Bill Text: CA AB1780 | 2013-2014 | Regular Session | Amended


Bill Title: Income taxes: credit: motion pictures.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2014-06-04 - From committee without further action pursuant to Joint Rule 62(a). [AB1780 Detail]

Download: California-2013-AB1780-Amended.html
BILL NUMBER: AB 1780	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 1, 2014

INTRODUCED BY   Assembly Member Donnelly

                        FEBRUARY 18, 2014

    An act relating to taxation.   An act to add
Sections 17053.18 and 23618 to the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy. 


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1780, as amended, Donnelly. Income taxes: credit: motion
pictures. 
   The 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.  
   This 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.  
   This bill would take effect immediately as a tax levy. 

   The 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.  
   This 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. 
   Vote: majority. Appropriation: no. Fiscal committee:  no
 yes  . State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 17053.18 is added to the 
 Revenue and Taxation Code   , to read:  
   17053.18.  (a) (1) For taxable years beginning on or after January
1, 2016, there shall be allowed to a qualified taxpayer a credit
against the "net tax," as defined in Section 17039, in an amount
equal to the applicable percentage, as specified in paragraph (2), of
the qualified expenditures for the production of a qualified motion
picture in California. A credit shall not be allowed under this
section for any qualified expenditures for the production of a motion
picture in California if a credit has been claimed for those same
expenditures under Section 17053.85.
   (2) For the purposes of paragraph (1), the applicable percentage
shall be:
   (A) Subject to subparagraph (B) and (C), 20 percent of the
qualified expenditures attributable to the production of one or more
qualified motion pictures in California with an aggregate qualified
expenditure amount that equals or exceeds five hundred thousand
dollars ($500,000).
   (B) The applicable percentage shall increase by 10 percent if each
qualified motion picture, for which qualified expenditures are
aggregated for the particular claim for the credit, includes a
California promotion. For a feature, television series, or video
game, the California promotion shall consist of a five-second long
logo that promotes California in the end credits before the
below-the-line crew crawl for the life of the project and a link to
www.visitcalifornia.com presented by the California Travel and
Tourism Commission on the Internet Web site of the feature,
television series, or video game. For a music video or commercial,
the California promotion shall consist of a link to
www.visitcalifornia.com, presented by the California Travel and
Tourism Commission, on the Internet Web site of the music video or
commercial.
   (C) The applicable percentage shall increase by either of the
following:
   (i) Five percent if each qualified motion picture, for which
qualified expenditures are aggregated for the particular claim for
the credit, incurred or paid the qualified expenditures relating to
original photography outside of a major city zone.
   (ii) Two and one-half percent if at least one of the qualified
motion pictures, for which qualified expenditures are aggregated for
the particular claim for the credit, incurred or paid the qualified
expenditures relating to original photography within a major city
zone.
   (b) For the purposes of this section, the following definitions
apply:
   (1) (A) "Employee fringe benefits" means the amount allowable as a
deduction under this part to the qualified taxpayer involved in the
production of the qualified motion picture, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
   (i) Employer contributions under any pension, profit-sharing,
annuity, or similar plan.
   (ii) Employer-provided coverage under any accident or health plan
for employees.
   (iii) The employer's cost of life or disability insurance provided
to employees.
   (B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (12) shall not be taken into account under this
paragraph.
   (2) "Major city zone" means an area within 15 miles of a city with
a population over 300,000.
   (3) "Original photography" includes principal photography,
additional unit photography, and reshooting original footage.
   (4) (A) "Postproduction" means the final activities in a qualified
motion picture's production, including editing, foley recording,
automatic dialogue replacement, sound editing, scoring and music
editing, beginning and end credits, negative cutting, negative
processing and duplication, the addition of sound and visual effects,
soundmixing, film-to-tape transfers, encoding, and color correction.

