AB 1780, as amended, Donnelly. Income taxes: credit: motion pictures.
begin insertThe Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a credit against those taxes for taxable years beginning on or after January 1, 2011, in an amount equal to an applicable percentage of either 20% or 25%, respectively, of the qualified expenditures, as defined, attributable to the production in California of a qualified motion picture, as defined. Existing law imposes specified duties on the California Film Commission related to the administration of the credits, including a requirement to allocate the tax credits until July 1, 2017, and limits the aggregate amount of credits that may be allocated to qualified motion pictures in any fiscal year to $100,000,000 through the 2016-17 fiscal year.
end insertbegin insertThis bill would establish new, alternative credits under the Personal Income Tax Law and the Corporation Tax Law for taxable years beginning on or after January 1, 2016, allowing a credit equal to 20% of the qualified expenditures attributable to the production in California of one or more qualified motion pictures, defined to include a feature, television series, music video, commercial, and video game, with a aggregate qualified expenditure amount of at least $500,000. The bill would provide that the credit amount may be increased by an additional 10% if each qualified motion picture, for which qualified expenditures are aggregated for the claim of credit, includes a California promotion, as specified. The bill would further provide that the credit amount may be increased by up to an additional 5% if each qualified motion picture, for which qualified expenditures are aggregated for the claim of credit, incurred or paid the qualified expenditures relating to original photography outside of a major city zone, as defined. The bill would authorize any credit allowed pursuant to these provisions to be sold to an unrelated party subject to specified requirements.
end insertbegin insertThis bill would take effect immediately as a tax levy.
end insertThe Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a credit against those taxes for taxable years beginning on or after January 1, 2011, in an amount equal to a specified percentage of the qualified expenditures, as defined, attributable to the production of a qualified motion picture in California.
end deleteThis bill would state the intent of the Legislature to enact legislation to allow a transferable tax credit for specified motion pictures in an amount equal to 20% of production and postproduction expenditures, as provided.
end deleteVote: majority.
Appropriation: no.
Fiscal committee: begin deleteno end deletebegin insertyesend insert.
State-mandated local program: no.
The people of the State of California do enact as follows:
begin insertSection 17053.18 is added to the end insertbegin insertRevenue and
2Taxation Codeend insertbegin insert, to read:end insert
(a) (1) For taxable years beginning on or after
4January 1, 2016, there shall be allowed to a qualified taxpayer a
5credit against the “net tax,” as defined in Section 17039, in an
6amount equal to the applicable percentage, as specified in
7paragraph (2), of the qualified expenditures for the production of
8a qualified motion picture in California. A credit shall not be
9allowed under this section for any qualified expenditures for the
10production of a motion picture in California if a credit has been
11claimed for those same expenditures under Section 17053.85.
P3 1(2) For the purposes of paragraph (1), the applicable percentage
2shall be:
3(A) Subject to
subparagraph (B) and (C), 20 percent of the
4qualified expenditures attributable to the production of one or
5more qualified motion pictures in California with an aggregate
6qualified expenditure amount that equals or exceeds five hundred
7thousand dollars ($500,000).
8(B) The applicable percentage shall increase by 10 percent if
9each qualified motion picture, for which qualified expenditures
10are aggregated for the particular claim for the credit, includes a
11California promotion. For a feature, television series, or video
12game, the California promotion shall consist of a five-second long
13logo that promotes California in the end credits before the
14below-the-line crew crawl for the life of the project and a link to
15www.visitcalifornia.com presented by the California Travel and
16Tourism Commission on the Internet Web site of the feature,
17television series, or video game. For a music video or commercial,
18the California promotion shall consist of a link
to
19www.visitcalifornia.com, presented by the California Travel and
20Tourism Commission, on the Internet Web site of the music video
21or commercial.
22(C) The applicable percentage shall increase by either of the
23following:
24(i) Five percent if each qualified motion picture, for which
25qualified expenditures are aggregated for the particular claim for
26the credit, incurred or paid the qualified expenditures relating to
27original photography outside of a major city zone.
28(ii) Two and one-half percent if at least one of the qualified
29motion pictures, for which qualified expenditures are aggregated
30for the particular claim for the credit, incurred or paid the qualified
31expenditures relating to original photography within a major city
32zone.
