AB 2319: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2026-09-19
Current Status:
Passed
(2026-09-19: Chaptered by Secretary of State - Chapter 343, Statutes of 2026.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
The bill creates a California Post‑production Tax Credit for producers and post‑production companies that complete post‑production work in California. It provides a base credit equal to 35% of eligible editorial post‑production spending, with additional bonuses up to 15% for music scoring or post‑production outside the Los Angeles zone and a 5% bonus if at least half of principal photography was in California; projects and visual‑effects spending face per‑project caps and the total credits each year are set in the state budget. Eighty‑five percent of credits are reserved for projects that attest to wage, benefit, and training standards; credits can be refundable or sold in limited cases, and the Film Commission must collect and report program data to the Legislature.
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The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and the Corporation Tax Fund and provides that payments required to be made to taxpayers or other persons are to be paid from those funds.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. The bill would require the California Film Commission to utilize a post-production services ratio, as defined, to allocate credits, as specified. The bill would limit the aggregate amount of credits allocated in a fiscal year based on a determination made by the Legislature in the annual Budget Act plus additional amounts, as described. The bill would require that 85% of the total allocable credits are reserved for qualified taxpayers that attest, under penalty of perjury, that they will abide by specified labor condition requirements. By expanding the scope of the crime of perjury, this bill would impose a state-mandated locale program. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account and the Corporation Tax Fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement. The bill would require exchange of information between the Legislative Analysts Office and other specified agencies in order to comply with these requirements. The bill would make the unauthorized disclosure of this information subject to existing law, the violation of which is a crime. By expanding the scope of a crime, this bill would impose a state-mandated local program.
This bill would incorporate additional changes to Sections 17039 and 23036 of the Revenue and Taxation Code proposed by AB 2222 to be operative only if this bill and AB 2222 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and the Corporation Tax Fund and provides that payments required to be made to taxpayers or other persons are to be paid from those funds.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. The bill would require the California Film Commission to utilize a post-production services ratio, as defined, to allocate credits, as specified. The bill would limit the aggregate amount of credits allocated in a fiscal year based on a determination made by the Legislature in the annual Budget Act plus additional amounts, as described. The bill would require that 85% of the total allocable credits are reserved for qualified taxpayers that attest, under penalty of perjury, that they will abide by specified labor condition requirements. By expanding the scope of the crime of perjury, this bill would impose a state-mandated locale program. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account and the Corporation Tax Fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement. The bill would require exchange of information between the Legislative Analysts Office and other specified agencies in order to comply with these requirements. The bill would make the unauthorized disclosure of this information subject to existing law, the violation of which is a crime. By expanding the scope of a crime, this bill would impose a state-mandated local program.
This bill would incorporate additional changes to Sections 17039 and 23036 of the Revenue and Taxation Code proposed by AB 2222 to be operative only if this bill and AB 2222 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and the Corporation Tax Fund and provides that payments required to be made to taxpayers or other persons are to be paid from those funds.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. The bill would require the California Film Commission to utilize a post-production services ratio, as defined, to allocate credits, as specified. The bill would limit the aggregate amount of credits allocated in a fiscal year based on a determination made by the Legislature in the annual Budget Act plus additional amounts, as described. The bill would require that 85% of the total allocable credits are reserved for qualified taxpayers that attest, under penalty of perjury, that they will abide by specified labor condition requirements. By expanding the scope of the crime of perjury, this bill would impose a state-mandated locale program. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account and the Corporation Tax Fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement. The bill would require exchange of information between the Legislative Analysts Office and other specified agencies in order to comply with these requirements. The bill would make the unauthorized disclosure of this information subject to existing law, the violation of which is a crime. By expanding the scope of a crime, this bill would impose a state-mandated local program.
This bill would incorporate additional changes to Sections 17039 and 23036 of the Revenue and Taxation Code proposed by AB 2222 to be operative only if this bill and AB 2222 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and the Corporation Tax Fund and provides that payments required to be made to taxpayers or other persons are to be paid from those funds.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. The bill would require the California Film Commission to utilize a post-production services ratio, as defined, to allocate credits, as specified. The bill would limit the aggregate amount of credits allocated in a fiscal year based on a determination made by the Legislature in the annual Budget Act plus additional amounts, as described. The bill would require that 85% of the total allocable credits are reserved for qualified taxpayers that attest, under penalty of perjury, that they will abide by specified labor condition requirements. By expanding the scope of the crime of perjury, this bill would impose a state-mandated locale program. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account and the Corporation Tax Fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement. The bill would require exchange of information between the Legislative Analysts Office and other specified agencies in order to comply with these requirements. The bill would make the unauthorized disclosure of this information subject to existing law, the violation of which is a crime. By expanding the scope of a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and the Corporation Tax Fund and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account. those funds.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account, Account and the Corporation Tax Fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the postproduction post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.
This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the postproduction of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayers tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including numerous motion picture credits. Most recently, existing law, for taxable years beginning on or after January 1, 2025, allows a motion picture credit (motion picture credit 4.0) to be allocated by the California Film Commission on or after July 1, 2025, and before July 1, 2030, in an amount equal to 35% or 40% of qualified expenditures for the production of a qualified motion picture in this state.This bill would make legislative findings and declarations relating to the need in California for tax incentives for postproduction performed in the state. The bill would state the intent of the Legislature to enact legislation that would establish a tax credit for postproduction activities.The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including numerous motion picture credits. Most recently, existing law, for taxable years beginning on or after January 1, 2025, allows a motion picture credit (motion picture credit 4.0) to be allocated by the California Film Commission on or after July 1, 2025, and before July 1, 2030, in an amount equal to 35% or 40% of qualified expenditures for the production of a qualified motion picture in this state.
This bill would make legislative findings and declarations relating to the need in California for tax incentives for postproduction performed in the state. The bill would state the intent of the Legislature to enact legislation that would establish a tax credit for postproduction activities.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), and (12).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraph (12).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 2.5.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), (12), and (13).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraphs (12) and (13).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76.
(14)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(AK)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76 (relating to local news outlets).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 3.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698, or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 17053.95 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The dollar amount of qualified expenditures included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in paragraph (2), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(4)Notwithstanding Section 19542, the California Film Commission, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Section 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 4.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), and (7).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 4.5.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), (7), and (8).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633.
(9)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by former Section 23633 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(AC)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633 (relating to local news outlets).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 5.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698 or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent recorded after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(D)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 23695 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages expenditures and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
SEC. 6.Sections 2.5 and 4.5 of this bill incorporate amendments to Sections 17039 and 23036, respectively, of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2222. Those sections of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Sections 17039 and 23036 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2222, in which case Sections 2 and 4 of this bill shall not become operative.
SEC. 7.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), and (12).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraph (12).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 2.5.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), (12), and (13).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraphs (12) and (13).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76.
(14)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(AK)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76 (relating to local news outlets).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 3.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698, or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 17053.95 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The dollar amount of qualified expenditures included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in paragraph (2), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(4)Notwithstanding Section 19542, the California Film Commission, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Section 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 4.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), and (7).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 4.5.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), (7), and (8).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633.
(9)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by former Section 23633 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(AC)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633 (relating to local news outlets).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 5.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698 or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent recorded after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(D)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 23695 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages expenditures and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
SEC. 6.Sections 2.5 and 4.5 of this bill incorporate amendments to Sections 17039 and 23036, respectively, of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2222. Those sections of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Sections 17039 and 23036 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2222, in which case Sections 2 and 4 of this bill shall not become operative.
SEC. 7.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), and (12).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraph (11). (12).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 2.5.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraph (9). paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credit described in paragraph (7) and the credit described in paragraph (9). credits described in paragraphs (7), (8), (9), (11), (12), and (13).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(9)(10)Credits that contain refundable provisions but do not contain carryover provisions. provisions, except the credit described in paragraphs (12) and (13).
(10)(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(11)(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76.
(12)(14)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(AK)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76 (relating to local news outlets).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 3.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698, or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 17053.95 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The dollar amount of qualified expenditures included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in paragraph (2), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(4)Notwithstanding Section 19542, the California Film Commission, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Section 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 4.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), and (7).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5. 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 4.5.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credit described in paragraph (5). credits described in paragraphs (5), (6), (7), and (8).
(5)For taxable years beginning on or after January 1, 2025, 2027, and before January 1, 2032, the credit allowed by Section 23698.1. 23698.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(6)(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633.
(7)(9)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by former Section 23633 (relating to targeted tax area sales or use tax credit). credit, repealed on December 1, 2015).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(AC)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 23633 (relating to local news outlets).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 5.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698 or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies, color and processing, cloud workflow and data management, use of off-camera talent recorded after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(16)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.
(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(D)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 23695 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(25)(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 the qualified taxpayer involved in the post-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 post-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 editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation, or proposed change to a proposed regulation, regarding allocating the credit pursuant to subdivision (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(II)Notwithstanding subclause (I), a recurring television series that does not request a credit allocation within 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the previous seasons allocation amount.
(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages expenditures and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each application window the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
SEC. 6.Sections 2.5 and 4.5 of this bill incorporate amendments to Sections 17039 and 23036, respectively, of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2222. Those sections of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Sections 17039 and 23036 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2222, in which case Sections 2 and 4 of this bill shall not become operative.
SEC. 6.SEC. 7.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (9), (11), and (12).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(10)Credits that contain refundable provisions but do not contain carryover provisions, except the credit described in paragraph (11).
(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(13)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 3.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1. 17053.98, 17053.98.1, 23698, or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies dailies, color and processing, cloud workflow and data management, use of off-camera talent after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(15)(16)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.
(16)(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(17)(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(18)(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(19)(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(20)(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(21)(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(22)(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(23)(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 17053.95 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(24)(25)(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 the qualified taxpayer involved in the post-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 post-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 (21). editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(25) (A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:(i)The base year allocation.(ii)The number of subsequent years.(iii)Three percent.(B)For purposes of this paragraph, the following definitions apply:(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202728 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202728, in the next fiscal year in which a Credit Allocation Letter or Letters were received.(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications. applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation regulation, or proposed change to a proposed regulation regulation, regarding allocating the credit pursuant to subdivision (g). (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(i)(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)(II)Notwithstanding clause (i), subclause (I), a recurring television series that does not request a credit allocation within 18 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television previous seasons allocation amount.
(iv)(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code. workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be directly created employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year application window the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that satisfy all of the following: provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The number of jobs dollar amount of qualified expenditures included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), paragraph (2), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1. 23698.1, and 23698.5.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(4)Notwithstanding Section 19542, the California Film Commission, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and Section 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 4.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credits described in paragraphs (5), (6), and (7).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(8)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 5.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98, 17053.98.1, 23698 or 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services principal photography days are performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences when the credit is allocated and ends when post-production concludes.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) (C) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) (25) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies dailies, color and processing, cloud workflow and data management, use of off-camera talent recorded after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music scoring performed by musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)(A)Post-Production Services Ratio means the dollar amount for qualified wages divided by the dollar amount of tax credits, not including any additional credit allowed pursuant to subparagraphs (B) and (C) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(B)For purposes of the calculation in subparagraph (A), qualified wages shall only include 80 percent of the qualified wages paid to third-party vendors pursuant to clauses (iii) and (iv) of subparagraph (A) of paragraph (25).
(C)For purposes of the calculation in subparagraph (A), visual effects, as defined in clause (ii) of subparagraph (A) of paragraph (14), shall be excluded.
(15)(16)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.
(16)(17)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(17)(18)Production period means the period beginning with preproduction and ending upon completion of post-production.
(18)(19)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(19)(20)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, used or otherwise consumed, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after allocation of the credit.
(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(20)(21)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(21)(22)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(22)(23)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 18 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(23)(24)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(D)Notwithstanding subparagraph (A), a qualified taxpayer is only required to participate in the Career Readiness requirement in Section 23695 to the extent the program has been adapted to post-production pursuant to regulations promulgated by the California Film Commission.
(24)(25)(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 the qualified taxpayer involved in the post-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 post-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 (20). editorial post-production service companies, including third-party vendors, in the post-production of a qualified motion picture.
