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