California Legislature—2015–16 Regular Session

Assembly Bill No. 1199

Introduced by Assembly Member Nazarian

February 27, 2015

An act to amend Sections 17053.95 and 23695 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1199, as introduced, Nazarian. Income taxes: credits: motion pictures.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including motion picture credits 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 credits allocated in each fiscal year to $330 million and, subject to a computation and ranking of applicants based on a jobs ratio, requires the California Film Commission to allocate credit amounts for, among others, a specified category of qualified motion pictures in an amount equal to 20% of qualified expenditures for the production of that motion picture in California. Existing law allows additional credits for such a qualified motion picture for, among other things, 5% of the qualified expenditures related to music scoring and music track recording by musicians attributable to the production of the qualified motion picture in California.

This bill would instead authorize that additional 5% for qualified expenditures relating to “qualified music preparation, music scoring, music track recording, and music editing,” but would limit the scope of that term to the described activities for which a specified amount of the total expenditures is paid or incurred in California.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.

This bill would take effect immediately as a tax levy.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

SECTION 1.  

Section 17053.95 of the Revenue and Taxation
Code is amended to read:

17053.95.  

(a) (1) For taxable years beginning on or after
January 1, 2016, there shall be allowed to a qualified taxpayer a
credit against the “net tax,” as defined in Section 17039, subject
to a computation and ranking by the California Film Commission
in subdivision (g) and the allocation amount categories described
in subdivision (i), in an amount equal to 20 percent or 25 percent,
whichever is the applicable credit percentage described in
paragraph (4), of the qualified expenditures for the production of
a qualified motion picture in California. A credit shall not be
allowed under this section for any qualified expenditures for the
production of a motion picture in California if a credit has been
claimed for those same expenditures under Section 17053.85.

(2) Except as otherwise provided in this section, the credit shall
be allowed for the taxable year in which the California Film
Commission issues the credit certificate pursuant to subdivision
(g) for the qualified motion picture, but in no instance prior to July
1, 2016, and shall be for the applicable percentage of all qualified
expenditures paid or incurred by the qualified taxpayer in all
taxable years for that qualified motion picture.

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

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

(A) Twenty percent of the qualified expenditures attributable
to the production of a qualified motion picture in California,
including, but not limited to, a feature, up to one hundred million
dollars ($100,000,000) in qualified expenditures, or a television
series that relocated to California that is in its second or subsequent
years of receiving a tax credit allocation pursuant to this section
or Section 17053.85.

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

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

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

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

(II) For purposes of this clause:

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

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

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

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

(ii) Five percent of the qualified expenditures relating to
begin insert qualified music preparation, end insert music begin delete scoring and end delete begin insert scoring end insert begin insert , end insert music
track recording begin insert , and music editing end insert by musicians attributable to
the production of a qualified motion picture in California.

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

(b) For purposes of this section:

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

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

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

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

(5) (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 motion picture, exclusive of any
amounts contributed by employees, for any year during the
production period with respect to any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of 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.

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

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

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

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

(iv) An independent film.

(v) A television series that relocated to California.

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

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

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

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

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

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

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

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

begin insert

(18.5) “Qualified music preparation, music scoring, music track
recording, and music editing” means music preparation, music
scoring, music track recording, and music editing where at least
75 percent or a minimum of one hundred thousand dollars
($100,000) of the total expenditures for the music preparation,
music scoring, music track recording, and music editing is paid
or incurred in California.

end insert

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

(B) In the case of any 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 is not
allowed to the pass-thru entity, but shall be passed through to the
partners or shareholders in accordance with applicable provisions
of Part 10 (commencing with Section 17001) or Part 11
(commencing with Section 23001). For purposes of this paragraph,
“pass-thru entity” means any entity taxed as a partnership or “S”
corporation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(c) (1) Notwithstanding any other law, a qualified taxpayer
may sell any credit allowed under this section that is attributable
to an independent film, as defined in paragraph (6) of subdivision
(b), to an unrelated party.

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

(3) In the case where the credit allowed under this section
exceeds the “net tax,” 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.

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

(5) A party that has acquired tax credits under this subdivision
shall be subject to the requirements of this section.

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

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

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

(9) Subdivision (g) of Section 17039 shall not apply to any
credit sold pursuant to this subdivision.

(10) For purposes of this subdivision, the unrelated party or
parties that purchase a credit pursuant to this subdivision shall be
treated as a qualified taxpayer pursuant to paragraph (1) of
subdivision (a).

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

(A) Identification of each qualified individual.

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

(C) The total wages paid.

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

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

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

(G) Information to substantiate its qualified expenditures.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i) The budget for the motion picture production.

(ii) The number of production days.

(iii) A financing plan for the production.

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

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

(vi) Financial information, if available, including, but not limited
to, the most recently produced balance sheets, annual statements
of profits and losses, audited or unaudited financial statements,
summary budget projections or results, or the functional equivalent
of these documents of a partnership or owner of a single member
limited liability company that is disregarded pursuant to Section
23038. The information provided pursuant to this clause shall be
confidential and shall not be subject to public disclosure.

