BILL ANALYSIS Ó AB 1199 Page 1 Date of Hearing: May 27, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1199 (Nazarian) - As Introduced February 27, 2015 ----------------------------------------------------------------- |Policy |AESTIM |Vote:|7 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This bill amends the existing California Motion Picture and Television Production Credit (Film Tax Credit) to expand the scope of "qualified expenditures relating to music scoring and music track recording," which qualifies films for an additional 5% credit, to include qualified music preparation and music editing, subject to a requirement that at least 75%, or a minimum of $100,000, of the total qualified expenditures for music preparation scoring, track recording, and editing be paid or incurred in California. FISCAL EFFECT: AB 1199 Page 2 1)Minor costs to the California Film Commission (CFC) to administer changes to the Film Tax Credit program. 2)No impact to state revenue. As the existing Film Tax Credit is several times oversubscribed but capped at $230 million in FY 2015-16 and $330 million annually thereafter, this bill is not expected to result in an increase in credits issued or claimed. Instead, this bill will affect credit priority and reallocate the tax credits among recipients. COMMENTS: 1)Purpose. According to the author, it is important to provide comprehensive incentives for the state's music industry. Supporters argue California's music scoring businesses has declined dramatically in the past 15 years, and while the Film Tax Credit is crucial to bringing middle class jobs to the state, improvements to that law are needed to ensure fair treatment of professional musicians who rely on film and television. Supporters note the bill requires a specified amount of music production to be done in California in order to qualify for the 5% bonus, tightening this provision over the current law. 2)Uplifting Film Tax Credits. AB 1839 (Gatto), statutes of 2014, created the new Film Tax Credit for taxable years beginning on or after January 1, 2016, increasing the annual amount available for tax credit allocation by CFC from $100 million to $330 million. The new law also implemented a number of programmatic changes, including converting the program from a lottery to a competitive system based on estimated jobs created by projects and the amount of funding requested. In effect, the credits function more like a grant, AB 1199 Page 3 as recipients must apply and be awarded the credits based on project merit. The Film Tax Credit contains a 5% credit "uplift" for certain qualified expenditures relating to: (i) original photography conducted outside Los Angeles; (ii) certain visual effects produced in California; and (iii) music scoring and music track recording conduced in California. In order to qualify for the visual effects bonus credit, at least 75% or a minimum of $10 million in visual effects expenditures must be incurred in California. No similar requirement exists for photography outside Los Angeles or music scoring and track recording. As a result, once a project is eligible for qualifying music costs, any amount conducted in California will be eligible for the 5% additional credit. This bill would apply a similar restriction to that contained in the visual effects credit uplift to music scoring. 3)Early Days, Unproven Success. The new Film Tax Credit was only adopted last year and is currently being implemented. As a result, its impact has yet to be measured or understood. The Legislative Analyst's Office is required to issue a report to the Legislature, on or before July 1, 2019, evaluating the economic effects and administration of the program. The committee may wish to consider whether it is prudent to begin modifying the Film Tax Credit before it has been fully implemented or any data has been generated with which to evaluate the program's effectiveness or needs. 4)Prior Legislation. In 2014, AB 2700 (Nazarian) would have allowed a tax credit under the personal income or corporation tax laws for the post-production expenditures of a qualified motion picture, as provided. AB 2700 was held on the Suspense File of this committee. AB 1199 Page 4 Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081