(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, producers, and on camera performers.
(v)Expenditures relating to principal photography, except those expenditures relating to post-production, including, but not limited to, wages paid to editors present during principal photography for editorial post-production purposes.
(25)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:(i)The base year allocation.(ii)The number of subsequent years.(iii)Three percent.(B)For purposes of this paragraph, the following definitions apply:(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202728 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202728, in the next fiscal year in which a Credit Allocation Letter or Letters were received.(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications. applications, including, but not limited to, credit and logo requirements and credit allocation procedures.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(IV)Rules and regulations necessary to adapt the existing Career Readiness requirements in subdivision (e) of Sections 17053.98 and 23698. The California Film Commission shall identify training and public service opportunities applicable to post-production that may include, but not be limited to, hiring interns, public service announcements, and community outreach.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation regulation, or proposed change to a proposed regulation regulation, regarding allocating the credit pursuant to subdivision (g). (e), computing the post-production services ratio, or defining reasonable cause pursuant to subparagraph (D) of paragraph (10) of subdivision (e).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture post-production.
(ii)The number of post-production weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) (g) in any fiscal year, the California Film Commission shall do all of the following:
(i)(I)For each allocation date and for each category, list each applicant from highest to lowest according to the post-production services ratio as computed by the California Film Commission.
(II)Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest post-production services ratio, working down the list, until the credit amount is exhausted.
(i)(ii)(I)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)(II)Notwithstanding clause (i), subclause (I), a recurring television series that does not request a credit allocation within 18 12 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)(III)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television previous seasons allocation amount.
(iv)(IV)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)(ia)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)(ib)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)(ic)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. verified and the post-production ratio has been computed. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code. workplan.
(IV)(ia)Aggregated data, voluntarily self-reported by individuals whose wages are included in qualified wages expenditures and individuals whose wages are excluded from qualified wages expenditures, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(ib)Third-party vendors may also submit aggregated data, voluntarily self-reported by hired individuals with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code, and which shall not be considered as part of the final diversity assessment.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(10)(A)The California Film Commission shall recompute the post-production services ratio following the qualified taxpayers submission of required documentation at the conclusion of the production period and compare this recomputed post-production services ratio to the post-production services ratio that the qualified taxpayer previously listed on its submitted application.
(B)If the California Film Commission determines that the post-production services ratio has been reduced by more than 10 percent for a qualified motion picture, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(C)If the California Film Commission determines that the post-production services ratio has been reduced by more than 20 percent for a qualified motion picture, the California Film Commission shall not accept an application described in subdivision (e) from that qualified taxpayer or any member of the qualified taxpayers controlled group for a period of not less than one year from the date of that determination, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the post-production services ratio reduction.
(D)For the purposes of this paragraph, reasonable cause means unforeseen circumstances beyond the control of the qualified taxpayer, such as, but not limited to, the cancellation of a television series prior to the completion of the scheduled number of episodes or other similar circumstances as determined by the California Film Commission in regulations to be adopted pursuant to subdivision (d).
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually shall, after each application window, post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the title of each qualified motion picture, the number of post-production weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs and third-party vendors that the qualified taxpayer represented in its application would be directly created employed, or utilized in the case of third-party vendors, by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) paragraphs (7) and (8) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year application window the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that satisfy all of the following: provide self-attestation, under penalty of perjury, confirming that they will satisfy all of the following for the qualified motion picture:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(C)The California Film Commission shall determine through regulations an appropriate penalty for failure to meet the commitments identified in the self-attestation. This procedure shall be similar to the procedure denoted in subparagraphs (B) and (C) of paragraph (10) of subdivision (e).
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, pilot, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
SEC. 6.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17039 of the Revenue and Taxation Code is amended to read:17039.(a)Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term net tax means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the net tax shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against net tax in the following order:
(1)Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2)Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(3)Credits that contain both carryover and refundable provisions, except the credit described in paragraph (9). paragraphs (9) and (11).
(4)The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5)(A)For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062.
(B)For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce net tax below the tentative minimum tax, as defined by Section 17062, except the credit described in paragraph (7) and the credit described in paragraph (9). credits described in paragraphs (7), (8), (9), (11), and (12).
(6)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7)For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(8)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(9)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(9)(10)Credits that contain refundable provisions but do not contain carryover provisions. provisions, except the credit described in paragraph (11).
(10)(11)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1.
(11)(12)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(12)(13)The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding).
(b)The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board.
(c)(1)Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A)The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007).
(B)The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989).
(C)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D)The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E)The credit allowed by Section 17052.12 (relating to research expenses).
(F)The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997).
(G)The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998).
(H)The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I)The credit allowed by Section 17053.5 (relating to the renters credit).
(J)The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997).
(K)The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(L)The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997).
(M)For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998).
(N)The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015).
(O)The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019).
(P)The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004).
(Q)The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015).
(R)The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019).
(S)The credit allowed by Section 17054 (relating to credits for personal exemption).
(T)The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U)The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V)The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993).
(W)The credit allowed by Section 17058 (relating to low-income housing).
(X)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y)The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z)Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA)The credit allowed by Section 19002 (relating to tax withholding).
(AB)For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017).
(AC)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD)For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act).
(AE)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit).
(AF)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit).
(AG)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5.
(AH)For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act).
(AI)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects).
(AJ)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17053.98.5 (relating to California Post-production Tax Credit).
(2)Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d)Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative.
(e)(1)Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayers respective share of the costs paid or incurred.
(2)In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partners distributive share.
(3)In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f)Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers net tax, as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. A credit shall not be allowed if the taxpayers regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayers regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit before the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3)This subdivision applies to credits that become inoperative on or after January 1, 2002.
(i)The amendments made to this section by Chapter 3 of the Statutes of 2022 shall apply as follows:
(1)The amendments to subdivisions (a), (e), and (h) shall be operative for taxable years beginning on or after January 1, 2022.
(2)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2021.
(j)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to paragraphs (3), (5), and (9) of subdivision (a) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (AE) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (AF) of paragraph (1) of subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 2.SEC. 3.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography when the credit is allocated and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies color and processing, cloud workflow and data management, use of off-camera talent after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions scoring performed by musicians, musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)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.
(16)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(17)Production period means the period beginning with preproduction and ending upon completion of post-production.
(18)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(19)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e). allocation of the credit.
(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(20)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(21)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(22)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(23)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(24)(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 post-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 post-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 (21).
(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, producers, and on camera performers.
(25)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 202728 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, 202728, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production. post-production.
(ii)The number of post-production days. weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that satisfy all of the following:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The number of jobs included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(4)Notwithstanding Section 19542, the California Film Commission, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 4.Section 23036 of the Revenue and Taxation Code is amended to read:23036.(a)(1)The term tax includes any of the following:
(A)The tax imposed under Chapter 2 (commencing with Section 23101).
(B)The tax imposed under Chapter 3 (commencing with Section 23501).
(C)The tax on unrelated business taxable income, imposed under Section 23731.
(D)The tax on S corporations imposed under Section 23802.
(2)The term tax does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b)For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and, for purposes of Sections 18601, 19001, and 19005, the term tax also includes all of the following:
(1)The tax on limited partnerships, imposed under Section 17935, the tax on limited liability companies, imposed under Section 17941, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948.
(2)The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3)The tax on built-in gains of S corporations, imposed under Section 23809.
(4)The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c)Notwithstanding any other provision of this part, credits are allowed against the tax in the following order:
(1)Credits that do not contain carryover provisions.
(2)Credits that, when the credit exceeds the tax, allow the excess to be carried over to offset the tax in succeeding taxable years, except for those credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3)The minimum tax credit allowed by Section 23453.
(4)Credits that are allowed to reduce the tax below the tentative minimum tax, as defined by Section 23455, except the credit described in paragraph (5). credits described in paragraphs (5), (6), and (7).
(5)For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.98.5.
(5)(6)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1.
(6)(7)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(7)(8)Credits for taxes withheld under Section 18662.
(d)Notwithstanding any other provision of this part, each of the following applies:
(1)A credit may not reduce the tax below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits:
(A)The credit allowed by former Section 23601 (relating to solar energy).
(B)The credit allowed by former Section 23601.4 (relating to solar energy).
(C)The credit allowed by former Section 23601.5 (relating to solar energy).
(D)The credit allowed by Section 23609 (relating to research expenditures).
(E)The credit allowed by former Section 23609.5 (relating to clinical testing expenses).
(F)The credit allowed by Section 23610.5 (relating to low-income housing).
(G)The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H)The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I)The credit allowed by former Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(J)The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(K)The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(L)The credit allowed by former Section 23623 (relating to program area hiring credit).
(M)The credit allowed by former Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(N)The credit allowed by former Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(O)The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(P)The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(Q)The credit allowed by former Section 23649 (relating to qualified property).
(R)For taxable years beginning on or after January 1, 2011, the credit allowed by Section 23685 (relating to qualified motion pictures).
(S)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23689 (relating to GO-Biz California Competes Credit).
(T)For taxable years beginning on or after January 1, 2016, the credit allowed by Section 23695 (relating to qualified motion pictures).
(U)For taxable years beginning on or after January 1, 2014, the credit allowed by Section 23686 (relating to the College Access Tax Credit Fund).
(V)For taxable years beginning on or after January 1, 2017, the credit allowed by Section 23687 (relating to the College Access Tax Credit Fund).
(W)For taxable years beginning on or after January 1, 2020, and before January 1, 2031, the credit allowed by Section 23636 (relating to the new advanced strategic aircraft credit).
(X)For taxable years beginning on or after January 1, 2020, the credit allowed by Section 23698 (relating to the California Motion Picture and Television Production Credit).
(Y)For taxable years beginning on or after January 1, 2025, the credit allowed by Section 23698.1 (relating to the California Motion Picture and Television Production Credit).
(Z)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23036.5.
(AA)For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 23640 (relating to eligible transmission projects).
(AB)For taxable years beginning on or after January 1, 2027, the credit allowed by Section 23698.5 (relating to California Post-production Tax Credit).
(2)A credit against the tax may not reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e)Any credit which is partially or totally denied under subdivision (d) is allowed to be carried over to reduce the tax in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f)Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative is allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g)Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer is eligible to receive the tax credit in proportion to their respective share of the costs paid or incurred.
(h)Unless otherwise provided, in the case of an S corporation, any credit allowed by this part is computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit applies to the S corporation and to each shareholder.
(i)(1)With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity is limited in accordance with paragraphs (2) and (3).
(2)The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayers tax, as defined in subdivision (a), for the taxable year is limited to an amount equal to the excess of the taxpayers regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. A credit is not allowed if the taxpayers regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayers regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3)If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (d), (e), and (f).
(j)(1)Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayers first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2)For purposes of this subdivision, eligible pass-thru entity means any partnership or S corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year a credit is operative.
(3)This subdivision applies to credits that become inoperative on or after the operative date of the act adding this subdivision.
(k)The amendments made to this section by Chapter 56 of the Statutes of 2023 shall apply as follows:
(1)The amendments to subdivision (c) shall be operative for taxable years beginning on or after January 1, 2025.
(2)The amendments to subparagraph (X) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2020.
(3)The amendments to subparagraph (Y) of paragraph (1) of subdivision (d) shall be operative for taxable years beginning on or after January 1, 2025.
SEC. 3.SEC. 5.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography when the credit is allocated and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, music orchestration, digital and film dailies color and processing, cloud workflow and data management, use of off-camera talent recorded after principal photography, music supervision, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions scoring performed by musicians, musicians and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(15)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.
(16)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(17)Production period means the period beginning with preproduction and ending upon completion of post-production.
(18)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(19)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e). allocation of the credit.
(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(C)Notwithstanding subparagraph (A), qualified expenditures includes amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
(20)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(21)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(22)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(23)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(24)(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 post-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 post-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 (20).
(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, producers, and on camera performers.
(25)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 202728 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, 202728, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production. post-production.
(ii)The number of post-production days. weeks.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall provide the Legislative Analysts Office and the Franchise Tax Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days weeks in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that satisfy all of the following:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(12)(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(14)(15)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.