33(b) For the purposes of
this section, the following definitions
34apply:
35(1) (A) “Employee fringe benefits” means the amount allowable
36as a deduction under this part to the qualified taxpayer involved
37in the production of the qualified motion picture, exclusive of any
38amounts contributed by employees, for any year during the
39production period with respect to any of the following:
P4 1(i) Employer contributions under any pension, profit-sharing,
2annuity, or similar plan.
3(ii) Employer-provided coverage under any accident or health
4plan for employees.
5(iii) The employer’s cost of life or disability insurance provided
6to employees.
7(B) Any amount treated as wages under clause (i) of
8subparagraph (A)
of paragraph (12) shall not be taken into account
9under this paragraph.
10(2) “Major city zone” means an area within 15 miles of a city
11with a population over 300,000.
12(3) “Original photography” includes principal photography,
13additional unit photography, and reshooting original footage.
14(4) (A) “Postproduction” means the final activities in a
15qualified motion picture’s production, including editing, foley
16recording, automatic dialogue replacement, sound editing, scoring
17and music editing, beginning and end credits, negative cutting,
18negative processing and duplication, the addition of sound and
19visual effects, soundmixing, film-to-tape transfers, encoding, and
20color correction.
21(B) “Postproduction” does not include the manufacture
or
22shipping of release prints.
23(5) “Preproduction” means the process of preparation for actual
24physical production which begins after a qualified motion picture
25has received a firm agreement of financial commitment, or is
26greenlit, with, for example, the establishment of a dedicated
27production office, the hiring of key crew members, and includes,
28but is not limited to, activities that include location scouting and
29execution of contracts with vendors of equipment and stage space.
30(6) “Principal photography” means the phase of production
31during which the motion picture is actually shot, as distinguished
32from preproduction and post production.
33(7) “Production period” means the period beginning with
34preproduction and ending upon completion of postproduction.
35(8) “Qualified expenditures” means amounts paid or incurred
36for tangible personal property purchased or leased, and used,
37within this state during the production period of a qualified motion
38picture and payments, including qualified wages, for services
39performed within this state during the production period of a
40qualified motion picture.
P5 1(9) (A) “Qualified individual” means any individual who
2performs services during the production period in an activity
3related to the production of a qualified motion picture.
4(B) “Qualified individual” shall not include either of the
5following:
6(i) Any individual related to the qualified taxpayer as described
7in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
8Revenue Code.
9(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of
10the Internal Revenue Code, of the qualified taxpayer.
11(10) (A) “Qualified motion picture” means a motion picture
12that is produced for distribution to the general public, regardless
13of medium, that is one of the following:
14(i) A feature.
15(ii) A television series.
16(iii) A music video.
17(iv) A commercial.
18(v) A video game.
19(B) “Qualified motion picture” shall not include a motion
20picture produced for private noncommercial
use, such as weddings,
21graduations, or as part of an educational course and made by
22students, a news program, current events or public events program,
23talk show, game show, sporting event or activity, awards show,
24telethon or other production that solicits funds, reality television
25program, clip-based programming if more than 50 percent of the
26content is comprised of licensed footage, documentaries, variety
27programs, daytime dramas, strip shows, one-half hour (air time)
28episodic television shows, or any production that falls within the
29recordkeeping requirements of Section 2257 of Title 18 of the
30United States Code.
31(11) “Qualified taxpayer” means a taxpayer who has paid or
32incurred qualified expenditures.
33(12) (A) “Qualified wages” means all of the following:
34(i) Any wages subject to
withholding under Division 6
35(commencing with Section 13000) of the Unemployment Insurance
36Code that were paid or incurred by any taxpayer involved in the
37production of a qualified motion picture with respect to a qualified
38individual for services performed on the qualified motion picture
39production within this state.
P6 1(ii) The portion of any employee fringe benefits paid or incurred
2by any taxpayer involved in the production of the qualified motion
3picture that are properly allocable to qualified wage amounts
4described in clauses (i), (iii), and (iv).
5(iii) Any payments made to a qualified entity for services
6performed in this state by qualified individuals within the meaning
7of paragraph (9).
8(iv) Remuneration paid to an independent contractor who is a
9qualified individual for services performed within this state by
that
10qualified individual.
11(B) “Qualified wages” shall not include any of the following:
12(i) Expenses, including wages, related to new use, reuse, clip
13use, licensing, secondary markets, or residual compensation, or
14the creation of any ancillary product, including, but not limited
15to, a soundtrack album, toy, game, trailer, or teaser.
16(ii) Expenses, including wages, paid or incurred with respect
17to acquisition, development, turnaround, or any rights thereto.