   (B) "Postproduction" does not include the manufacture or shipping
of release prints.
   (5) "Preproduction" means the process of preparation for actual
physical production which begins after a qualified motion picture has
received a firm agreement of financial commitment, or is greenlit,
with, for example, the establishment of a dedicated production
office, the hiring of key crew members, and includes, but is not
limited to, activities that include location scouting and execution
of contracts with vendors of equipment and stage space.
   (6) "Principal photography" means the phase of production during
which the motion picture is actually shot, as distinguished from
preproduction and post production.
   (7) "Production period" means the period beginning with
preproduction and ending upon completion of postproduction.
   (8) "Qualified expenditures" means amounts paid or incurred for
tangible personal property purchased or leased, and used, within this
state during the production period of a qualified motion picture and
payments, including qualified wages, for services performed within
this state during the production period of a qualified motion
picture.
   (9) (A) "Qualified individual" means any individual who performs
services during the production period in an activity related to the
production of a qualified motion picture.
   (B) "Qualified individual" shall not include either of the
following:
   (i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
Revenue Code.
   (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
   (10) (A) "Qualified motion picture" means a motion picture that is
produced for distribution to the general public, regardless of
medium, that is one of the following:
   (i) A feature.
   (ii) A television series.
   (iii) A music video.
   (iv) A commercial.
   (v) A video game.
   (B) "Qualified motion picture" shall not include a motion picture
produced for private noncommercial use, such as weddings,
graduations, or as part of an educational course and made by
students, a news program, current events or public events program,
talk show, game show, sporting event or activity, awards show,
telethon or other production that solicits funds, reality television
program, clip-based programming if more than 50 percent of the
content is comprised of licensed footage, documentaries, variety
programs, daytime dramas, strip shows, one-half hour (air time)
episodic television shows, or any production that falls within the
recordkeeping requirements of Section 2257 of Title 18 of the United
States Code.
   (11) "Qualified taxpayer" means a taxpayer who has paid or
incurred qualified expenditures.
   (12) (A) "Qualified wages" means all of the following:
   (i) Any wages subject to withholding under Division 6 (commencing
with Section 13000) of the Unemployment Insurance Code that were paid
or incurred by any taxpayer involved in the production of a
qualified motion picture with respect to a qualified individual for
services performed on the qualified motion picture production within
this state.
   (ii) The portion of any employee fringe benefits paid or incurred
by any taxpayer involved in the production of the qualified motion
picture that are properly allocable to qualified wage amounts
described in clauses (i), (iii), and (iv).
   (iii) Any payments made to a qualified entity for services
performed in this state by qualified individuals within the meaning
of paragraph (9).
   (iv) Remuneration paid to an independent contractor who is a
qualified individual for services performed within this state by that
qualified individual.
   (B) "Qualified wages" shall not include any of the following:
   (i) Expenses, including wages, related to new use, reuse, clip
use, licensing, secondary markets, or residual compensation, or the
creation of any ancillary product, including, but not limited to, a
soundtrack album, toy, game, trailer, or teaser.
   (ii) Expenses, including wages, paid or incurred with respect to
acquisition, development, turnaround, or any rights thereto.
   (iii) Expenses, including wages, related to financing, overhead,
marketing, promotion, or distribution of a qualified motion picture.
   (iv) Expenses, including wages, paid per person per qualified
motion picture for writers, directors, music directors, music
composers, music supervisors, producers, and performers, other than
background actors with no scripted lines.
   (c) (1) Notwithstanding any other law, a qualified taxpayer may
sell any credit allowed under this section to an unrelated party.
   (2) The qualified taxpayer shall report to the Franchise Tax Board
prior to the sale of the credit, in the form and manner specified by
the Franchise Tax Board, all required information regarding the
purchase and sale of the credit, including the social security or
other taxpayer identification number of the unrelated party to whom
the credit has been sold, the face amount of the credit sold, and the
amount of consideration received by the qualified taxpayer for the
sale of the credit.
   (3) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the unrelated