(15)(16)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(16)(17)Production period means the period beginning with preproduction and ending upon completion of post-production.
(17)(18)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(19)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)(20)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(20)(21)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(21)(22)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(23)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(23)(24)(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 post-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 post-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 (20). (21).
(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, producers, and on camera performers.
(24)(25)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of post-production days.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, Office and the Franchise Tax Board, and the California Department of Tax and Fee Administration Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5, is ____ dollars ($____), 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that satisfy all of the following:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(2)(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The number of jobs included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Governance and Finance, Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(C)Request and receive all information provided to the California Department of Tax and Fee Administration pursuant to subdivisions (c) and (g) of Section 6902.5.(4)Notwithstanding Section 19542, the California Film Commission, the California Department of Tax and Fee Administration, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 3.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(I)Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(III)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(C)An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pension means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.
(12)(13)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(14)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Post-production does not include the manufacture or shipping of release prints or their equivalent.
(14)(15)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.
(15)(16)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.
(16)(17)Production period means the period beginning with preproduction and ending upon completion of post-production.
(17)(18)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(19)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)(20)Qualified expenditures relating to post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.
(20)(21)(A)Qualified individual means any individual who performs services during the production period in an activity related to the post-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.
(21)(22)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)Provides a diversity workplan checklist.
(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(23)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(23)(24)(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 post-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 post-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 (20).
(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, producers, and on camera performers.
(24)(25)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)(26)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)(27)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)(28)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)(29)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(iii)(I)Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.
(II)Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.
(III)(ia)Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.
(ib)Independent films are not subject to an increase to the fee pursuant this subclause.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of post-production days.
(iii)A financing plan for the post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, Office and the Franchise Tax Board, and the California Department of Tax and Fee Administration Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.
(ii)A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 is ____ dollars ($____), shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)(A)For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that satisfy all of the following:
(i)The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
(ii)The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.
(iii)The applicant participates in a career-based learning and training program approved by the California Film Commission.
(iv)The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.
(v)The applicant directly employs at least one employee providing qualified services in the state.
(B)Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.
(2)(3)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)(4)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. shareholder. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account Corporation Tax Fund and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit 4.0.
(2)That credit does not cover postproduction post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the states incentive framework.
(3)Postproduction Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of Californias existing postproduction post-production ecosystem and a massive decline in taxable wages.
(4)Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.
(5)Editorial houses and postproduction post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.
(6)Protecting the future of Californias film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.
(7)The tax credit program created by this act is not intended to compete with or replace Californias principal photography incentive, but to complement it by capturing postproduction post-production activity not otherwise eligible for existing credits.
(b)This act shall be known as the California Postproduction Post-production Tax Credit, a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their postproduction post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.
SEC. 2.Section 17053.98.5 is added to the Revenue and Taxation Code, to read:17053.98.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation and ranking by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the postproduction post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the postproduction post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the postproduction post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(i)(I)Five percent of qualified expenditures for expenditures relating to postproduction post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii). subclause (II).
(ii)(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to postproduction post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(iii)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.(III)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when postproduction post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(A)Postproduction means the final activities in a qualified motion pictures production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction.
(13)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Postproduction Post-production does not include the manufacture or shipping of release prints or their equivalent.
(14)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.
(15)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. post-production.
(16)Production period means the period beginning with preproduction and ending upon completion of postproduction. post-production.
(17)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the postproduction post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures does not include expenditures relating to music scoring unless at least 75 percent of postproduction music scoring labor is performed at a facility located within the state and one of the following is met:(i)For a motion picture with a total production budget of less than fifteen million dollars ($15,000,000), at least two thousand five hundred dollars ($2,500) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(ii)For a motion picture with a total production budget of at least fifteen million dollars ($15,000,000), at least ten thousand dollars ($10,000) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)Qualified expenditures relating to postproduction post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to postproduction post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to postproduction post-production outside the Los Angeles zone.
(20)(A)Qualified individual means any individual who performs services during the production period in an activity related to the postproduction post-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.
(21)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), whichever is greater, of postproduction of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Postproduction Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)(I)Except as provided in subclause (II), principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a productions ability to begin principal photography within the prescribed 180- or 240-day commencement period.(II)Notwithstanding subclause (I), a production that completed principal photography of the previous season more than 48 months prior to the application for a credit allocation under this section, shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.(III)Notwithstanding subclauses (I) and (II), a television series that did not commence principal photography prior to July 1, 2027, and applied for but did not receive an allocation under this section for its first season filming in California and makes an application for allocation of credit for its second season filming in California shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission. (v)(iv)Provides a diversity workplan checklist.
(vi)(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the postproduction post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(23)(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 postproduction post-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 postproduction post-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 (20).
(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. on camera performers.
(24)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of postproduction post-production days.
(iii)A financing plan for the postproduction. post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the postproduction post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the postproduction post-production of the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the postproduction post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect up to ____ percent any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of postproduction. post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was postproduction post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete postproduction post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the postproduction, post-production, and the total amount of qualified expenditures expected to be spent by the postproduction. post-production.
(ii)A narrative staff summary describing the postproduction post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5, is ____ dollars ($____), plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate up to ____ percent any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television postproductions, post-production, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with postproduction post-production incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of postproductions post-production that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The number of jobs included in the budgets of postproductions post-productions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Governance and Finance, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(C)Request and receive all information provided to the California Department of Tax and Fee Administration pursuant to subdivisions (c) and (g) of Section 6902.5.
(4)Notwithstanding Section 19542, the California Film Commission, the California Department of Tax and Fee Administration, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 3.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the postproduction post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the postproduction post-production of a qualified motion picture in California.
(B)(i)Additional credits shall be allowed for the postproduction post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(i)(I)Five percent of qualified expenditures for expenditures relating to postproduction post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(ii)(II)Ten percent of qualified expenditures for qualified wages paid for services performed relating to postproduction post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(iii)(III)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(ii)The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when postproduction post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(A)Postproduction means the final activities in a qualified motion pictures production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction.
(13)(A)Post-production means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:
(i)Editorial post-production means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.
(ii)Visual effects has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.
(B)Postproduction Post-production does not include the manufacture or shipping of release prints or their equivalent.
(14)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.
(15)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction. post-production.
(16)Production period means the period beginning with preproduction and ending upon completion of postproduction. post-production.
(17)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the postproduction post-production of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures does not include expenditures relating to music scoring unless at least 75 percent of postproduction music scoring labor is performed at a facility located within the state and one of the following is met:(i)For a motion picture with a total production budget of less than fifteen million dollars ($15,000,000), at least two thousand five hundred dollars ($2,500) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(ii)For a motion picture with a total production budget of at least fifteen million dollars ($15,000,000), at least ten thousand dollars ($10,000) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.(C)Qualified expenditures shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)Qualified expenditures relating to postproduction post-production outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to postproduction post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to postproduction post-production outside the Los Angeles zone.
(20)(A)Qualified individual means any individual who performs services during the production period in an activity related to the postproduction post-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.
(21)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), whichever is greater, of postproduction of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Postproduction Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)(I)Except as provided in subclause (II), principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a productions ability to begin principal photography within the prescribed 180- or 240-day commencement period.(II)Notwithstanding subclause (I), a production that completed principal photography of the previous season more than 48 months prior to the application for a credit allocation under this section, shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.(III)Notwithstanding subclauses (I) and (II), a television series that did not commence principal photography prior to July 1, 2027, and applied for but did not receive an allocation under this section for its first season filming in California and makes an application for allocation of credit for its second season filming in California shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.(v)(iv)Provides a diversity workplan checklist.
(vi)(v)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the postproduction post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(23)(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 postproduction post-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 postproduction post-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 (20).
(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. on camera performers.
(24)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of postproduction post-production days.
(iii)A financing plan for the postproduction. post-production.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the postproduction post-production of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the postproduction post-production of the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the postproduction post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect up to ____ percent any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of postproduction. post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was postproduction post-production completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete postproduction post-production in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the postproduction, post-production, and the total amount of qualified expenditures expected to be spent by the postproduction. post-production.
(ii)A narrative staff summary describing the postproduction post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 is ____ dollars ($____), plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate up to ____ percent any of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the net tax, as defined in Section 17039, subject to a computation and ranking by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the postproduction of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the postproduction of a qualified motion picture in California.
(B)Additional credits shall be allowed for the postproduction of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(i)Five percent of qualified expenditures for expenditures relating to postproduction outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(ii)Ten percent of qualified expenditures for qualified wages paid for services performed relating to postproduction outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(iii)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when postproduction concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(A)Postproduction means the final activities in a qualified motion pictures production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction.
(B)Postproduction does not include the manufacture or shipping of release prints or their equivalent.
(14)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.
(15)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction.
(16)Production period means the period beginning with preproduction and ending upon completion of postproduction.
(17)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction of a qualified motion picture and payments, including qualified wages, for services performed within this state in the postproduction of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures does not include expenditures relating to music scoring unless at least 75 percent of postproduction music scoring labor is performed at a facility located within the state and one of the following is met:
(i)For a motion picture with a total production budget of less than fifteen million dollars ($15,000,000), at least two thousand five hundred dollars ($2,500) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)For a motion picture with a total production budget of at least fifteen million dollars ($15,000,000), at least ten thousand dollars ($10,000) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)Qualified expenditures relating to postproduction outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to postproduction outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to postproduction outside the Los Angeles zone.
(20)(A)Qualified individual means any individual who performs services during the production period in an activity related to the postproduction 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.
(21)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), whichever is greater, of postproduction expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Postproduction of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)(I)Except as provided in subclause (II), principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a productions ability to begin principal photography within the prescribed 180- or 240-day commencement period.
(II)Notwithstanding subclause (I), a production that completed principal photography of the previous season more than 48 months prior to the application for a credit allocation under this section, shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.
(III)Notwithstanding subclauses (I) and (II), a television series that did not commence principal photography prior to July 1, 2027, and applied for but did not receive an allocation under this section for its first season filming in California and makes an application for allocation of credit for its second season filming in California shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.
(v)Provides a diversity workplan checklist.
(vi)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the postproduction of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(23)(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 postproduction 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 postproduction 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 (20).
(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.
(24)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(A)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.
(B)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.
(C)A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.
(D)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.
(E)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(F)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 subdivision.
(G)Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(H)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).
(2)In the case where the credit allowed under this section exceeds the net tax, the excess credit may be carried over to reduce the net tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of postproduction days.
(iii)A financing plan for the postproduction.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the postproduction of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the postproduction of the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the postproduction will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect up to ____ percent of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of postproduction. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was postproduction completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete postproduction in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the postproduction, and the total amount of qualified expenditures expected to be spent by the postproduction.
(ii)A narrative staff summary describing the postproduction of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5, is ____ dollars ($____), plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate up to ____ percent of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the net tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the net tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the net tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the net tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers net tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers net tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(j)For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:
(1)The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:
(A)To maintain and expand motion picture and television postproductions, and the quality of the jobs they provide, in California.
(B)To keep Californias Film Tax Credit competitive with postproduction incentives offered by other states and other countries.
(C)To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.
(2)The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
(A)The number and types of postproductions that apply for the tax credits allowed by this section and Section 23698.5.
(B)The total amount of credit allocations applied for under this section and Section 23698.5.
(C)The total amount of credits allocated under this section and Section 23698.5.
(D)The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.
(E)The number of jobs included in the budgets of postproductions receiving the tax credits allocated by this section and Section 23698.5.
(F)A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.
(G)The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.
(3)On or before May 1, 2030, the Legislative Analysts Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Governance and Finance, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analysts Office may do all of the following:
(A)Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1.
(B)Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.
(C)Request and receive all information provided to the California Department of Tax and Fee Administration pursuant to subdivisions (c) and (g) of Section 6902.5.
(4)Notwithstanding Section 19542, the California Film Commission, the California Department of Tax and Fee Administration, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analysts Office, as necessary to research the report required by this subdivision.
(5)(A)The information received by the Legislative Analysts Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.