18(iii) Expenses, including wages, related to financing, overhead,
19marketing, promotion, or distribution of a qualified motion picture.
20(iv) Expenses, including wages, paid per person per qualified
21motion picture for writers, directors,
music directors, music
22composers, music supervisors, producers, and performers, other
23than background actors with no scripted lines.
24(c) (1) Notwithstanding any other law, a qualified taxpayer
25may sell any credit allowed under this section to an unrelated
26party.
27(2) The qualified taxpayer shall report to the Franchise Tax
28Board prior to the sale of the credit, in the form and manner
29specified by the Franchise Tax Board, all required information
30regarding the purchase and sale of the credit, including the social
31security or other taxpayer identification number of the unrelated
32party to whom the credit has been sold, the face amount of the
33credit sold, and the amount of consideration received by the
34qualified taxpayer for the sale of the credit.
35(3) A credit shall not be sold pursuant to this
subdivision to
36more than one taxpayer, nor may the credit be resold by the
37unrelated party to another taxpayer or other party.
38(4) A party that has acquired tax credits under this section shall
39be subject to the requirements of this section.
P7 1(5) In no event may a qualified taxpayer assign or sell any tax
2credit to the extent the tax credit allowed by this section is claimed
3on any tax return of the qualified taxpayer.
4(6) In the event that both the original taxpayer and a taxpayer
5to whom the credit has been sold both claim the same amount of
6credit on their tax returns, the Franchise Tax Board may disallow
7the credit of either taxpayer, so long as the statute of limitations
8upon assessment remains open.
9(7) Subdivision (g) of Section 17039 shall not
apply to any credit
10sold pursuant to this subdivision.
11(8) For purposes of this subdivision, the unrelated party or
12parties that purchase a credit pursuant to this subdivision shall
13be treated as a qualified taxpayer pursuant to paragraph (1) of
14subdivision (a).
15(d) In the case where the credit allowed by this section exceeds
16the “net tax,” the excess may be carried over to reduce the “net
17tax” in the following year, and succeeding seven years if necessary,
18until the credit is exhausted.
19(e) A deduction otherwise allowed under this part for any
20amount paid or incurred by the qualified taxpayer upon which the
21credit is based shall be reduced by the amount of the credit allowed
22by this section.
23(f) Credit under this section shall be allowed only for
credits
24claimed on a timely filed original return of the qualified taxpayer.
25(g) (1) The Franchise Tax Board may prescribe rules,
26guidelines, or procedures necessary or appropriate to carry out
27the purposes of this section.
28(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
29Division 3 of Title 2 of the Government Code does not apply to
30any standard, criterion, procedure, determination, rule, notice, or
31guideline established or issued by the Franchise Tax Board
32pursuant to this section.
begin insertSection 23618 is added to the end insertbegin insertRevenue and Taxation
34Codeend insertbegin insert, to read:end insert
(a) (1) For taxable years beginning on or after January
361, 2016, there shall be allowed to a qualified taxpayer a credit
37against the “tax,” as defined in Section 23036, in an amount equal
38to the applicable percentage, as specified in paragraph (2), of the
39qualified expenditures for the production of a qualified motion
40picture in California. A credit shall not be allowed under this
P8 1section for any qualified expenditures for the production of a
2motion picture in California if a credit has been claimed for those
3same expenditures under Section 23685.
4(2) For the purposes of paragraph (1), the applicable percentage
5shall be:
6(A) Twenty percent of the qualified
expenditures attributable
7to the production of one or more qualified motion pictures in
8California with an aggregate qualified expenditure amount that
9equals or exceeds five hundred thousand dollars ($500,000).
10(B) The applicable percentage shall increase by 10 percent if
11each qualified motion picture, for which qualified expenditures
12are aggregated for the particular claim for the credit, includes a
13California promotion. For a feature, television series, or video
14game, the California promotion shall consist of a five-second long
15logo that promotes California in the end credits before the
16below-the-line crew crawl for the life of the project and a link to
17www.visitcalifornia.com presented by the California Travel and
18Tourism Commission on the Internet Web site of the feature,
19television series, or video game. For a music video or commercial,
20the California promotion shall consist of a link to
21www.visitcalifornia.com presented by the California
Travel and
22Tourism Commission on the Internet Web site of the music video
23or commercial.
24(C) The applicable percentage shall increase by either of the
25following:
26(i) Five percent if each qualified motion picture, for which
27qualified expenditures are aggregated for the particular claim for
28the credit, incurred or paid the qualified expenditures relating to
29original photography outside of a major city zone.