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

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

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

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

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

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

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

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

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

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

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

(v) Notwithstanding any other provision, any television series,
relocating television series, or any new television series based on
a pilot for a new television series that has been approved and issued
a credit allocation by the California Film Commission under this
section, Section 23695, 17053.85, or 23685 shall be issued a credit
for each subsequent year, for the life of that television series
whenever credits are allocated within a fiscal year.

(E) Subject to the annual cap and the allocation credit amounts
based on categories described in subdivision (i), allocate an
aggregate amount of credits under this section and Section 23695,
and allocate any carryover of unallocated credits from prior years
and the amount of any credits reduced pursuant to paragraph (2)
of subdivision (d).

(3) Certify tax credits allocated to qualified taxpayers.

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

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

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

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

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

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

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

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

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

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

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

(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
clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).

(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.

(h) (1) The California Film Commission shall annually provide
the Legislative Analyst’s Office, the Franchise Tax Board, and the
board 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
taxpayer.

(2) (A) Notwithstanding paragraph (6) of subdivision (g), 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: a
list of qualified taxpayers and the tax credit amounts allocated to
each qualified taxpayer by the California Film Commission, the
number of production days in California the qualified taxpayer
represented in its application would occur, the number of California
jobs that the qualified taxpayer represented in its application would
be directly created by the production, and the total amount of
qualified expenditures expected to be spent by the production.

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

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

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

(i) (1) (A) The aggregate amount of credits that may be
allocated for a fiscal year pursuant to this section and Section
23695 is the applicable amount described in the following, plus
any amount described in subparagraph (B), (C), or (D):

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) 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.

SEC. 2.  

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

23695.  

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

(2) Except as otherwise provided in this section, the credit shall
be allowed for the taxable year in which the California Film
Commission issues the credit certificate pursuant to subdivision
(g) for the qualified motion picture, but in no instance prior to July
1, 2016, and shall be for the applicable percentage of all qualified
expenditures paid or incurred by the qualified taxpayer in all
taxable years for that qualified motion picture.

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

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

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

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

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

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

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

(II) For purposes of this clause:

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

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

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

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

(ii) Five percent of the qualified expenditures relating to
begin insert qualified music preparation, end insert music begin delete scoring and end delete begin insert scoring end insert begin insert , end insert music
track recording begin insert , and music editing end insert by musicians attributable to the
production of a qualified motion picture in California.

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

(b) For purposes of this section:

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

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

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

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

(5) (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 motion picture, exclusive of any
amounts contributed by employees, for any year during the
production period with respect to any of the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of 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.

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

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

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

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

(iv) An independent film.

(v) A television series that relocated to California.

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

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

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

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

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

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

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

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

begin insert

(18.5) “Qualified music preparation, music scoring, music track
recording, and music editing” means music preparation, music
scoring, music track recording, and music editing where at least
75 percent or a minimum of one hundred thousand dollars
($100,000) of the total expenditures for the music preparation,
music scoring, music track recording, and music editing is paid
or incurred in California.

end insert

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

(B) (i) In the case of any 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 is not
allowed to the pass-thru entity, but shall be passed through to the
partners or shareholders in accordance with applicable provisions
of Part 10 (commencing with Section 17001) or 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(4) In the case where the credit allowed under this section
exceeds the “tax,” the excess credit may 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.

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

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

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

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

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

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

(11) For purposes of this subdivision:

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

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

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

(A) Identification of each qualified individual.

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

(C) The total wages paid.

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

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

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

(G) Information to substantiate its qualified expenditures.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(i) The budget for the motion picture production.

(ii) The number of production days.

(iii) A financing plan for the production.

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

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

(vi) Financial information, if available, including, but not limited
to, the most recently produced balance sheets, annual statements
of profits and losses, audited or unaudited financial statements,
summary budget projections or results, or the functional equivalent
of these documents of a partnership or owner of a single member
limited liability company that is disregarded pursuant to Section
23038. The information provided pursuant to this clause shall be
confidential and shall not be subject to public disclosure.

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

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

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

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

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

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

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

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

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

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

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

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

(E) Subject to the annual cap and the allocation credit amounts
based on categories described in subdivision (i), allocate an
aggregate amount of credits under this section and Section
17053.95, and allocate any carryover of unallocated credits from
prior years and the amount of any credits reduced pursuant to
paragraph (2) of subdivision (d).

(3) Certify tax credits allocated to qualified taxpayers.

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

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

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

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

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

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

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

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

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

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

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

(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
clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).

(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.

(h) (1) The California Film Commission shall annually provide
the Legislative Analyst’s Office, the Franchise Tax Board, and the
board 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
taxpayer.

(2) (A) Notwithstanding paragraph (6) of subdivision (g), 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: a
list of qualified taxpayers and the tax credit amounts allocated to
each qualified taxpayer by the California Film Commission, the
number of production days in California the qualified taxpayer
represented in its application would occur, the number of California
jobs that the qualified taxpayer represented in its application would
be directly created by the production, and the total amount of
qualified expenditures expected to be spent by the production.

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

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

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

(i) (1) (A) The aggregate amount of credits that may be
allocated for a fiscal year pursuant to this section and Section
17053.95 is the applicable amount described in the following, plus
any amount described in subparagraph (B), (C), or (D):

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(j) 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.

SEC. 3.  

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.