(B)The Legislative Analysts Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analysts Office pursuant to this section, 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 under Part 11 (commencing with Section 23001) of Division 2.
SEC. 3.Section 23698.5 is added to the Revenue and Taxation Code, to read:23698.5.(a)(1)For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the tax, as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the postproduction of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 23698.1.
(2)Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
(3)(A)The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(B)In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:
(i)In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
(ii)In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
(4)For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:
(A)Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the postproduction of a qualified motion picture in California.
(B)Additional credits shall be allowed for the postproduction of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:
(i)Five percent of qualified expenditures for expenditures relating to postproduction outside the Los Angeles zone, excluding qualified wages described in clause (ii).
(ii)Ten percent of qualified expenditures for qualified wages paid for services performed relating to postproduction outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.
(iii)Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.
(b)For purposes of this section:
(1)Ancillary product means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.
(2)Applicable period means the period that commences with the first day of principal photography and ends when postproduction concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(3)Budget means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.
(4)Clip use means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(5)Credit certificate means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).
(6)Diversity workplan checklist means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.
(7)(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 employers cost of life or disability insurance provided to employees.
(B)Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (23) shall not be taken into account under this paragraph.
(8)Independent film means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.
(9)Licensing means any grant of rights to distribute the qualified motion picture, in whole or in part.
(10)Los Angeles zone means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.
(11)New use means any use of a motion picture in a medium other than the medium for which it was initially created.
(12)Pilot for a new television series means the initial episode produced for a proposed television series.
(13)(A)Postproduction means the final activities in a qualified motion pictures production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction.
(B)Postproduction does not include the manufacture or shipping of release prints or their equivalent.
(14)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.
(15)Principal photography means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction.
(16)Production period means the period beginning with preproduction and ending upon completion of postproduction.
(17)Qualified entity means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
(18)(A)Qualified expenditures means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction of a qualified motion picture and payments, including qualified wages, for services performed within this state in the postproduction of a qualified motion picture.
(B)Qualified expenditures includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).
(C)Qualified expenditures does not include expenditures relating to music scoring unless at least 75 percent of postproduction music scoring labor is performed at a facility located within the state and one of the following is met:
(i)For a motion picture with a total production budget of less than fifteen million dollars ($15,000,000), at least two thousand five hundred dollars ($2,500) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)For a motion picture with a total production budget of at least fifteen million dollars ($15,000,000), at least ten thousand dollars ($10,000) of postproduction expenses relating to music scoring are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(19)Qualified expenditures relating to postproduction outside the Los Angeles zone means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to postproduction outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to postproduction outside the Los Angeles zone.
(20)(A)Qualified individual means any individual who performs services during the production period in an activity related to the postproduction 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.
(21)(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, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).
(ii)A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iii)A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).
(iv)A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.
(v)A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.
(B)To qualify as a qualified motion picture, all of the following conditions shall be satisfied:
(i)At least 75 percent, or one million dollars ($1,000,000), whichever is greater, of postproduction expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii)Postproduction of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayers application is approved by the California Film Commission.
(iii)The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.
(iv)(I)Except as provided in subclause (II), principal photography of the qualified motion picture commences after the date on which the application is approved by the California Film Commission, but no later than 180 days after the date of that approval if the qualified motion picture has a budget with qualified expenditures of less than one hundred million dollars ($100,000,000), and no later than 240 days after the date of that approval in the case of a qualified motion picture with a budget of qualified expenditures with at least one hundred million dollars ($100,000,000), unless death, disability, or disfigurement of the director or of a principal cast member; an act of God, including, but not limited to, fire, flood, earthquake, storm, hurricane, or other natural disaster; terrorist activities; or government sanction has directly prevented a productions ability to begin principal photography within the prescribed 180- or 240-day commencement period.
(II)Notwithstanding subclause (I), a production that completed principal photography of the previous season more than 48 months prior to the application for a credit allocation under this section, shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.
(III)Notwithstanding subclauses (I) and (II), a television series that did not commence principal photography prior to July 1, 2027, and applied for but did not receive an allocation under this section for its first season filming in California and makes an application for allocation of credit for its second season filming in California shall be deemed not to have commenced principal photography prior to the date on which the application for an allocation of credit under this section is approved by the California Film Commission.
(v)Provides a diversity workplan checklist.
(vi)Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
(C)For the purposes of subparagraph (A), in computing the total wages paid or incurred for the postproduction of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.
(D)Qualified motion picture shall not include commercial advertising, music videos, 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, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(22)(A)Qualified taxpayer means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).
(B)In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, pass-thru entity means any entity taxed as a partnership or S corporation.
(C)In the case of an S corporation, the credit allowed under this section shall not be used by an S corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).
(23)(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 postproduction 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 postproduction 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 (20).
(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.
(24)(A)Recurring television allocation amount means the sum of the base year allocation and the product of all of the following:
(i)The base year allocation.
(ii)The number of subsequent years.
(iii)Three percent.
(B)For purposes of this paragraph, the following definitions apply:
(i)Base year allocation means the amount received by the recurring television series in its fiscal year 202526 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 202526, in the next fiscal year in which a Credit Allocation Letter or Letters were received.
(ii)The number of subsequent years means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.
(25)Recurring television series means any television series that was previously approved and issued a credit allocation letter under this section.
(26)Residual compensation means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.
(27)Reuse means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.
(28)Secondary markets means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(c)(1)(A)A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.
(B)For purposes of the election provided in subparagraph (A), all of the following shall apply:
(i)The election may be based on any method selected by the qualified taxpayer that originally receives the credit.
(ii)Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.
(iii)The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayers affiliated corporations that assign and receive the credits.
(iv)The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.
(C)For purposes of this paragraph, affiliated corporation has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that 100 percent is substituted for more than 50 percent wherever it appears in the section, and voting common stock is substituted for voting stock wherever it appears in the section.
(2)Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.
(3)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.
(4)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.
(5)A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(6)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.
(7)In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission 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.
(8)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 subdivision.
(9)Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold pursuant to this subdivision.
(10)For purposes of this subdivision, the following shall apply:
(A)The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(B)An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(11)In the case where the credit allowed under this section exceeds the tax, the excess credit may be carried over to reduce the tax in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.
(d)(1)(A)Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:
(i)Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).
(ii)Any rules and regulations necessary to establish procedures, processes, requirements, and applications.
(B)Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the Governors Office of Business and Economic Development shall first approve the proposed regulation or proposed change to a proposed regulation regarding allocating the credit pursuant to subdivision (g).
(2)The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.
(e)For purposes of this section, the California Film Commission shall do all of the following:
(1)(A)Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.
(B)The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.
(2)(A)Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:
(i)The budget for the motion picture production.
(ii)The number of postproduction days.
(iii)A financing plan for the postproduction.
(iv)The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the postproduction of the qualified motion picture, to the extent possible.
(v)The amount of qualified wages the applicant expects to pay to qualified individuals.
(vi)The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).
(vii)A statement establishing that the tax credit described in this section is a significant factor in the applicants choice of location for the postproduction of the qualified motion picture. The statement shall include information about whether the qualified motion picture is at risk of not being filmed or specify the jurisdiction or jurisdictions in which the postproduction will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(viii)The applicants written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.
(ix)If applicable, summary of the applicants voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.
(x)Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.
(B)Establish criteria, consistent with the requirements of this section, for allocating tax credits.
(C)Determine and designate applicants who meet the requirements of this section.
(D)For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:
(i)Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.
(ii)Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.
(iii)The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.
(iv)In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:
(I)Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect up to ____ percent of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.
(II)Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 202930 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 202930 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 202930 fiscal year shall not be certified until July 1, 2030, or later.
(III)The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.
(E)Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.
(3)Certify tax credits allocated to qualified taxpayers and do all of the following:
(A)Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.
(B)Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.
(C)Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(D)(i)Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).
(ii)The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:
(I)A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of Californias population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:
(ia)A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.
(ib)A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.
(ic)A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).
(id)Other requirements as the California Film Commission shall determine by regulation.
(II)An interim assessment on the qualified taxpayers efforts to meet the diversity workplan prior to the commencement of postproduction. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.
(III)A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.
(iii)The California Film Commission, in consultation with the Governors Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commissions internet website.
(iv)The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.
(v)This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.
(4)Obtain, when possible, the following information from applicants that do not receive an allocation of credit:
(A)Whether the qualified motion picture that was the subject of the application was completed.
(B)If completed, in which state or foreign jurisdiction was postproduction completed.
(C)Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete postproduction in that location.
(5)Provide the Legislative Analysts Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analysts Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).
(6)The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.
(7)(A)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(B)For purposes of this section, previously allocated credits not certified means either of the following:
(i)Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.
(ii)The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).
(8)Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.
(9)The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.
(f)(1)The California Film Commission shall annually provide the Legislative Analysts Office, the Franchise Tax Board, and the California Department of Tax and Fee Administration with a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. 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.
(2)(A)Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:
(i)A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the postproduction, and the total amount of qualified expenditures expected to be spent by the postproduction.
(ii)A narrative staff summary describing the postproduction of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayers application for the credit.
(iii)The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).
(B)Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).
(g)(1)(A)The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 is ____ dollars ($____), plus any amount described in subparagraph (B) or (C) in credits for the 202728 fiscal year and each fiscal year thereafter, through and including the 203233 fiscal year, except as provided in paragraph (7) of subdivision (e).
(B)The unused allocation credit amount, if any, for the preceding fiscal year.
(C)The amount of previously allocated credits not certified.
(2)Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate up to ____ percent of the funds within one category to the other category to maximize the amount of total credits allocated:
(A)Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).
(B)A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).
(3)Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and may be passed by not less than two-thirds of all Members elected to each of the two houses of the Legislature.
(h)The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.
(i)(1)A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.
(2)For purposes of this subdivision, the following definitions shall apply:
(A)Annual refundable amount means 20 percent of the total refundable amount.
(B)(i)Credit amount means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).
(ii)In the case of a pass-thru entity, the credit amount means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this clause, the term pass-thru entity means any partnership, S corporation, or limited liability company treated as a partnership.
(iii)In the case of an assigned credit, the credit amount means the credit amount that was assigned to the taxpayer.
(C)Refundable period means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.
(D)Total refundable amount means 90 percent of the credit amount that exceeds the tax in the first taxable year of the refundable period.
(3)The refund shall be computed as follows:
(A)(i)In the first taxable year of the refundable period, the credit amount shall be allowed against the tax computed under this part for the taxable year.
(ii)If the credit allowed by this section exceeds the tax in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.
(B)(i)In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the tax computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.
(ii)If the qualified taxpayers tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayers tax.
(4)(A)In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.
(B)In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayers tax or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.
(C)Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.
(5)Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.
(6)An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.
(7)A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.
(a)The Legislature finds and declares all of the following:
(1)California film and TV productions greatly benefit from the current motion picture tax credit.
(2)This credit does not cover postproduction when principal photography takes place elsewhere or the project otherwise did not qualify for a motion picture tax credit.
(3)Other jurisdictions, including New York, Louisiana, New Mexico, New Jersey, Canada, Australia, Spain, France, and Qatar, offer generous postproduction tax incentives.
(4)Because of the above, many lucrative postproduction projects have left California for these competing locations.