30(ii) Two and one-half percent if at least one of the qualified
31motion pictures, for which qualified expenditures are aggregated
32for the particular claim for the credit, incurred or paid the qualified
33expenditures relating to original photography within a major city
34zone.
35(b) For the purposes of this section, the following definitions
36shall apply:
37(1) (A) “Employee fringe benefits” means the amount allowable
38as a deduction under this part to the qualified taxpayer involved
39in the production of the qualified motion picture, exclusive of any
P9 1amounts contributed by employees, for any year during the
2production period with respect to any of the following:
3(i) Employer contributions under any pension, profit-sharing,
4annuity, or similar plan.
5(ii) Employer-provided coverage under any accident or health
6plan for employees.
7(iii) The employer’s cost of life or disability insurance provided
8to employees.
9(B) Any amount treated as wages under clause (i) of
10subparagraph (A) of paragraph (12) shall not be taken into account
11
under this paragraph.
12(2) “Major city zone” means an area within 15 miles of a city
13with a population over 300,000.
14(3) “Original photography” includes principal photography,
15additional unit photography, and reshooting original footage.
16(4) (A) “Postproduction” means the final activities in a
17qualified motion picture’s production, including editing, foley
18recording, automatic dialogue replacement, sound editing, scoring
19and music editing, beginning and end credits, negative cutting,
20negative processing and duplication, the addition of sound and
21visual effects, soundmixing, film-to-tape transfers, encoding, and
22color correction.
23(B) “Postproduction” does not include the manufacture or
24shipping of release prints.
25(5) “Preproduction” means the process of preparation for actual
26physical production which begins after a qualified motion picture
27has received a firm agreement of financial commitment, or is
28greenlit, with, for example, the establishment of a dedicated
29production office, the hiring of key crew members, and includes,
30but is not limited to, activities that include location scouting and
31execution of contracts with vendors of equipment and stage space.
32(6) “Principal photography” means the phase of production
33during which the motion picture is actually shot, as distinguished
34from preproduction and post production.
35(7) “Production period” means the period beginning with
36preproduction and ending upon completion of postproduction.
37(8) “Qualified expenditures”
means amounts paid or incurred
38for tangible personal property purchased or leased, and used,
39within this state during the production period of a qualified motion
40picture and payments, including qualified wages, for services
P10 1performed within this state during the production period of a
2qualified motion picture.
3(9) (A) “Qualified individual” means any individual who
4performs services during the production period in an activity
5related to the production of a qualified motion picture.
6(B) “Qualified individual” shall not include either of the
7following:
8(i) Any individual related to the qualified taxpayer as described
9in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
10Revenue Code.
11(ii) Any 5-percent owner, as
defined in Section 416(i)(1)(B) of
12the Internal Revenue Code, of the qualified taxpayer.
13(10) (A) “Qualified motion picture” means a motion picture
14that is produced for distribution to the general public, regardless
15of medium, that is one of the following:
16(i) A feature.
17(ii) A television series.
18(iii) A music video.
19(iv) A commercial.
20(v) A video game.
21(B) “Qualified motion picture” shall not include a motion
22picture produced for private noncommercial use, such as weddings,
23graduations, or as part of an educational course and made by
24
students, a news program, current events or public events program,
25talk show, game show, sporting event or activity, awards show,
26telethon or other production that solicits funds, reality television
27program, clip-based programming if more than 50 percent of the
28content is comprised of licensed footage, documentaries, variety
29programs, daytime dramas, strip shows, one-half hour (air time)
30episodic television shows, or any production that falls within the
31recordkeeping requirements of Section 2257 of Title 18 of the
32United States Code.
33(11) “Qualified taxpayer” means a taxpayer who has paid or
34incurred qualified expenditures.
35(12) (A) “Qualified wages” means all of the following:
36(i) Any wages subject to withholding under Division 6
37(commencing with Section 13000) of the Unemployment Insurance
38
Code that were paid or incurred by any taxpayer involved in the
39production of a qualified motion picture with respect to a qualified
P11 1individual for services performed on the qualified motion picture
2production within this state.
3(ii) The portion of any employee fringe benefits paid or incurred
4by any taxpayer involved in the production of the qualified motion
5picture that are properly allocable to qualified wage amounts
6described in clauses (i), (iii), and (iv).
