Assembly Bill No. 1069
CHAPTER 731An act to repeal and amend Sections 17053.85 and 23685 of the Revenueand Taxation Code, relating to taxation, to take effect immediately, tax levy.
[Approved by Governor October9, 2011. Filed withSecretary of State October9, 2011.]
legislative counsel
’
s digest
AB1069, Fuentes.Income taxes: credits:
f
lm: extension.The Personal Income Tax Law and the Corporation Tax Law authorizevarious credits against the taxes imposed by those laws, including a creditagainst those taxes for taxable years beginning on or after January 1, 2011,in an amount equal to a speci
f
ed percentage of the quali
f
ed expenditures,as de
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ned, attributable to the production of a quali
f
ed motion picture inCalifornia, or, where the quali
f
ed motion picture has relocated to Californiaor is an independent
f
lm, as provided. Existing law requires the CaliforniaFilm Commission to allocate the tax credits until July 1, 2014, and limitsthe aggregate amount of credits that may be allocated to quali
f
ed motionpictures in any
f
scal year to $100,000,000, through the 2013
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14
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scal year.This bill, under the Personal Income Tax Law and the Corporation TaxLaw, would extend the California Film Commission
’
s requirement to allocatethe tax credits one additional year, until July 1, 2015. This bill would alsoextend the limit on the aggregate amount of credits that may be allocatedthrough the 2014
–
15
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scal year.This bill would take effect immediately as a tax levy.
The people of the State of California do enact as follows:
SECTION 1.Section 17053.85 of the Revenue and Taxation Code, asadded by Section 4 of Chapter 10 of the 3rd Extraordinary Session of theStatutes of 2009, is repealed.SEC. 2.Section 17053.85 of the Revenue and Taxation Code, as addedby Section 4 of Chapter 17 of the 3rd Extraordinary Session of the Statutesof 2009, is amended to read:17053.85.(a) (1) For taxable years beginning on or after January 1,2011, there shall be allowed to a quali
f
ed taxpayer a credit against the
“
nettax,
”
as de
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ned in Section 17039, in an amount equal to the applicablepercentage, as speci
f
ed in paragraph (4), of the quali
f
ed expenditures forthe production of a quali
f
ed motion picture in California.(2) The credit shall be allowed for the taxable year in which the CaliforniaFilm Commission issues the credit certi
f
cate pursuant to subdivision (g)
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for the quali
f
ed motion picture, and shall be for the applicable percentageof all quali
f
ed expenditures paid or incurred by the quali
f
ed taxpayer inall taxable years for that quali
f
ed motion picture.(3) The amount of the credit allowed to a quali
f
ed taxpayer shall belimited to the amount speci
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ed in the credit certi
f
cate issued to the quali
f
edtaxpayer by the California Film Commission pursuant to subdivision (g).(4) For purposes of paragraphs (1) and (2), the applicable percentageshall be:(A) Twenty percent of the quali
f
ed expenditures attributable to theproduction of a quali
f
ed motion picture in California.(B) Twenty-
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ve percent of the quali
f
ed expenditures attributable to theproduction of a quali
f
ed motion picture in California where the quali
f
edmotion picture is a television series that relocated to California or anindependent
f
lm.(b) For purposes of this section:(1)
“
Ancillary product
”
means any article for sale to the public thatcontains a portion of, or any element of, the quali
f
ed motion picture.(2)
“
Budget
”
means an estimate of all expenses paid or incurred duringthe production period of a quali
f
ed motion picture. It shall be the samebudget used by the quali
f
ed taxpayer and production company for allquali
f
ed motion picture purposes.(3)
“
Clip use
”
means a use of any portion of a motion picture, other thanthe quali
f
ed motion picture, used in the quali
f
ed motion picture.(4)
“
Credit certi
f
cate
”
means the certi
f
cate issued by the CaliforniaFilm Commission pursuant to subparagraph (C) of paragraph (2) of subdivision (g).(5) (A)
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Employee fringe bene
f
ts
”
means the amount allowable as adeduction under this part to the quali
f
ed taxpayer involved in the productionof the quali
f
ed motion picture, exclusive of any amounts contributed byemployees, for any year during the production period with respect to anyof the following:(i) Employer contributions under any pension, pro
f
t-sharing, annuity,or similar plan.(ii) Employer-provided coverage under any accident or health plan foremployees.(iii) The employer
’
s cost of life or disability insurance provided toemployees.(B) Any amount treated as wages under clause (i) of subparagraph (A)of paragraph (18) shall not be taken into account under this paragraph.(6)
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Independent
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lm
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means a motion picture with a minimum budgetof one million dollars ($1,000,000) and a maximum budget of ten milliondollars ($10,000,000) that is produced by a company that is not publiclytraded and publicly traded companies do not own, directly or indirectly,more than 25 percent of the producing company.(7)
“
Licensing
”
means any grant of rights to distribute the quali
f
edmotion picture, in whole or in part.
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Ch.731
(8)
“
New use
”
means any use of a motion picture in a medium other thanthe medium for which it was initially created.(9) (A)
“
Postproduction
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means the
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nal activities in a quali
f
ed motionpicture
’
s production, including editing, foley recording, automatic dialoguereplacement, sound editing, scoring and music editing, beginning and endcredits, negative cutting, negative processing and duplication, the additionof sound and visual effects, soundmixing,
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lm-to-tape transfers, encoding,and color correction.(B)
“
Postproduction
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does not include the manufacture or shipping of release prints.(10)
“
Preproduction
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means the process of preparation for actual physicalproduction which begins after a quali
f
ed motion picture has received a
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rmagreement of
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nancial commitment, or is greenlit, with, for example, theestablishment of a dedicated production of
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ce, the hiring of key crewmembers, and includes, but is not limited to, activities that include locationscouting and execution of contracts with vendors of equipment and stagespace.(11)
“
Principal photography
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means the phase of production duringwhich the motion picture is actually shot, as distinguished frompreproduction and postproduction.(12)
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Production period
”
means the period beginning with preproductionand ending upon completion of postproduction.(13)
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Quali
f
ed entity
”
means a personal service corporation as de
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nedin Section 269A(b)(1) of the Internal Revenue Code, a payroll servicescorporation, or any entity receiving quali
f
ed wages with respect to servicesperformed by a quali
f
ed individual.(14) (A)
“
Quali
f
ed individual
”
means any individual who performsservices during the production period in an activity related to the productionof a quali
f
ed motion picture.(B)
“
Quali
f
ed individual
”
shall not include either of the following:(i) Any individual related to the quali
f
ed taxpayer as described insubparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal RevenueCode.(ii) Any 5-percent owner, as de
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ned in Section 416(i)(1)(B) of the InternalRevenue Code, of the quali
f
ed taxpayer.(15) (A)
“
Quali
f
ed motion picture
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means a motion picture that isproduced for distribution to the general public, regardless of medium thatis one of the following:(i) A feature with a minimum production budget of one million dollars($1,000,000) and a maximum production budget of seventy-
f
ve milliondollars ($75,000,000).(ii) A movie of the week or miniseries with a minimum production budgetof
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ve hundred thousand dollars ($500,000).(iii) A new television series produced in California with a minimumproduction budget of one million dollars ($1,000,000) licensed for originaldistribution on basic cable.(iv) An independent
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lm.
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Ch.731
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California Legislature AB 1069 (Oct. 9, 2011)
The California film tax credit at an amount based on a percentage of expenditures for the production of a qualified motion picture in California, or, where the qualified motion picture has relocated to California or is an independent film, has been extended to July 1, 2015.
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