party to another taxpayer or other party.
   (4) A party that has acquired tax credits under this section shall
be subject to the requirements of this section.
   (5) In no event may a qualified taxpayer assign or sell any tax
credit to the extent the tax credit allowed by this section is
claimed on any tax return of the qualified taxpayer.
   (6) In the event that both the original taxpayer and a taxpayer to
whom the credit has been sold both claim the same amount of credit
on their tax returns, the Franchise Tax Board may disallow the credit
of either taxpayer, so long as the statute of limitations upon
assessment remains open.
   (7) Subdivision (g) of Section 17039 shall not apply to any credit
sold pursuant to this subdivision.
   (8) For purposes of this subdivision, the unrelated party or
parties that purchase a credit pursuant to this subdivision shall be
treated as a qualified taxpayer pursuant to paragraph (1) of
subdivision (a).
   (d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
   (e) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
   (f) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
   (g) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
   (2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section. 
   SEC. 2.    Section 23618 is added to the  
Revenue and Taxation Code   , to read:  
   23618.  (a) (1) For taxable years beginning on or after January 1,
2016, there shall be allowed to a qualified taxpayer a credit
against the "tax," as defined in Section 23036, in an amount equal to
the applicable percentage, as specified in paragraph (2), of the
qualified expenditures for the production of a qualified motion
picture in California. A credit shall not be allowed under this
section for any qualified expenditures for the production of a motion
picture in California if a credit has been claimed for those same
expenditures under Section 23685.
   (2) For the purposes of paragraph (1), the applicable percentage
shall be:
   (A) Twenty percent of the qualified expenditures attributable to
the production of one or more qualified motion pictures in California
with an aggregate qualified expenditure amount that equals or
exceeds five hundred thousand dollars ($500,000).
   (B) The applicable percentage shall increase by 10 percent if each
qualified motion picture, for which qualified expenditures are
aggregated for the particular claim for the credit, includes a
California promotion. For a feature, television series, or video
game, the California promotion shall consist of a five-second long
logo that promotes California in the end credits before the
below-the-line crew crawl for the life of the project and a link to
www.visitcalifornia.com presented by the California Travel and
Tourism Commission on the Internet Web site of the feature,
television series, or video game. For a music video or commercial,
the California promotion shall consist of a link to
www.visitcalifornia.com presented by the California Travel and
Tourism Commission on the Internet Web site of the music video or
commercial.
   (C) The applicable percentage shall increase by either of the
following:
   (i) Five percent if each qualified motion picture, for which
qualified expenditures are aggregated for the particular claim for
the credit, incurred or paid the qualified expenditures relating to
original photography outside of a major city zone.
   (ii) Two and one-half percent if at least one of the qualified
motion pictures, for which qualified expenditures are aggregated for
the particular claim for the credit, incurred or paid the qualified
expenditures relating to original photography within a major city
zone.
   (b) For the purposes of this section, the following definitions
shall apply:
   (1) (A) "Employee fringe benefits" means the amount allowable as a
deduction under this part to the qualified taxpayer involved in the
production of the qualified motion picture, exclusive of any amounts
contributed by employees, for any year during the production period
with respect to any of the following:
   (i) Employer contributions under any pension, profit-sharing,
annuity, or similar plan.
   (ii) Employer-provided coverage under any accident or health plan
for employees.
   (iii) The employer's cost of life or disability insurance provided
to employees.
   (B) Any amount treated as wages under clause (i) of subparagraph
(A) of paragraph (12) shall not be taken into account under this
paragraph.
   (2) "Major city zone" means an area within 15 miles of a city with
a population over 300,000.
   (3) "Original photography" includes principal photography,
additional unit photography, and reshooting original footage.
   (4) (A) "Postproduction" means the final activities in a qualified
motion picture's production, including editing, foley recording,
automatic dialogue replacement, sound editing, scoring and music
editing, beginning and end credits, negative cutting, negative
processing and duplication, the addition of sound and visual effects,
soundmixing, film-to-tape transfers, encoding, and color correction.

