BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1167|
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THIRD READING
Bill No: SB 1167
Author: Calderon (D)
Amended: 7/5/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-1, 6/28/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, La
Malfa, Liu, Yee
NOES: Kehoe
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/16/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Income taxes: credits: film: extension
SOURCE : Author
DIGEST : This bill extends the California Motion Picture
Tax Credit to July 1, 2017.
ANALYSIS : In 1985, the Legislature established the
California Film Commission (CFC) to coordinate state and
local governments efforts at providing an environment
conducive for the film industry. 21 members of the film
industry, private sector, and state and local governments
are appointed by the Governor, Senate Pro Tem, and Speaker
of the Assembly to sit on the CFC board.
In 2009, Governor Schwarzenegger signed the California Film
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and Television Tax Credit Program (Film Tax Credit Program)
as a part of the 2009 Budget plan to promote film
production and create and retain jobs in California (SB
15X3 (Calderon), Chapter 17, Statutes of 2009, and AB 15X3
(Krekorian), Chapter 19, Statutes of 2009). Qualified
motion pictures, defined as: (1) feature films with
budgets between $1 million and $75 million; (2) movies of
the week with a minimum budget of $500,000; and (3) new
television series with a minimum $1 million budget, may
apply for the credit. Also, 75% of the motion picture
shooting days must take place in California, or 75% of the
motion production budget must pay for services or the
purchase or rental or property within the state. Because
SB 15X3 authorized the CFC to allocate two years of credits
in the first year, each year's allocation is for the next
fiscal year's credits. For example, when CFC allocated
credits in July 1, 2012, it is for credits in Fiscal Year
2013-14. Last year, Governor Brown approved AB 1069
(Fuentes), Chapter 731, Statutes of 2011, which extended
the Film Tax Credit Program for one year to 2014-15.
This bill:
I. Extension . Authorizes the CFC to allocate $100
million film tax credits annually for two fiscal years,
starting July 1, 2015 until July 2017.
II. Application . Requires an applicant to list on its
application:
All members of a combined reporting group, if
known at the time of application; and,
The names of all partners in a partnership not
publicly traded or the names of all members of a
limited liability company classified as a partnership
not publicly traded for California income tax
purposes that have a financial interest in the
applicant's qualified motion picture.
III. CFC . Before the CFC issues a credit certificate, it
must establish a procedure for a qualified taxpayer to
report to the CFC the following information:
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If readily available, a list of the states,
provinces, or other jurisdictions in which any member
of the applicant's combined reporting group in the
same business unit as the qualified taxpayer that, in
the preceding calendar year, has produced a qualified
motion picture intended for release in the United
States market.
Whether a qualified motion picture was awarded
any financial incentive by the state, province, or
other jurisdiction that was predicated on the
performance of primary principal photography or
postproduction in that location
A "qualified motion picture" does not include any
episodes of a television series that were complete or
in production prior to July 1, 2009.
This bill authorizes the CFC to allow qualified
taxpayers that receive multiple credit certificates in a
calendar year to file a single report on a calendar year
basis.
This bill requires the CFC to obtain, when possible, the
following information from applicants that do not
receive an allocation of credit:
Whether the qualified motion picture that was the
subject of the application was completed.
If an application was completed, which state or
foreign jurisdiction was the primary principal
photography completed.
Whether the applicant received any financial
incentives from the state or foreign jurisdiction to
make the qualified motion picture in that location.
This bill requires CFC to provide the Legislative
Analyst's Office (LAO), upon its request, any or all
application materials or any other materials received
from, or submitted by the, applicants, in electronic
format when available.
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This bill requires CFC to annually provide the LAO a
list of qualified taxpayers and the tax credit amounts
allocated to each qualified taxpayer by the CFC. The
list shall include the names and taxpayer identification
numbers, including taxpayer identification numbers of
each partner or shareholder, as applicable, of the
qualified taxpayer.
This bill provides that information provided to the CFC
constitutes confidential tax information pursuant to the
franchise and income tax laws.
IV. Study . Provides that the LAO must provide to the
Assembly Revenue and Taxation Committee, the Senate
Governance and Finance Committee, and the public, on or
before January 1, 2015, a report evaluating the economic
effects and administration of the tax credits.
This bill authorizes the LAO, in researching the
reports, to:
Request and receive all information provided to
the CFC pursuant to state law.
Request and receive all information provided to
the Franchise Tax Board (FTB) relating to the sale or
assignment of credits.
Request and receive all information provided to
the board pursuant to state law.
This bill also requires CFC, the board, the FTB, the
Employment Development Department, and all other
relevant state agencies to provide additional
information, as specified by the LAO, as needed to
research the reports.
This bill provides that information received by the LAO
pursuant to this section must be considered confidential
taxpayer information and subject to the appropriate
confidentiality requirements of the participating state
agency.
This bill authorizes the LAO to publish statistics in
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conjunction with the reports required, derived from
information provided to the LAO, if the published
statistics are classified to prevent the identification
of particular taxpayers, reports, and tax returns and
the publication of the percentage of dividends paid by a
corporation that is deductible by the recipient.
This bill requires the CFC to annually post 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 CFC.
Comments
When 43 other U.S. states and overseas production companies
offer enticing tax subsidies for film and TV productions,
California loses big. Productions that leave the state to
pursue other state or international incentives -- "runaway
productions" -- translate to significant job and economic
losses. California has a historical comparative advantage
over other states, because of the long-established film
industry and the high-paying talent pool that resides in
state. Along with the state's natural beauty, clement
weather, and high-tech media studios, a tax incentive
retains and attracts production to California. However,
with the credit set to expire in 2015, California's film
industry will become uncompetitive, as other locations
invest in and develop their own infrastructure and talent
pools. Moreover, the state will no longer draw ancillary
economic benefits from tourism. This bill's tax credit
extension provides the necessary economic stability to
retain and attract film industry productions back to
California.
Related legislation . AB 2026 (Fuentes), currently pending
in the Assembly Appropriations Committee, would extend the
of the film tax credit for five-years and authorize the
allocation of an additional $100 million annually in tax
credits to qualified productions from July 1, 2015 until
July 1, 2020.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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According to the Senate Appropriations Committee:
Estimated tax revenue loss of $5.1 million in 2014-15,
$22 million in 2015-16, and an additional $161 million
in future fiscal years as a result of extended tax
credit benefits (General Fund).
Extended staffing costs at the CFC of approximately
$300,000 annually through 2016-17 for continued
administration of the credit program (General Fund).
Estimated staff costs to the LAO of approximately
$75,000, likely absorbable, to report on the economic
effects and administration of the credit program.
SUPPORT : (Verified 8/16/17)
Artists One Union
California Chamber of Commerce
California Labor Federation
California Retailers Association
California Taxpayers Association
California Teamsters Public Affairs Council
Cities of Los Angeles and Santa Clarita
County of Placer
Directors Guild of America
Film Liaisons in California Statewide
Inland Empire Economic Partnership
Los Angeles Area Chamber of Commerce
Los Angeles Mayor Antonio Villaraigosa
Motion Picture Association of America, Inc.
NBC Universal
Paramount Pictures
Sacramento Convention and Visitors Bureau
San Diego Film Commission
San Francisco Travel Association
Screen Actors Guild - American Federation of Television and
Radio Teamsters Local Union 399
Vallejo/Solano County Film Office
Valley Industry and Commerce Association
OPPOSITION : (Verified 8/16/17)
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American Cancer Society
American Heart Association
American Lung Association
California School Employees Association, AFL-CIO
California Teachers Association
AGB:k 8/20/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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