7(iii) Any payments made to a qualified entity for services
8performed in this state by qualified individuals within the meaning
9of paragraph (9).
10(iv) Remuneration paid to an independent contractor who is a
11qualified individual for services performed within this state by that
12qualified individual.
13(B) “Qualified wages” shall not include any of the following:
14(i) Expenses, including wages, related to new use, reuse, clip
15use, licensing, secondary markets, or residual compensation, or
16the creation of any ancillary product, including, but not limited
17to, a soundtrack album, toy, game, trailer, or teaser.
18(ii) Expenses, including wages, paid or incurred with respect
19to acquisition, development, turnaround, or any rights thereto.
20(iii) Expenses, including wages, related to financing, overhead,
21marketing, promotion, or distribution of a qualified motion picture.
22(iv) Expenses, including wages, paid per person per qualified
23motion picture for writers, directors, music directors, music
24composers, music supervisors, producers, and performers,
other
25than background actors with no scripted lines.
26(c) (1) Notwithstanding any other law, a qualified taxpayer
27may sell any credit allowed under this section to an unrelated
28party.
29(2) The qualified taxpayer shall report to the Franchise Tax
30Board prior to the sale of the credit, in the form and manner
31specified by the Franchise Tax Board, all required information
32regarding the purchase and sale of the credit, including the social
33security or other taxpayer identification number of the unrelated
34party to whom the credit has been sold, the face amount of the
35credit sold, and the amount of consideration received by the
36qualified taxpayer for the sale of the credit.
37(3) A credit shall not be sold pursuant to this subdivision to
38more than one taxpayer, nor may the credit be resold by the
39unrelated
party to another taxpayer or other party.
P12 1(4) A party that has acquired tax credits under this section shall
2be subject to the requirements of this section.
3(5) In no event may a qualified taxpayer assign or sell any tax
4credit to the extent the tax credit allowed by this section is claimed
5on any tax return of the qualified taxpayer.
6(6) In the event that both the original taxpayer and a taxpayer
7to whom the credit has been sold both claim the same amount of
8credit on their tax returns, the Franchise Tax Board may disallow
9the credit of either taxpayer, so long as the statute of limitations
10upon assessment remains open.
11(7) Subdivision (i) of Section 23036 shall not apply to any credit
12sold pursuant to this subdivision.
13(8) For purposes of this subdivision, the unrelated party or
14parties that purchase a credit pursuant to this subdivision shall
15be treated as a qualified taxpayer pursuant to paragraph (1) of
16subdivision (a).
17(d) In the case where the credit allowed by this section exceeds
18the “net tax,” the excess may be carried over to reduce the “net
19tax” in the following year, and succeeding seven years if necessary,
20until the credit is exhausted.
21(e) A deduction otherwise allowed under this part for any
22amount paid or incurred by the qualified taxpayer upon which the
23credit is based shall be reduced by the amount of the credit allowed
24by this section.
25(f) Credit under this section shall be allowed only for credits
26claimed on a timely filed original return of the
qualified taxpayer.
27(g) (1) The Franchise Tax Board may prescribe rules,
28guidelines, or procedures necessary or appropriate to carry out
29the purposes of this section.
30(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
31Division 3 of Title 2 of the Government Code does not apply to
32any standard, criterion, procedure, determination, rule, notice, or
33guideline established or issued by the Franchise Tax Board
34pursuant to this section.
This act provides for a tax levy within the meaning of
36Article IV of the Constitution and shall go into immediate effect.
It is the intent of the Legislature to enact
38legislation to provide a credit against the taxes imposed under the
39Personal Income Tax Law and the Corporation Tax Law for motion
40pictures that would accomplish all of the following:
P13 1(a) Provide for a transferable tax credit in an amount equal to
220 percent of the qualified production and postproduction
3expenditures for the motion picture paid or incurred within
4California, provided the motion picture is not subject to specified
5recordkeeping requirements under federal law.
6(b) Provide for an additional 10 percent credit amount if a
7production
company of a motion picture eligible for the tax credit
8includes an imbedded California promotional logo in the feature
9film, television series, music video, or video game project.
10(c) Include in the calculation of the qualified expenditures the
11number and wages of in-state and out-of-state residents working
12in California, including any employee fringe benefits.
13(d) Allow the credit without including a repeal date.
14(e) Allow the taxpayer to group multiple qualified motion
15pictures, specifically commercials and music videos, in order to
16reach the minimum qualified expenditure amount.
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