BILL ANALYSIS Ó
AB 1941
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Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Kansen Chu, Chair
AB 1941
(Lopez) - As Amended April 4, 2016
SUBJECT: California Film Commission: membership and duties.
SUMMARY: This bill would increase the number of members of the
California Film Commission (CFC) to 27 by increasing the
Governor's appointees from 13 to 14, as specified. The bill
would also require the commission to establish procedures and
services specifically directed to independent films.
Specifically, this bill:
1)Increases the membership of the CFC by one to 27 members by
giving the Governor an additional appointment, from the
current 13 up to 14 members.
2)Requires that one of the Governor's appointments shall be an
independent filmmaker.
3)Provides that in addition to other duties as specified in law,
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the CFC shall establish procedures and services specifically
directed to independent films.
4)Defines, "Independent filmmaker" for purposes of this section,
to mean "a producer of a film with a running time of at least
seventy-five (75) minutes intended for commercial distribution
to a motion picture theater, directly to the home video
market, directly to television, or via the internet. An
independent film produced by an independent filmmaker shall be
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."
EXISTING LAW:
1)Establishes the California Film Commission within the
Governor's Office of Business and Economic Development
(Government Code14998.2. et seq).
2)States that the commission shall consist of 26 members, with
the Governor appointing 13 members, the Senate Committee on
Rules four members, the Speaker of the Assembly four members,
and five members shall be ex officio.
3)Provides that all members of the commission, except
legislators who are appointed either by the Senate Committee
on Rules or by the Speaker of the Assembly for four year
terms, shall serve at the pleasure of the appointing authority
for a term of two years from the effective date of the
appointment.
4)Declares that six of the 13 members appointed by the Governor
shall be as follows:
a) One shall be a person who is a member or employee of a
union or guild of motion picture artists.
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b) One shall be a person who is a member or employee of a
union or guild representing motion picture craftsmen,
technicians, or photographers.
c) Two shall be from major motion picture studios.
d) One shall be a member of the city council or a member of
the county board of supervisors of a city or a county with
a population of at least two million people.
e) One shall be a member of the city council or a member of
the county board of supervisors of a city or a county with
a population of less than two million people.
5)Defines "Independent film" within the California Film Tax
Credit Program to mean 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. [Revenue and Taxation Code
17053.95.(b)(6)]
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author and sponsor's statement of need for legislation.
According to the author, "Currently, the California Film
Commission is not required by statue to include a board member
who is an independent filmmaker, nor to provide services
targeted to this unique sub-group. Despite this, California
produced 177 independent films in 2012-13, which is the
highest of any state in the United States with New York coming
in second at 96 productions. This impressive output makes them
a very important sector in our entertainment economy despite
the comparatively small size of their budgets."
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The sponsors state the following in support, "Since more
independent film productions are made a year in California
than large studio productions, it is critical that an
independent filmmaker be added to the commission. Independent
filmmakers will be able to bring a different perspective to
filmmaking, discuss the current trends and needs of filmmakers
and provide ideas as a whole to improve independent filmmaking
in California."
The author concludes, "Independent filmmakers are resourceful
artists, who have firsthand knowledge of solving unique issues
that arise during the independent filmmaking process and have
developed the core skill of grassroots networking. AB 1941
will ensure that the unique needs of independent filmmakers
are served so that California can remain first in the United
States in producing independent films."
2)Background:
a) California Film Production Tax Credit program is
administered by the CFC. In 1985, the Legislature
established CFC to co-ordinate state and local governments'
efforts at providing an environment conducive for the film
industry. Twenty-six members of the film industry, private
sector, and state and local governments are appointed by
the Governor, Senate President Pro Tempore, and Speaker of
the Assembly to sit on the CFC board.
In 2009, to combat "runaway production," the Legislature enacted
a tax credit for qualified motion picture production in
California as part of the State Budget Agreement, directing CFC
to allocate $100 million in credits annually (SB 15X3 (Calderon,
Chapter 17) and AB 15X3 (Krekorian, Chapter 10) in Third
Extraordinary Session). Last session that program was
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substantially expanded by AB 1839 (Gatto and Bocanegra).
b) Prior related legislation. AB 1839 (Gatto and
Bocanegra), Chapter 413, Statutes of 2014, created a new
and expanded tax credit for qualified expenditures for the
production of qualified motion pictures in California for
taxable years beginning on or after January 1, 2016, and
authorized the California Film Commission (CFC) to
administer the program and allocate the tax credits,
subject to a $230 million cap in the first year (2015-16)
and $330 million aggregate annual cap for each fiscal year
(FY) from the 2016-17 FY through and including the 2019-20
FY. In relevant part, AB 1839 required special treatment
for independent films as follows:
i) Requires the CFC to allocate the credit amounts
subject to the following categories in order to insure
like productions compete against each other under the
jobs ratio formula:
(1) Independent films shall be allocated 5%.
(2) Features shall be allocated 35%.
(3) A relocating television series shall be allocated
20%.
(4) A new television series, pilots for a new
television series, movies of the week, miniseries, and
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recurring television series shall be allocated 40%.
ii) Requires the CFC to audit final submissions for tax
credits and compare the jobs ratio figures contained in
original tax credit applications to those actual
qualified expenditures, and provides for discrepancies as
follows:
(1) If the CFC finds a reduction in actual
qualified expenditures of no more than 10% they shall
reduce the amount of credit allowed by an equal
percentage, with limited exception for reasonable
cause, as provided.
(2) In addition, if the CFC finds a reduction in
actual qualified expenditures by more than 20%, the
CFC shall not accept an application from that
qualified taxpayer for one year, with exceptions for
reasonable cause, as provided.
(3) Independent films would be treated
differently, with any reduction of 30% or more in
actual qualified expenditures reducing the amount of
credit allowed by an equal percentage, plus subjecting
them to a penalty of 10% of the difference in
requested tax credit allowance and actual
expenditures, with exceptions for reasonable cause, as
provided.
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iii) In addition, CFC must set aside $10 million credits
each year, for independent films. The CFC must provide
the Franchise Tax Board (FTB) an annual list of qualified
taxpayers and the tax credit amounts allocated to each
qualified taxpayer. The amount of the tax credit is
equal to either:
(1) 20% of the qualified production expenditures
of a motion picture; or
(2) 25% of the qualified expenditures of an
independent film or a television series that relocated
to California.
Please see committee analysis of AB 1839 for complete
discussion of the issues of runaway production and the state's
investment in the California Film Tax Credit program.
3)Recent amendments adopt CFC definition of "independent film
producer." This measure would require the Governor to appoint
an independent filmmaker to the CFC and would require the CFC
to create and provide specific services to independent
filmmakers. However, the existing code only defines an
independent film for purposes of the California Film
Production Tax Credit program with financial and investment
limitations. In order to reach "independent filmmakers" and
not simply independent film productions eligible for the
California Film Production Tax Credit program, the author
worked with the CFC in crafting their definition.
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The bill defines the term for purposes of this section to mean
"a producer of a film with a running time of at least
seventy-five (75) minutes intended for commercial distribution
to a motion picture theater, directly to the home video
market, directly to television, or via the internet. An
independent film produced by an independent filmmaker shall be
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." This definition is the
working definition used by the CFC, and represents the
coordinated language of various parts of the California Film
Production Tax Credit program.
REGISTERED SUPPORT / OPPOSITION:
Support
Groat Family Productions (sponsor)
Opposition
There is no opposition on file.
Analysis Prepared by:Dana Mitchell / A.,E.,S.,T., & I.M. / (916)
AB 1941
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319-3450