(b)It is the intent of the Legislature to enact legislation that would establish a tax credit for postproduction performed in the state.
|
Date
|
Status
|
|---|---|
| Sep 19, 2026 | Chaptered by Secretary of State - Chapter 343, Statutes of 2026. |
| Sep 19, 2026 | Approved by the Governor. |
| Sep 10, 2026 | Enrolled and presented to the Governor at 3 p.m. |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 72. Noes 2.). |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 72. Noes 2. Page 6919.). |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 30, 2026 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 30, 2026 | Read third time. Passed. Ordered to the Assembly. (Ayes 33. Noes 5.). |
| Aug 28, 2026 | Read second time. Ordered to third reading. |
| Aug 27, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 24, 2026 | Read second time. Ordered to third reading. |
| Aug 21, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 17, 2026 | Read second time. Ordered to third reading. |
| Aug 13, 2026 | Read second time and amended. Ordered returned to second reading. |
| Aug 13, 2026 | From committee: Amend, and do pass as amended. (Ayes 5. Noes 1.) (August 13). |
| Aug 3, 2026 | In committee: Referred to APPR. suspense file. |
| Jun 25, 2026 | Read second time and amended. Re-referred to Com. on APPR. |
| Jun 24, 2026 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 4. Noes 0.) (June 24). |
| Jun 10, 2026 | Referred to Com. on REV. & TAX. |
| May 27, 2026 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 73. Noes 3.) |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 73. Noes 3. Page 5313.) |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. |
| May 21, 2026 | Read third time and amended. Ordered to third reading. (Page 5243.) |
| May 21, 2026 | Read third time and amended. Ordered to third reading. |
| May 18, 2026 | Read second time. Ordered to third reading. |
| May 14, 2026 | From committee: Do pass. (Ayes 15. Noes 0.) (May 14). |
| May 6, 2026 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr 21, 2026 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 6. Noes 1.) (April 20). Re-referred to Com. on APPR. |
| Apr 20, 2026 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| Apr 7, 2026 | From committee: Do pass and re-refer to Com. on REV. & TAX. (Ayes 8. Noes 0.) (April 7). Re-referred to Com. on REV. & TAX. |
| Mar 23, 2026 | Re-referred to Com. on A.,E.,S., & T. |
| Mar 19, 2026 | Referred to Coms. on A.,E.,S., & T. and REV. & TAX. |
| Mar 19, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on A.,E.,S., & T. Read second time and amended. |
| Feb 20, 2026 | From printer. May be heard in committee March 22. |
| Feb 19, 2026 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 30, 2026 | AB 2319 Schultz Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 30, 2026 | Assembly 3rd Reading AB2319 Schultz et al. By Allen | Senate Floor |
Passed |
|
| Aug 13, 2026 | Do pass as amended | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 3, 2026 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 24, 2026 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Revenue and Taxation |
Passed |
|
| May 26, 2026 | AB 2319 Schultz Assembly Third Reading | Assembly Floor |
Passed |
|
| May 14, 2026 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 20, 2026 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
|
| Apr 7, 2026 | Do pass and be re-referred to the Committee on [Revenue and Taxation] | Assembly Standing Committee on Arts, Entertainment, Sports, and Tourism |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| #makeitbay | ** Support | |
| 62 Individuals | ** Support | |
| 69 Individuals | ** Support | |
| American Cinema Editors | ** Support | |
| Apple | ** Support | |
| Blue Bonsai Music | ** Support | |
| California Arts Advocates | ** Support | |
| California Iatse Council | ** Support | |
| California Post Alliance | ** Support | |
| California Post Alliance (co-source) | ** Support | |
| California State Treasurer Fiona Ma | ** Support | |
| City and County of San Francisco | ** Support | |
| City Of Burbank | ** Support | |
| City of Emeryville | ** Support | |
| City Of Los Angeles | ** Support | |
| City of Los Angeles Mayor Karen Bass | ** Support | |
| City Of Oakland | ** Support | |
| City of Santa Monica | ** Support | |
| City of West Hollywood | ** Support | |
| Company 3 | ** Support | |
| Crafty Apes LLC | ** Support | |
| Crafty Apes, LLC | ** Support | |
| Engine Room, LLC | ** Support | |
| Exceptional Minds | ** Support | |
| Film Consortium San Diego | ** Support | |
| Film Liaisons In California Statewide | ** Support | |
| Film SF | ** Support | |
| Formosa Group, LLC | ** Support | |
| Fox Entertainment Group, Inc. | ** Support | |
| Greater San Fernando Valley Chamber of Commerce | ** Support | |
| Green Watch Films | ** Support | |
| Gsk Talent | ** Support | |
| hollywood chamber of commerce | ** Support | |
| Karen Bass, Mayor, City of Los Angeles | ** Support | |
| Kincade Productions, LLC | ** Support | |
| Lindsey P. Horvath, Supervisor, Los Angeles County | ** Support | |
| Long Beach Area Chamber of Commerce | ** Support | |
| Monkeyland Audio, INC | ** Support | |
| Monkeyland Audio, Inc. | ** Support | |
| Mosaic Post Production, LLC | ** Support | |
| Motion Picture Editors Guild | ** Support | |
| Motion Picture Editors Guild (co-source) | ** Support | |
| MPEG 700 | ** Support | |
| Netflix | ** Support | |
| Point 360 | ** Support | |
| Recording Academy | ** Support | |
| SAG-AFTRA | ** Support | |
| Santa Monica Pier | ** Support | |
| Santa Monica Pier Restoration Corporation | ** Support | |
| Santa Monica Travel & Tourism | ** Support | |
| Serrano Sound INC. | ** Support | |
| Showrunnr, Inc. | ** Support | |
| Signature Post | ** Support | |
| Signature Post Services LLC | ** Support | |
| Signature Post Services, LLC | ** Support | |
| Sony Pictures Entertainment | ** Support | |
| Television Academy | ** Support | |
| The Society of Composers and Lyricists | ** Support | |
| THE WALT DISNEY COMPANY AND ITS AFFILIATED ENTITIES | ** Support | |
| Tracy Park, Councilmember District 11, City of Los Angeles | ** Support | |
| Trevanna Post | ** Support | |
| Trevanna Post, INC. | ** Support | |
| Universal Music Group | ** Support | |
| WARNER BROS. DISCOVERY | ** Support | |
| YouthBeat | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2319
Author:(Schultz)
As Amended Ver:August 27, 2026
2/3 vote
SUMMARY
AB 2319 enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and Corporation Taxes for qualified expenses relating to the post-production of a qualified motion picture in California.
Senate Amendments
Senate amendments modified several requirements to improve implementation of the credit by the California Film Commission (CFC). The amendments also incorporate provisions from the Motion Picture and Television Production 4.0 credit program, replace the first-come-first-served allocation award process with a ranking system based on applicant′s ″post-production services ratio,″ specify that CFC must promulgate regulations to administer and enforce the requirements of the credit, and make other technical and conforming changes. Recent amendments also add double-jointing language with AB 2222 (Ward).
COMMENTS
Background. The Legislature enacted the Motion Picture, Television, and Commercial Industries Act of 1984, creating the California Film Commission (CFC) to coordinate state and local government efforts to cultivate a successful environment for the film industry. Today, the Governor, the Senate Pro Tempore, and the Speaker of the Assembly appoint CFC′s 26 members from the film industry, private sector, and state and local governments.
The Legislature enacted a tax credit for qualified motion picture production in California, commonly known as ″Film and TV Tax Credit 1.0,″ directing CFC to annually allocate $100 million in credits until the 2012-13 fiscal year (SBx3 15, Calderon and ABx3 15, Krekorian, 2009). In 2011, the Legislature extended the program until 2014-15 (AB 1069, Fuentes), and again until 2016-17 (AB 2026, Fuentes, 2012; and SB 1197, Calderon, 2012).
In 2014, the Legislature enacted ″Film and TV Tax Credit 2.0,″ increasing the amount of credit CFC allocates to $330 million in credits each fiscal year through 2019-20 (AB 1839, Gatto). The Legislature designed Film and TV Tax Credit 1.0 and 2.0 in very similar ways, but 2.0 contained several key differences in credit mechanics, including higher credit percentages – known as ″uplifts″ – for certain categories of expenditures, among other changes. In 2018, the Legislature enacted ″Film and TV Credit 3.0,″ authorizing CFC to allocate $330 million in tax credits each fiscal year from 2020-21 to 2024-25 (SB 878, Committee on Budget & Fiscal Review).
In 2021, the Legislature enacted SB 144 (Portantino, 2021), allocating an additional $150 million in film tax credits for productions filmed at new or renovated soundstages. When a taxpayer constructs or renovates a soundstage, they automatically qualify for production credits, notwithstanding the allocation process for the general credit. Taxpayers can claim credits beginning in the 2022 taxable year and until the 2031 taxable year. SB 144 directs CFC to identify and certify qualified soundstage construction projects, thereby making taxpayers eligible for the credit. According to its 2023 progress report, CFC has certified thirteen soundstages – eight newly constructed and five renovated – with a combined size of over 200,000 sq. ft.
In 2023, the Legislature enacted ″Film and TV Credit 4.0,″ which authorizes CFC to allocate $330 million annually for an additional five years, starting in 2025-26 and ending in 2029-30 (SB 132, Committee on Budget & Fiscal Review). SB 132 also makes the credit California′s first refundable business entity tax credit, which allows firms with no income or sales tax liability to receive a cash refund from the state.
In 2025, Governor Newsom proposed to increase the total annual California Film and Television Tax Credit 4.0 award cap from $330 million to $750 million for fiscal years 2025-26 through 2029-30. The Senate Committee on Revenue & Taxation and Budget and Fiscal Review Subcommittee #4 held a joint oversight hearing to assess the Governor′s proposal on March 26, 2025. In June, the Legislature enacted SB 132 (Committee on Budget & Fiscal Review, 2025), which, among other provisions, increases the cap on 4.0 credits from $330 million to $750 million for fiscal years 2025-26 through 2029-30.
Post-production in California. According to the Assembly Committee on Arts, Entertainment, Sports, and Tourism, based on data provided by CVL Economics, California′s post-production sector, which includes editing, visual effects, sound design, music scoring, color grading, and finishing, employs over 12,000 workers at more than 1,800 firms statewide. However, between 2005 and 2025, the state lost approximately 1,874 direct jobs in the sector. This decline occurred while overall U.S. post-production employment grew by approximately 10%.
Every major competitor jurisdiction, including New York (30% standalone post-production credit), the United Kingdom (25.5% Audio Visual Expenditure Credit), British Columbia (16 to 25% VFX credit), and Australia (30% Post, Digital & Visual Effects Offset), offers a standalone post-production credit pathway. As a result, a project that films elsewhere but completes its post-production in California receives no incentive for that California-based work. When that work leaves, California workers lose jobs and local businesses lose income. This work will continue to migrate to other jurisdictions that offer a standalone post-production credit.
Although post-production costs may qualify under the Film and Television Tax Credit 4.0 when tied to a California-based qualified motion picture, those benefits are generally not available until productions are selected and incur qualifying expenditures.
The author wants to authorize a standalone post-production credit to provide more immediate and targeted financial support for California post-production businesses that face layoffs, lost work, or business closures due to the delay in realizing Program 4.0 benefits.
According to the Author
″California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California′s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California′s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.″
Arguments in Support
According to the California Post Alliance (Sponsor), ″California-headquartered companies, such as Netflix, Apple, Disney, and the independent production sector that anchors much of the state′s creative economy, are among the primary financiers of American film and television content.
″When those productions choose to complete post-production in another jurisdiction because that jurisdiction offers an incentive which California does not, California-sourced capital generates jobs, wages, and tax revenue for someone else′s economy. The workers who would have edited that film in Burbank, scored its music on a stage in Hollywood, or mixed its sound in Northern California instead do that work somewhere else, and the income tax, the vendor spending, and the economic multiplier effect follows.
″AB 2319 does not solve every competitive variable in the global production landscape, but it does close the specific policy gap that is causing work to leave that would otherwise stay here.
″It has support from post-production facilities, music scoring stages, editorial houses, and VFX companies that have watched their booking calendars thin as work migrates to incentivized jurisdictions.″
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Appropriations Committee:
- The CFC indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill (General Fund).
VOTES:
ASM ARTS, ENTERTAINMENT, SPORTS, AND TOURISM: 8-0-1
YES: Ward, Lackey, Elhawary, Jeff Gonzalez, McKinnor, Ortega, Valencia, Zbur
ABS, ABST OR NV: Quirk-Silva
ASM REVENUE AND TAXATION: 6-1-0
YES: Gipson, Sanchez, Carrillo, McKinnor, Quirk-Silva, Michelle Rodriguez
NO: DeMaio
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
ASSEMBLY FLOOR: 73-3-4
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, Dixon, Elhawary, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO: DeMaio, Ellis, Gallagher
ABS, ABST OR NV: Lee, Macedo, Muratsuchi, Celeste Rodriguez
UPDATED
VERSION: August 27, 2026
CONSULTANT: Brian V. Anderson, Jr. / A.,E.,S., & T. / (916) 319-3450 FN: 0004502
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2319 |
THIRD READING
Bill No: AB 2319
Author: Schultz (D), et al.
