) (A) The aggregate amount of credits that may be
23allocated for a fiscal year pursuant to this section and Section
2417053.95 is the applicable amount described in the following, plus
25any amount described in subparagraph (B), (C), or (D):

26(i) Two hundred thirty million dollars ($230,000,000) in credits
27for the 2015-16 fiscal year.

28(ii) Three hundred thirty million dollars ($330,000,000) in
29credits for the 2016-17 fiscal year and each fiscal year thereafter,
30through and including the 2019-20 fiscal year.

31(B) The unused allocation credit amount, if any, for the
32preceding fiscal year.

33(C) The amount of previously allocated credits not certified.

34(D) The amount of any credits reduced pursuant to paragraph
35(2) of subdivision (d).

36(2) (A) Notwithstanding the foregoing, the California Film
37Commission shall allocate the credit amounts subject to the
38following categories:

39(i) Independent films shall be allocated 5 percent of the amount
40specified in paragraph (1).

P19   1(ii) Features shall be allocated 35 percent of the amount specified
2in paragraph (1).

3(iii) A relocating television series shall be allocated 20 percent
4of the amount specified in paragraph (1).

5(iv)  A new television series, pilots for a new television series,
6movies of the week, miniseries, and recurring television series
7shall be allocated 40 percent of the amount specified in paragraph
8(1).

9(B) Within 60 days after the allocation period, any unused
10amount within a category or categories shall be first reallocated
11to the category described in clause (iv) of subparagraph (A) and,
12if any unused amount remains, reallocated to another category or
13categories with a higher demand as determined by the California
14Film Commission.

15(C) Notwithstanding the foregoing, the California Film
16Commission may increase or decrease an allocation amount in
17subparagraph (A) by 5 percent, if necessary, due to the jobs ratio,
18the number of applications, or the allocation credit amounts
19available by category compared to demand.

20(D) With respect to a relocating television series issued a credit
21in a subsequent year pursuant to clause (v) of subparagraph (D)
22of paragraph (2) of subdivision (g), that subsequent credit amount
23shall be allowed from the allocation amount described in clause
24(iv) of subparagraph (A).

25(3) Any act that reduces the amount that may be allocated
26pursuant to paragraph (1) constitutes a change in state taxes for
27the purpose of increasing revenues within the meaning of Section
283 of Article XIII   A of the California Constitution and may be
29passed by not less than two-thirds of all Members elected to each
30of the two houses of the Legislature.

31(j) The California Film Commission shall have the authority to
32allocate tax credits in accordance with this section and in
33accordance with any regulations prescribed pursuant to subdivision
34(e) upon adoption.



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