BILL ANALYSIS �
AB 2026
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2026 (Fuentes) - As Introduced: February 23, 2012
Policy Committee: Revenue and
Taxation Vote: 8-0
Arts 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends the operation of the California Motion Picture
Tax Credit for five additional years, from July 1, 2015 until
July 1, 2020. Specifically, this bill:
1)Authorizes the California Film Commission (CFC) to allocate
annually the motion picture tax credits, under both the
Personal Income Tax and the Corporation Tax, to qualified
applicants for five additional fiscal years, from July 1, 2015
until July 1, 2020.
2)Extend the existing $100 million limitation on the aggregate
amount of motion picture tax credits that may be allocated by
the CFC in any fiscal year, through and including 2019-20, for
a total of $500 million.
3)Takes effect immediately as a tax levy.
FISCAL EFFECT
FTB staff estimates this bill will result in an annual revenue
loss of $5.1 million in fiscal year 2014-15, $22 million in
2015-16, with the remaining revenue losses occurring through
July 1, 2020.
COMMENTS
1)Author's Statement . The author notes California has suffered
significant employment and financial losses as hundreds of
productions have left the state to seek incentives offered
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elsewhere, in a phenomenon commonly referred to as run-away
production. According to the author, in addition to
international competition from Canada, Australia and most
European Union, over 40 states offer meaningful financial
incentives to lure production and post-production jobs and
spending from California.
To help California compete, in February 2009, the California
Film & Television Tax Credit Program was enacted as part of a
targeted economic stimulus package to increase production
spending, jobs and tax revenues in California. The author
argues the program has been successful in its goal to retain
and increase film and television production occurring in
California and has introduced AB 2026 to seek a five-year
extension to the existing law.
2)Arguments in Support . Proponents, including the California
Labor Federation and the Chamber of Commerce, state that the
film production tax credit has been successful in its effort
to retain and increase film and television production in
California. Proponents note the program has generated 41,000
new jobs and $2.2 billion in direct spending. They argue the
program helps California stay competitive because, when
productions leave the state, only top tier talent is flown to
work on location and, as a result, many well-paying production
jobs with good benefits are lost and ancillary businesses such
as caterers, dry cleaners and restaurants are negatively
impacted. The proponents assert that, given that 40 other
states and many foreign countries are promoting aggressive
programs to attract motion picture production to their
jurisdictions, it is vital for California to retain this
important incentive that contributes ingenuity, talent, and
creativity to our economy.
The proponents also emphasize that the film tax credit is one
of few tax breaks in California that has the appropriate
accountability measures to make sure it is effective. The
program includes a five-year sunset, an annual cap of $100
million and is targeted. The proponents conclude that this
bill gives California the needed competitive edge to keep its
heritage industry and will continue the successful momentum of
the program.
3)Arguments in Opposition . The opponents, including the
California School Employees Association, state the
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non-partisan Legislative Analyst Office finding this program
is ineffective and argue that extending the credit by an
additional five years means other vital state programs, such
as like education, public safety, or other health and human
services would have to be reduced. Other opponents, including
the American Cancer Association and the American Heart
Association contend California's film tax should not provide
subsidies for movies to only those that do not have
tobacco-related imagery.
4)California Motion Picture Tax Credit Program . In February
2009, the California Film & Television Tax Credit Program was
enacted as a part of an economic stimulus plan to promote
production spending, jobs and tax revenues in California. The
existing film tax credit is targeted, capped and allocated.
In many respects, it is similar to a grant program. The
California Film Commission is required to allocate and certify
the credit on the first-come first-serve basis, up to $100
million every FY. It is effective only for five years, from
fiscal years 2009-10 to 2014-15, and $500 million is allocated
over the life of the program.
5)Related Legislation .
a) AB 1069 (Fuentes), Chapter 731, Statutes of 2011,
extended the film production tax credit program for one
year, until July 1, 2015.
b) SB 1197 (Calderon,) 2010, deleted the sunset date of the
film tax credit program. SB 1197 was held in Senate
Revenue and Taxation Committee.
c) SBX8 55 (Calderon), 2010, deleted the sunset date of the
film tax credit program. SBx8 55 was held in Senate Rules
Committee.
d) ABX3 15 (Krekorian), Chapter 10, Statutes of 2009,
established the Film Tax Credit Program.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081