Amended: 8/27/26 in Senate
Vote: 27
SENATE REVENUE AND TAXATION COMMITTEE: 4-0, 6/24/26
AYES: McNerney, Ashby, Becker, Grayson
NO VOTE RECORDED: Alvarado-Gil
SENATE APPROPRIATIONS COMMITTEE: 5-1, 8/13/26
AYES: Cervantes, Cabaldon, Grayson, Richardson, Wahab
NOES: Dahle
NO VOTE RECORDED: Seyarto
ASSEMBLY FLOOR: 73-3, 5/26/26 - See last page for vote
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
SOURCE: The California Post Alliance & the Motion Picture Editors Guild
DIGEST:
This bill enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and Corporation Taxes for qualified expenses relating to the post-production of a qualified motion picture in California.
Senate Floor Amendments of 8/27/26 (1) Fix incorrect cross-references in the tentative minimum tax (TMT) and alternative minimum tax (AMT) provisions under the Personal Income and Corporate Tax Laws; (2) Resolve conflicts with AB 2222 (Ward, 2026), which amend the same code sections; and (3) Make other technical and conforming changes.
ANALYSIS:
- Allows various income tax credits and deductions, as well as sales and use tax exemptions.
- Limits the total of all business credits, including credit carry forwards, to $5 million or 50% of liability, whichever is greater, commencing in the 2024 taxable year and ending before the 2030 taxable year, after which limits credits to $5 million or 75% of liability, whichever is greater, with some exceptions (SB 167, Committee on Budget & Fiscal Review, Chapter 34, Statutes of 2024 and SB 122, Committee on Budget & Fiscal Review, Chapter 23, Statutes of 2026). Taxpayers can make an irrevocable election to receive an annual refundable credit claimed in future tax years for business credits equal to credit amounts not claimed due to the limitation.
- Enacts the Film & Television Tax Credit Program 4.0 program, which authorizes a tax credit against the Personal Income and Corporation Taxes for qualified motion picture production in California, directing California Film Commission (CFC) to allocate $750 million in credits each fiscal year (FY) starting in 2025-26 and continuing through 2029-30 (SB 132 Committee on Budget & Fiscal Review, Chapter 56, Statutes of 2023; SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025; AB 1138, Zbur, Chapter 27, Statutes of 2025).
- Provides that a “qualified motion picture” includes:
- A feature with a minimum production budget of at least $1 million; however, no more than $120 million in qualified expenditures count for purposes of generating the credit.
- An independent film, defined as a motion picture that is produced by a company that is neither publicly traded, nor more than 30% owned by publicly traded companies.
- A television series that relocated to California.
- A live action or animated series produced in California with a run time of 20 minutes or more on average, with a minimum budget of $1 million per episode.
- Animated films produced in California with a $1 million budget or more.
- A large-scale competition show produced in California with a minimum budget of $1 million per episode.
- A pilot for a new live action or animated series with a run time of 20 minutes or more on average, produced in California with a minimum budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the following general requirements:
- Have 75% of the motion picture shooting days in California, or have 75% of the production budget incurred within the state;
- Commence principal photography after the date CFC approves its application, but before 180 days after the date of approval, and finish within 18 months from the date when the application was approved by the CFC;
- Obtain a copyright from the United States Copyright Office; and
- Provide a workplace diversity plan checklist.
This bill:
- Enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and the Corporation Taxes, to a “qualified taxpayer” for qualified post-production expenditures of a “qualified motion picture” in California, to be allocated by the CFC, to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year (FY).
- Provides that the credit shall be an amount equal to the sum of:
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Up to $6 million for qualified expenditures, unrelated to visual effects.
- Up to $6 million for qualified expenditures relating to visual effects.
- An aggregate amount, not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures relating to post-production outside the Los Angeles (LA) zone, as specified;
- 10% of qualified expenditures for qualified wages relating to post-production outside of the LA zone to “qualified individuals;” and
- 15% of qualified expenditures relating to qualified music scoring.
- An additional 5% of qualified expenditures if 50% or more of production days were performed in state.
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Caps the aggregate amount of credits that may be allocated per FY, at an amount authorized in a Budget Act, for FY 2027-28 and through FY 2032-33.
- Requires the credit to be administered in the same manner as the Film & Television Tax Credit Program 4.0, except as specified.
- Specifies that the credit shall not be allowed for a motion picture for which a credit has been claimed under the 4.0 program.
- Requires CFC to allocate the annual credit amounts as follows:
- 50% to features, independent films, and animated films.
- 50% to television series, miniseries, limited series, and animated series.
- Provides an additional 5% of qualified expenditures if at least 50% of below-the-line production wages are for services performed in the state.
- Requires CFC to reserve 85% of the total aggregate credits allocable for the year for applicants that demonstrate meeting specified labor standards:
- Provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers.
- Provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing services in state.
- Participates in a CFC approved career-based learning and training program.
- Complies with reporting requirements established by the CFC, including reporting related to diversity, anti-harassment, and workforce composition.
- Directly employs at least one employee providing qualified services in state.
- Provides that deviation from the above criteria shall not be disqualifying if such deviation is required to comply with a collective bargaining agreement.
- Requires that applicants provide a self-attestation, under penalty of perjury, confirming that they will satisfy all specified requirements for the qualified motion picture.
- Requires CFC to promulgate regulations and an appropriate penalty for failure to meet the commitments identified in the self-attestation.
- Requires CFC, when allocating the credit, to list each applicant from highest to lowest according to the post-production services ratio as computed by the CFC, and to then allocate the credit to each applicant with the highest post-production services ratio, working down the list until the credit amount is exhausted.
- Provides that a qualified taxpayer may make a one-time election to make the credit refundable for each taxable year of the “refundable period,” not to exceed the “annual refundable amount.”
- The “refundable period” means the first taxable year the credit certificate is issued to the qualified taxpayer and the succeeding four taxable years.
- The “annual refundable amount” is 20% of the “total refundable amount.”
- The “total refundable amount” is equal to 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
- Requires CFC to promulgate rules and regulations necessary to adapt the existing Career Readiness requirements of the Film & Television Tax Credit Program 4.0 to this credit; provides that a qualified taxpayer must participate in Career Readiness only to the extent the program has been adapted to post-production pursuant to regulations promulgated by CFC.
- Establishes a diversity assessment requirement, mirroring the Film 4.0 program, requiring CFC to review this data separately from the diversity workplan and assessment process.
- Defines “qualified taxpayer” as a taxpayer or a disregarded single-member limited liability company, that has “qualified expenditures,” fulfilled the Career Readiness requirement, and been issued a credit certificate by CFC.
- Defines “qualified expenditures” as amounts paid or incurred for:
- Tangible personal property purchased or leased, and used, within this state;
- Services performed within this state; and
- Music orchestration services performed outside of the state if it is for music recorded in the state.
- Specifies that “qualified expenditures” include only those amounts paid or incurred, for tangible personal property purchased or leased, used or otherwise consumed in this state, including qualified wages.
- Defines “post-production” to mean both “editorial post-production” and “visual effects,” as defined.
- Defines “qualified motion picture” substantially similar to the 4.0 program, with the following differences:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
- Defines “post-production services ratio” to mean the dollar amount for qualified wages divided by the dollar amount of tax credits, not including the credit uplifts allowed by this bill as computed by the CFC. For purposes of the calculation, “qualified wages” only includes 80% of the qualified wages paid to third-party vendors and excludes visual effects, as defined.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the substantially similar general requirements to the 4.0 Film program, with the following difference: at least 75%, or $1 million, whichever is greater, of post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- Provides that the CFC must issue a credit certificate only after it has verified a qualified taxpayer’s qualified expenditures and computed the post-production service ratio.
- Specifies that if a qualified motion picture’s actual post-production services ratio comes in more than 10% below what was represented on its application, the CFC must reduce the credit by that same percentage, unless the applicant can demonstrate reasonable cause for the shortfall, in which case CFC has discretion not to apply the reduction. This requirement mirrors the existing Film 4.0 program approach of holding applicants accountable to their attested figures.
- Provides that the credit is allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture.
- Specifies that the amount of the credit allowed to a qualified taxpayer is limited to the amount specified in the credit certificate issued by the CFC.
- Contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
- Makes other technical and conforming changes.
- Contains provisions that would remedy potential chaptering-out conflicts with AB 2222 (Ward, 2026) related to the TMT under the Personal Income and Corporation Tax Law.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee:
- The CFC indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill (General Fund).
SUPPORT: (Verified 8/27/26)
California Post Alliance (co-source)
Motion Picture Editors Guild (co-source)
California State Treasurer Fiona Ma
Karen Bass, Mayor, City of Los Angeles
Lindsey P. Horvath, Supervisor, Los Angeles County
Tracy Park, Councilmember District 11, City of Los Angeles
#MakeItBay
American Cinema Editors
Blue Bonsai Music
California Arts Advocates
California IATSE Council
City and County of San Francisco
City of Burbank
City of Emeryville
City of Los Angeles
City of Oakland
City of Santa Monica
City of West Hollywood
Company 3
Crafty Apes, LLC
Engine Room, LLC
Exceptional Minds
Film Consortium San Diego
Film Liaisons in California Statewide
Film SF
Formosa Group, LLC
Fox Entertainment Group, Inc.
Greater San Fernando Valley Chamber of Commerce
Green Watch Films
GSK Talent
Hollywood Chamber of Commerce
Kincade Productions, LLC
Long Beach Area Chamber of Commerce
Monkeyland Audio, Inc.
Mosaic Post Production, LLC
Point 360
Recording Academy
SAG-AFTRA
Santa Monica Pier Restoration Corporation
Santa Monica Travel & Tourism
Showrunnr, Inc.
Signature Post Services, LLC
Sony Pictures Entertainment
Television Academy
The Society of Composers and Lyricists
The Walt Disney Company and its Affiliated Entities
Trevanna Post, Inc.
Universal Music Group
Warner Bros. Discovery
YouthBeat
OPPOSITION: (Verified 8/27/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California’s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California’s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.”
ASSEMBLY FLOOR: 73-3, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, Dixon, Elhawary, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NOES: DeMaio, Ellis, Gallagher
NO VOTE RECORDED: Lee, Macedo, Muratsuchi, Celeste Rodriguez
Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117
8/28/26 9:55:20
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2319 |
THIRD READING
Bill No: AB 2319
Author: Schultz (D), et al.
Amended: 8/21/26 in Senate
Vote: 27
SENATE REVENUE AND TAXATION COMMITTEE: 4-0, 6/24/26
AYES: McNerney, Ashby, Becker, Grayson
NO VOTE RECORDED: Alvarado-Gil
ASSEMBLY FLOOR: 73-3, 5/26/26 - See last page for vote
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
SOURCE: The California Post Alliance & the Motion Picture Editors Guild
DIGEST:
This bill enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and Corporation Taxes for qualified expenses relating to the post-production of a qualified motion picture in California.
Senate Floor Amendments of 8/21/26 (1) Modify several requirements to improve implementation of the credit by the California Film Commission (CFC); (2) Import provisions from the Motion Picture and Television Production 4.0 credit program; (3) Replace the first-come-first-served allocation award process with a ranking system based on applicant’s “post-production services ratio,” as defined; (4) Specify that CFC must promulgate regulations to administer and enforce the requirements of the credit; and (5) Make other technical and conforming changes.
Existing law:
- Allows various income tax credits and deductions, as well as sales and use tax exemptions.
- Limits the total of all business credits, including credit carry forwards, to $5 million or 50% of liability, whichever is greater, commencing in the 2024 taxable year and ending before the 2030 taxable year, after which limits credits to $5 million or 75% of liability, whichever is greater, with some exceptions (SB 167, Committee on Budget & Fiscal Review, Chapter 34, Statutes of 2024 and SB 122, Committee on Budget & Fiscal Review, Chapter 23, Statutes of 2026). Taxpayers can make an irrevocable election to receive an annual refundable credit claimed in future tax years for business credits equal to credit amounts not claimed due to the limitation.