   (B) "Postproduction" does not include the manufacture or shipping
of release prints.
   (5) "Preproduction" means the process of preparation for actual
physical production which begins after a qualified motion picture has
received a firm agreement of financial commitment, or is greenlit,
with, for example, the establishment of a dedicated production
office, the hiring of key crew members, and includes, but is not
limited to, activities that include location scouting and execution
of contracts with vendors of equipment and stage space.
   (6) "Principal photography" means the phase of production during
which the motion picture is actually shot, as distinguished from
preproduction and post production.
   (7) "Production period" means the period beginning with
preproduction and ending upon completion of postproduction.
   (8) "Qualified expenditures" means amounts paid or incurred for
tangible personal property purchased or leased, and used, within this
state during the production period of a qualified motion picture and
payments, including qualified wages, for services performed within
this state during the production period of a qualified motion
picture.
   (9) (A) "Qualified individual" means any individual who performs
services during the production period in an activity related to the
production of a qualified motion picture.
   (B) "Qualified individual" shall not include either of the
following:
   (i) Any individual related to the qualified taxpayer as described
in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal
Revenue Code.
   (ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of
the Internal Revenue Code, of the qualified taxpayer.
   (10) (A) "Qualified motion picture" means a motion picture that is
produced for distribution to the general public, regardless of
medium, that is one of the following:
   (i) A feature.
   (ii) A television series.
   (iii) A music video.
   (iv) A commercial.
   (v) A video game.
   (B) "Qualified motion picture" shall not include a motion picture
produced for private noncommercial use, such as weddings,
graduations, or as part of an educational course and made by
students, a news program, current events or public events program,
talk show, game show, sporting event or activity, awards show,
telethon or other production that solicits funds, reality television
program, clip-based programming if more than 50 percent of the
content is comprised of licensed footage, documentaries, variety
programs, daytime dramas, strip shows, one-half hour (air time)
episodic television shows, or any production that falls within the
recordkeeping requirements of Section 2257 of Title 18 of the United
States Code.
   (11) "Qualified taxpayer" means a taxpayer who has paid or
incurred qualified expenditures.
   (12) (A) "Qualified wages" means all of the following:
   (i) Any wages subject to withholding under Division 6 (commencing
with Section 13000) of the Unemployment Insurance Code that were paid
or incurred by any taxpayer involved in the production of a
qualified motion picture with respect to a qualified individual for
services performed on the qualified motion picture production within
this state.
   (ii) The portion of any employee fringe benefits paid or incurred
by any taxpayer involved in the production of the qualified motion
picture that are properly allocable to qualified wage amounts
described in clauses (i), (iii), and (iv).
   (iii) Any payments made to a qualified entity for services
performed in this state by qualified individuals within the meaning
of paragraph (9).
   (iv) Remuneration paid to an independent contractor who is a
qualified individual for services performed within this state by that
qualified individual.
   (B) "Qualified wages" shall not include any of the following:
   (i) Expenses, including wages, related to new use, reuse, clip
use, licensing, secondary markets, or residual compensation, or the
creation of any ancillary product, including, but not limited to, a
soundtrack album, toy, game, trailer, or teaser.
   (ii) Expenses, including wages, paid or incurred with respect to
acquisition, development, turnaround, or any rights thereto.
   (iii) Expenses, including wages, related to financing, overhead,
marketing, promotion, or distribution of a qualified motion picture.
   (iv) Expenses, including wages, paid per person per qualified
motion picture for writers, directors, music directors, music
composers, music supervisors, producers, and performers, other than
background actors with no scripted lines.
   (c) (1) Notwithstanding any other law, a qualified taxpayer may
sell any credit allowed under this section to an unrelated party.
   (2) The qualified taxpayer shall report to the Franchise Tax Board
prior to the sale of the credit, in the form and manner specified by
the Franchise Tax Board, all required information regarding the
purchase and sale of the credit, including the social security or
other taxpayer identification number of the unrelated party to whom
the credit has been sold, the face amount of the credit sold, and the
amount of consideration received by the qualified taxpayer for the
sale of the credit.
   (3) A credit shall not be sold pursuant to this subdivision to
more than one taxpayer, nor may the credit be resold by the unrelated
party to another taxpayer or other party.
   (4) A party that has acquired tax credits under this section shall
be subject to the requirements of this section.
   (5) In no event may a qualified taxpayer assign or sell any tax
credit to the extent the tax credit allowed by this section is
claimed on any tax return of the qualified taxpayer.
   (6) In the event that both the original taxpayer and a taxpayer to
whom the credit has been sold both claim the same amount of credit
on their tax returns, the Franchise Tax Board may disallow the credit
of either taxpayer, so long as the statute of limitations upon
assessment remains open.
   (7) Subdivision (i) of Section 23036 shall not apply to any credit
sold pursuant to this subdivision.
   (8) For purposes of this subdivision, the unrelated party or
parties that purchase a credit pursuant to this subdivision shall be
treated as a qualified taxpayer pursuant to paragraph (1) of
subdivision (a).
   (d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding seven years if necessary,
until the credit is exhausted.
   (e) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
   (f) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
   (g) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes of
this section.
   (2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to any
standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board pursuant
to this section. 
   SEC. 3.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    It is the intent of the Legislature
to enact legislation to provide a credit against the taxes imposed
under the Personal Income Tax Law and the Corporation Tax Law for
motion pictures that would accomplish all of the following:
   (a) Provide for a transferable tax credit in an amount equal to 20
percent of the qualified production and postproduction expenditures
for the motion picture paid or incurred within California, provided
the motion picture is not subject to specified recordkeeping
requirements under federal law.
   (b) Provide for an additional 10 percent credit amount if a
production company of a motion picture eligible for the tax credit
includes an imbedded California promotional logo in the feature film,
television series, music video, or video game project.
                      (c) Include in the calculation of the qualified
expenditures the number and wages of in-state and out-of-state
residents working in California, including any employee fringe
benefits.
   (d) Allow the credit without including a repeal date.
   (e) Allow the taxpayer to group multiple qualified motion
pictures, specifically commercials and music videos, in order to
reach the minimum qualified expenditure amount.  
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