BILL ANALYSIS �
AB 2026
Page 1
( Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
AB 2026 (Fuentes)
As Amended August 27, 2012
2/3 vote. Urgency
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|ASSEMBLY: |75-4 |(August 16, |SENATE: |32-2 |(August 31, |
| | |2012) | | |2012) |
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Original Committee Reference: REV. & TAX.
SUMMARY : Extends the operation of the California Motion Picture
Tax Credit (Film Tax Credit) for two years, thereby authorizing
the allocation of an additional $100 million annually in tax
credits to qualified productions from July 1, 2015, until July
1, 2017.
The Senate amendments provide that this bill shall take effect
immediately as an urgency statute.
AS PASSED BY THE ASSEMBLY, this bill:
1)Authorized the California Film Commission (CFC) to allocate
annually the motion picture tax credits, under both the
Personal Income Tax (PIT) and the Corporation Tax (CT) Laws,
to qualified applicants for two additional fiscal years (FYs),
from July 1, 2015, until July 1, 2017.
2)Extended the existing $100 million-per-FY limitation on the
aggregate amount of motion picture tax credits that may be
allocated by the CFC in any FY, through and including the
2016-17 FY.
3)Required the Legislative Analyst's Office (LAO) to prepare a
report evaluating the economic effects and administration of
the Film Tax Credit and provide the report to the Assembly
Revenue and Taxation Committee, the Senate Governance and
Finance Committee, and the public.
4)Revised the types of information required to be included in an
application for a Film Tax Credit allocation and specifies
that certain tax information obtained by the CFC from a
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qualified taxpayer prior to the issuance of a credit
certificate shall remain confidential, as provided.
5)Required the CFC to post annually on its Internet Web site,
and make available for public release, specified information,
including a list of qualified taxpayers and the tax credit
amounts allocated to each qualified taxpayer by the
commission.
6)Added language, allowing the bill to take effect immediately
as a tax levy.
FISCAL EFFECT : The Franchise Tax Board (FTB) staff estimates
that this bill will result in an annual General Fund (GF)
revenue loss of $5.1 million in FY 2014-15, $22 million in FY
2015-16, and an additional $161 million in future FYs as a
result of extended tax credit benefits.
According to the Assembly Appropriations Committee, extended
staffing costs at the CFC would be approximately $300,000
annually, through 2016-17, for continued administration of the
tax credit program. In addition, the staff estimates costs to
the LAO of approximately $75,000, likely absorbable, associated
with preparing a report on the economic effects and
administration of the credit program.
COMMENTS :
Author's statement . The author provides the following
statement in support of this bill:
California suffered both job and financial losses as
hundreds of productions have left the state to seek
incentives offered elsewhere. A phenomenon commonly
referred to 'run-away production.' In addition to the
international competition from Canada, Australia and
most EU nations, over 40 U.S. states offer meaningful
financial incentives to the film industry successfully
luring production and post-production jobs and
spending away from California.
In February 2009, the California Film & Television Tax
Credit Program was enacted as part of a targeted
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economic stimulus package to increase production
spending, jobs and tax revenues in California. AB
2026, in seeking a two-year extension to the existing
law, acknowledges that the Program has been successful
in its goal to retain and increase film and television
production occurring in California.
California Motion Picture Tax Credit Program: Background . In
February 2009, the California Film & Television Tax Credit
Program (Film Tax Credit Program) was enacted as a part of an
economic stimulus plan to promote production spending, jobs, and
tax revenues in California. Originally, the program was
scheduled to sunset in 2013-14 FY, but was extended by the
Legislature in 2011 for one additional year - until FY 2014-15.
�AB 1069 (Fuentes) Chapter 731, Statutes of 2011]. Although a
bill creating some sort of a tax incentive for the motion
picture and television production in California had been
introduced almost every legislative session long prior to 2009,
the existing film tax credit program was initially recommended
by then Governor Schwarzenegger in his 2009-10 budget proposal.
Unlike other proposals in the past, the existing film tax credit
is targeted, capped and allocated. In many respects, it is
similar to a grant program. It is effective only for six FYs,
from FY 2009-10 until FY 2014-15, and only $600 million total
has been allocated to this credit over the life of the program.
The CFC is required to allocate and certify the credit on a
first-come first-serve basis, up to $100 million every FY.
Is the Film Tax Credit Program effective in achieving the stated
goal ? With the current financial state of the California
economy, all state programs affecting the General Fund are under
scrutiny to ensure that the programs are effectively achieving
desired results. The film and television industry has been a
large source of employment and revenue for the state and losing
the industry could be detrimental to the California economy.
The main goal of the Film Tax Credit Program is to prevent
runaway production and retain production already being filmed in
California. The Film Tax Credit Program is a relatively new
program, and whether the Film Tax Credit Program has been
successful in achieving its main goal is up for debate.
The CFC's July 2011 Progress Report on the Film Tax Credit
Program cites an economic impact study conducted by the Los
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Angeles Economic Development Corporation (LAEDC) on the first 77
projects that received an allocation of tax credits. The study
concluded that during the first two years of the film tax credit
program, the credit generated more than $3.8 billion in economic
output, supports over 20,000 jobs in California, and will return
$200 million to state and local governments. The study
indicates that the credit returns $1.13 for each dollar spent.
The UCLA Institute for Research on Labor and Employment
(UCLA-IRLE) analyzed the LAEDC study and concluded that the
state may recover a more modest $1.04 to state and local
governments per dollar of tax credit. The UCLA-IRLE study
attributed the reduced benefit to the LAEDC assumption that all
productions that received a credit allocation would have
otherwise filmed elsewhere.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
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0005883