- Enacts the Film & Television Tax Credit Program 4.0 program, which authorizes a tax credit against the Personal Income and Corporation Taxes for qualified motion picture production in California, directing California Film Commission (CFC) to allocate $750 million in credits each fiscal year (FY) starting in 2025-26 and continuing through 2029-30 (SB 132 Committee on Budget & Fiscal Review, Chapter 56, Statutes of 2023; SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025; AB 1138, Zbur, Chapter 27, Statutes of 2025).
- Provides that a “qualified motion picture” includes:
- A feature with a minimum production budget of at least $1 million; however, no more than $120 million in qualified expenditures count for purposes of generating the credit.
- An independent film, defined as a motion picture that is produced by a company that is neither publicly traded, nor more than 30% owned by publicly traded companies.
- A television series that relocated to California.
- A live action or animated series produced in California with a run time of 20 minutes or more on average, with a minimum budget of $1 million per episode.
- Animated films produced in California with a $1 million budget or more.
- A large-scale competition show produced in California with a minimum budget of $1 million per episode.
- A pilot for a new live action or animated series with a run time of 20 minutes or more on average, produced in California with a minimum budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the following general requirements:
- Have 75% of the motion picture shooting days in California, or have 75% of the production budget incurred within the state;
- Commence principal photography after the date CFC approves its application, but before 180 days after the date of approval, and finish within 18 months from the date when the application was approved by the CFC;
- Obtain a copyright from the United States Copyright Office; and
- Provide a workplace diversity plan checklist.
This bill:
- Enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and the Corporation Taxes, to a “qualified taxpayer” for qualified post-production expenditures of a “qualified motion picture” in California, to be allocated by the CFC, to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year (FY).
- Provides that the credit shall be an amount equal to the sum of:
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Up to $6 million for qualified expenditures, unrelated to visual effects.
- Up to $6 million for qualified expenditures relating to visual effects.
- An aggregate amount, not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures relating to post-production outside the Los Angeles (LA) zone, as specified;
- 10% of qualified expenditures for qualified wages relating to post-production outside of the LA zone to “qualified individuals;” and
- 15% of qualified expenditures relating to qualified music scoring.
- An additional 5% of qualified expenditures if 50% or more of production days were performed in state.
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Caps the aggregate amount of credits that may be allocated per FY, at an amount authorized in a Budget Act, for FY 2027-28 and through FY 2032-33.
- Requires the credit to be administered in the same manner as the Film & Television Tax Credit Program 4.0, except as specified.
- Specifies that the credit shall not be allowed for a motion picture for which a credit has been claimed under the 4.0 program.
- Requires CFC to allocate the annual credit amounts as follows:
- 50% to features, independent films, and animated films.
- 50% to television series, miniseries, limited series, and animated series.
- Provides an additional 5% of qualified expenditures if at least 50% of below-the-line production wages are for services performed in the state.
- Requires CFC to reserve 85% of the total aggregate credits allocable for the year for applicants that demonstrate meeting specified labor standards:
- Provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers.
- Provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing services in state.
- Participates in a CFC approved career-based learning and training program.
- Complies with reporting requirements established by the CFC, including reporting related to diversity, anti-harassment, and workforce composition.
- Directly employs at least one employee providing qualified services in state.
- Provides that deviation from the above criteria shall not be disqualifying if such deviation is required to comply with a collective bargaining agreement.
- Requires that applicants provide a self-attestation, under penalty of perjury, confirming that they will satisfy all specified requirements for the qualified motion picture.
- Requires CFC to promulgate regulations and an appropriate penalty for failure to meet the commitments identified in the self-attestation.
- Requires CFC, when allocating the credit, to list each applicant from highest to lowest according to the post-production services ratio as computed by the CFC, and to then allocate the credit to each applicant with the highest post-production services ratio, working down the list until the credit amount is exhausted.
- Provides that a qualified taxpayer may make a one-time election to make the credit refundable for each taxable year of the “refundable period,” not to exceed the “annual refundable amount.”
- The “refundable period” means the first taxable year the credit certificate is issued to the qualified taxpayer and the succeeding four taxable years.
- The “annual refundable amount” is 20% of the “total refundable amount.”
- The “total refundable amount” is equal to 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
- Requires CFC to promulgate rules and regulations necessary to adapt the existing Career Readiness requirements of the Film & Television Tax Credit Program 4.0 to this credit; provides that a qualified taxpayer must participate in Career Readiness only to the extent the program has been adapted to post-production pursuant to regulations promulgated by CFC.
- Establishes a diversity assessment requirement, mirroring the Film 4.0 program, requiring CFC to review this data separately from the diversity workplan and assessment process.
- Defines “qualified taxpayer” as a taxpayer or a disregarded single-member limited liability company, that has “qualified expenditures,” fulfilled the Career Readiness requirement, and been issued a credit certificate by CFC.
- Defines “qualified expenditures” as amounts paid or incurred for:
- Tangible personal property purchased or leased, and used, within this state;
- Services performed within this state; and
- Music orchestration services performed outside of the state if it is for music recorded in the state.
- Specifies that “qualified expenditures” include only those amounts paid or incurred, for tangible personal property purchased or leased, used or otherwise consumed in this state, including qualified wages.
- Defines “post-production” to mean both “editorial post-production” and “visual effects,” as defined.
- Defines “qualified motion picture” substantially similar to the 4.0 program, with the following differences:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
- Defines “post-production services ratio” to mean the dollar amount for qualified wages divided by the dollar amount of tax credits, not including the credit uplifts allowed by this bill as computed by the CFC. For purposes of the calculation, “qualified wages” only includes 80% of the qualified wages paid to third-party vendors and excludes visual effects, as defined.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the substantially similar general requirements to the 4.0 Film program, with the following difference: at least 75%, or $1 million, whichever is greater, of post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- Provides that the CFC must issue a credit certificate only after it has verified a qualified taxpayer’s qualified expenditures and computed the post-production service ratio.
- Specifies that if a qualified motion picture’s actual post-production services ratio comes in more than 10% below what was represented on its application, the CFC must reduce the credit by that same percentage, unless the applicant can demonstrate reasonable cause for the shortfall, in which case CFC has discretion not to apply the reduction. This requirement mirrors the existing Film 4.0 program approach of holding applicants accountable to their attested figures.
- Provides that the credit is allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture.
- Specifies that the amount of the credit allowed to a qualified taxpayer is limited to the amount specified in the credit certificate issued by the CFC.
- Contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
- Makes other technical and conforming changes.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee:
- The CFC indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill (General Fund).
California Post Alliance (Co-Source)
Motion Picture Editors Guild (Co-Source)
California State Treasurer Fiona Ma
Karen Bass, Mayor, City of Los Angeles
Lindsey P. Horvath, Supervisor, Los Angeles County
Tracy Park, Councilmember District 11, City of Los Angeles
#MakeItBay
American Cinema Editors
California Arts Advocates
California IATSE Council
City and County of San Francisco
City of Burbank
City of Emeryville
City of Los Angeles
City of Oakland
City of Santa Monica
City of West Hollywood
Company 3
Crafty Apes, LLC
Engine Room, LLC
Exceptional Minds
Film Consortium San Diego
Film Liaisons in California Statewide
Film SF
Formosa Group, LLC
Fox Entertainment Group, Inc.
Greater San Fernando Valley Chamber of Commerce
Green Watch Films
GSK Talent
Hollywood Chamber of Commerce
Kincade Productions, LLC
Monkeyland Audio, Inc.
Mosaic Post Production, LLC
Point 360
Recording Academy
SAG-AFTRA
Santa Monica Pier Restoration Corporation
Santa Monica Travel & Tourism
Showrunnr, Inc.
Signature Post Services, LLC
Television Academy
The Society of Composers and Lyricists
Trevanna Post, Inc.
Universal Music Group
YouthBeat
69 Individuals
OPPOSITION: (Verified 8/24/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California’s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California’s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.”
ASSEMBLY FLOOR: 73-3, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, Dixon, Elhawary, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NOES: DeMaio, Ellis, Gallagher
NO VOTE RECORDED: Lee, Macedo, Muratsuchi, Celeste Rodriguez
Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117
8/24/26 12:49:43
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2319 |
THIRD READING
Bill No: AB 2319
Author: Schultz (D), et al.
Amended: 8/13/26 in Senate
Vote: 27
SENATE REVENUE AND TAXATION COMMITTEE: 4-0, 6/24/26
AYES: McNerney, Ashby, Becker, Grayson
NO VOTE RECORDED: Alvarado-Gil
SENATE APPROPRIATIONS COMMITTEE: 5-1, 8/13/26
AYES: Cervantes, Cabaldon, Grayson, Richardson, Wahab
NOES: Dahle
NO VOTE RECORDED: Seyarto
ASSEMBLY FLOOR: 73-3, 5/26/26 - See last page for vote
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
SOURCE: The California Post Alliance, The Motion Picture Editors Guild
DIGEST:
This bill enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and Corporation Taxes, for qualified expenses relating to the post-production of a qualified motion picture in California.
Existing law:
- Allows various income tax credits and deductions, as well as sales and use tax exemptions.
- Limits the total of all business credits, including credit carry forwards, to $5 million or 50% of liability, whichever is greater, commencing in the 2024 taxable year and ending before the 2030 taxable year, after which limits credits to $5 million or 75% of liability, whichever is greater, with some exceptions (SB 167, Committee on Budget & Fiscal Review, Chapter 34, Statutes of 2024 and SB 122, Committee on Budget & Fiscal Review, Chapter 23, Statutes of 2026). Taxpayers can make an irrevocable election to receive an annual refundable credit claimed in future tax years for business credits equal to credit amounts not claimed due to the limitation.
- Enacts the Film & Television Tax Credit Program 4.0 program, which authorizes a tax credit against the Personal Income and Corporation Taxes for qualified motion picture production in California, directing California Film Commission (CFC) to allocate $750 million in credits each fiscal year (FY) starting in 2025-26 and continuing through 2029-30 (SB 132 Committee on Budget & Fiscal Review, Chapter 56, Statutes of 2023; SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025; AB 1138, Zbur, Chapter 27, Statutes of 2025).
- Provides that a “qualified motion picture” includes:
- A feature with a minimum production budget of at least $1 million; however, no more than $120 million in qualified expenditures count for purposes of generating the credit.
- An independent film, defined as a motion picture that is produced by a company that is neither publicly traded, nor more than 30% owned by publicly traded companies.
- A television series that relocated to California.
- A live action or animated series produced in California with a run time of 20 minutes or more on average, with a minimum budget of $1 million per episode.
- Animated films produced in California with a $1 million budget or more.
- A large-scale competition show produced in California with a minimum budget of $1 million per episode.
- A pilot for a new live action or animated series with a run time of 20 minutes or more on average, produced in California with a minimum budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the following general requirements:
- Have 75% of the motion picture shooting days in California, or have 75% of the production budget incurred within the state;
- Commence principal photography after the date CFC approves its application, but before 180 days after the date of approval, and finish within 30 months from the date when the application was approved by the CFC;
- Obtain a copyright from the United States Copyright Office; and
- Provide a workplace diversity plan checklist.
This bill:
- Enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and the Corporation Taxes, to a “qualified taxpayer” for qualified post-production expenditures of a “qualified motion picture” in California, to be allocated by the CFC, to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per FY.
- Requires the credit to be administered in the same manner as the Film & Television Tax Credit Program 4.0, except as specified.
- Specifies that the credit shall not be allowed for a motion picture for which a credit has been claimed under the 4.0 program.
- Caps the aggregate amount of credits that may be allocated per FY, at an amount authorized in a Budget Act, for FY 2027-28 and through FY 2032-33.
- Requires CFC to allocate the annual credit amounts as follows:
- 50% to features, independent films, and animated films.
- 50% to television series, miniseries, limited series, and animated series.
- Provides an additional 5% of qualified expenditures if at least 50% of below-the-line production wages are for services performed in the state.
- Requires CFC to reserve 85% of the total aggregate credits allocable for the year for applicants that demonstrate meeting specified labor standards:
- Provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers.
- Provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing services in state.
- Participates in a CFC approved career-based learning and training program.
- Complies with reporting requirements established by the CFC, including reporting related to diversity, anti-harassment, and workforce composition.
- Directly employs at least one employee providing qualified services in state.
- Provides that deviation from the above criteria shall not be disqualifying if such deviation is required to comply with a collective bargaining agreement.
- Provides that the credit shall be an amount equal to the sum of:
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Up to $6,000,000 for qualified expenditures, unrelated to visual effects.
- Up to $6,000,000 for qualified expenditures relating to visual effects.
- An aggregate amount, not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures relating to post-production outside the Los Angeles (LA) zone, as specified;
- 10% of qualified expenditures for qualified wages relating to post-production outside of the LA zone to “qualified individuals;” and
- 15% of qualified expenditures relating to qualified music scoring.
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Provides that a qualified taxpayer may make a one-time election to make the credit refundable for each taxable year of the “refundable period,” not to exceed the “annual refundable amount.”
- The “refundable period” means the first taxable year the credit certificate is issued to the qualified taxpayer and the succeeding four taxable years.
- The “annual refundable amount” is 20% of the “total refundable amount.”
- The “total refundable amount” is equal to 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
- Defines “qualified taxpayer” as a taxpayer, or a disregarded single-member limited liability company, that has: “qualified expenditures;” fulfilled the Career Readiness requirement; and been issued a credit certificate by CFC.
- Defines “qualified expenditures” as amounts paid or incurred for:
- Tangible personal property purchased or leased, and used, within this state;
- Payments for services performed within this state; and
- Amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
- Specifies that “qualified expenditures” include only those amounts paid or incurred.
- Defines “post-production” to mean both “editorial post-production” and “visual effects,” as defined.
- Defines “qualified motion picture” substantially similar to the 4.0 program, with the following differences:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the substantially similar general requirements, with the following differences:
- At least 75%, or $1 million, whichever is greater, of post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- The taxpayer pays a prevailing wage.
- Provides that the credit shall be allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture.
- Specifies that the amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued by the CFC.
- Contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
- Makes other technical and conforming changes.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee:
- The CFC indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill (General Fund).
California Post Alliance (co-Source)
Motion Picture Editors Guild (co-Source)
California State Treasurer Fiona Ma
Karen Bass, Mayor, City of Los Angeles
Lindsey P. Horvath, Supervisor, Los Angeles County
Tracy Park, Councilmember District 11, City of Los Angeles
#MakeItBay
American Cinema Editors
California Arts Advocates
California IATSE Council
City and County of San Francisco
City of Burbank
City of Emeryville
City of Los Angeles
City of Oakland
City of Santa Monica
City of West Hollywood
Company 3
Crafty Apes, LLC
Engine Room, LLC
Exceptional Minds
Film Consortium San Diego
Film Liaisons in California Statewide
Film SF
Formosa Group, LLC
Fox Entertainment Group, Inc.
Greater San Fernando Valley Chamber of Commerce
Green Watch Films
GSK Talent
Hollywood Chamber of Commerce
Kincade Productions, LLC
Monkeyland Audio, Inc.
Point 360
Recording Academy
SAG-AFTRA
Santa Monica Pier Restoration Corporation
Santa Monica Travel & Tourism
Showrunnr, Inc.
Signature Post Services LLC
Television Academy
The Society of Composers and Lyricists
Universal Music Group
YouthBeat
63 Individuals
OPPOSITION: (Verified 8/20/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California’s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California’s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.”
ASSEMBLY FLOOR: 73-3, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, Dixon, Elhawary, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NOES: DeMaio, Ellis, Gallagher
NO VOTE RECORDED: Lee, Macedo, Muratsuchi, Celeste Rodriguez
Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117
8/20/26 10:45:54
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2319 |
THIRD READING
Bill No: AB 2319
Author: Schultz (D), et al.
Amended: 8/13/26 in Senate
Vote: 27
SENATE REVENUE AND TAXATION COMMITTEE: 4-0, 6/24/26
AYES: McNerney, Ashby, Becker, Grayson
NO VOTE RECORDED: Alvarado-Gil
SENATE APPROPRIATIONS COMMITTEE: 5-1, 8/13/26
AYES: Cervantes, Cabaldon, Grayson, Richardson, Wahab
NOES: Dahle
NO VOTE RECORDED: Seyarto
ASSEMBLY FLOOR: 73-3, 5/26/26 - See last page for vote
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
SOURCE: The California Post Alliance, The Motion Picture Editors Guild
DIGEST:
This bill enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and Corporation Taxes, for qualified expenses relating to the post-production of a qualified motion picture in California.
Existing law:
- Allows various income tax credits and deductions, as well as sales and use tax exemptions.
- Limits the total of all business credits, including credit carry forwards, to $5 million or 50% of liability, whichever is greater, commencing in the 2024 taxable year and ending before the 2030 taxable year, after which limits credits to $5 million or 75% of liability, whichever is greater, with some exceptions (SB 167, Committee on Budget & Fiscal Review, Chapter 34, Statutes of 2024 and SB 122, Committee on Budget & Fiscal Review, Chapter 23, Statutes of 2026). Taxpayers can make an irrevocable election to receive an annual refundable credit claimed in future tax years for business credits equal to credit amounts not claimed due to the limitation.
- Enacts the Film & Television Tax Credit Program 4.0 program, which authorizes a tax credit against the Personal Income and Corporation Taxes for qualified motion picture production in California, directing California Film Commission (CFC) to allocate $750 million in credits each fiscal year (FY) starting in 2025-26 and continuing through 2029-30 (SB 132 Committee on Budget & Fiscal Review, Chapter 56, Statutes of 2023; SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025; AB 1138, Zbur, Chapter 27, Statutes of 2025).
- Provides that a “qualified motion picture” includes:
- A feature with a minimum production budget of at least $1 million; however, no more than $120 million in qualified expenditures count for purposes of generating the credit.
- An independent film, defined as a motion picture that is produced by a company that is neither publicly traded, nor more than 30% owned by publicly traded companies.
- A television series that relocated to California.
- A live action or animated series produced in California with a run time of 20 minutes or more on average, with a minimum budget of $1 million per episode.
- Animated films produced in California with a $1 million budget or more.
- A large-scale competition show produced in California with a minimum budget of $1 million per episode.
- A pilot for a new live action or animated series with a run time of 20 minutes or more on average, produced in California with a minimum budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the following general requirements:
- Have 75% of the motion picture shooting days in California, or have 75% of the production budget incurred within the state;
- Commence principal photography after the date CFC approves its application, but before 180 days after the date of approval, and finish within 30 months from the date when the application was approved by the CFC;
- Obtain a copyright from the United States Copyright Office; and
- Provide a workplace diversity plan checklist.
This bill:
- Enacts the California Post-production Tax Credit program, authorizing a credit under the Personal Income and the Corporation Taxes, to a “qualified taxpayer” for qualified post-production expenditures of a “qualified motion picture” in California, to be allocated by the CFC, to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per FY.
- Requires the credit to be administered in the same manner as the Film & Television Tax Credit Program 4.0, except as specified.
- Specifies that the credit shall not be allowed for a motion picture for which a credit has been claimed under the 4.0 program.
- Caps the aggregate amount of credits that may be allocated per FY, at an amount authorized in a Budget Act, for FY 2027-28 and through FY 2032-33.
- Requires CFC to allocate the annual credit amounts as follows:
- 50% to features, independent films, and animated films.
- 50% to television series, miniseries, limited series, and animated series.
- Provides an additional 5% of qualified expenditures if at least 50% of below-the-line production wages are for services performed in the state.
- Requires CFC to reserve 85% of the total aggregate credits allocable for the year for applicants that demonstrate meeting specified labor standards:
- Provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers.
- Provides, or contributes to, employer-paid health and welfare benefits and pension contributions for direct-hire employees performing services in state.
- Participates in a CFC approved career-based learning and training program.
- Complies with reporting requirements established by the CFC, including reporting related to diversity, anti-harassment, and workforce composition.
- Directly employs at least one employee providing qualified services in state.
- Provides that deviation from the above criteria shall not be disqualifying if such deviation is required to comply with a collective bargaining agreement.
- Provides that the credit shall be an amount equal to the sum of:
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Up to $6,000,000 for qualified expenditures, unrelated to visual effects.
- Up to $6,000,000 for qualified expenditures relating to visual effects.
- An aggregate amount, not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures relating to post-production outside the Los Angeles (LA) zone, as specified;
- 10% of qualified expenditures for qualified wages relating to post-production outside of the LA zone to “qualified individuals;” and
- 15% of qualified expenditures relating to qualified music scoring.
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, subject to the following credit limitations:
- Provides that a qualified taxpayer may make a one-time election to make the credit refundable for each taxable year of the “refundable period,” not to exceed the “annual refundable amount.”
- The “refundable period” means the first taxable year the credit certificate is issued to the qualified taxpayer and the succeeding four taxable years.
- The “annual refundable amount” is 20% of the “total refundable amount.”
- The “total refundable amount” is equal to 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
- Defines “qualified taxpayer” as a taxpayer, or a disregarded single-member limited liability company, that has: “qualified expenditures;” fulfilled the Career Readiness requirement; and been issued a credit certificate by CFC.
- Defines “qualified expenditures” as amounts paid or incurred for:
- Tangible personal property purchased or leased, and used, within this state;
- Payments for services performed within this state; and
- Amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
- Specifies that “qualified expenditures” include only those amounts paid or incurred.
- Defines “post-production” to mean both “editorial post-production” and “visual effects,” as defined.
- Defines “qualified motion picture” substantially similar to the 4.0 program, with the following differences:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
- Authorizes CFC to allocate credits to “qualified motion pictures” that satisfy the substantially similar general requirements, with the following differences:
- At least 75%, or $1 million, whichever is greater, of post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- The taxpayer pays a prevailing wage.
- Provides that the credit shall be allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture.
- Specifies that the amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued by the CFC.
- Contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
- Makes other technical and conforming changes.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee:
- The CFC indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill (General Fund).
California Post Alliance (co-Source)
Motion Picture Editors Guild (co-Source)
California State Treasurer Fiona Ma
Karen Bass, Mayor, City of Los Angeles
Lindsey P. Horvath, Supervisor, Los Angeles County
Tracy Park, Councilmember District 11, City of Los Angeles
#MakeItBay
California Arts Advocates
California IATSE Council
City and County of San Francisco
City of Burbank
City of Emeryville
City of Los Angeles
City of Oakland
City of Santa Monica
City of West Hollywood
Company 3
Crafty Apes, LLC
Engine Room, LLC
Exceptional Minds
Film Consortium San Diego
Film Liaisons in California Statewide
Film SF
Formosa Group, LLC
Greater San Fernando Valley Chamber of Commerce
Green Watch Films
GSK Talent
Hollywood Chamber of Commerce
Kincade Productions, LLC
Monkeyland Audio, Inc.
Point 360
Recording Academy
SAG-AFTRA
Santa Monica Pier Restoration Corporation
Santa Monica Travel & Tourism
Showrunnr, Inc.
Signature Post Services LLC
Television Academy
The Society of Composers and Lyricists
Universal Music Group
YouthBeat
62 Individuals
OPPOSITION: (Verified 8/14/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California’s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California’s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.”
ASSEMBLY FLOOR: 73-3, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, Dixon, Elhawary, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NOES: DeMaio, Ellis, Gallagher
NO VOTE RECORDED: Lee, Macedo, Muratsuchi, Celeste Rodriguez
Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117
8/17/26 11:13:24
**** END ****
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 2319 (Schultz) - Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 2319 would enact the California Postproduction Tax Credit program, as specified.
*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********
The following information is revised to reflect amendments
adopted by the committee on August 13, 2026
Fiscal Impact:
- The California Film Commission (CFC) indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board (FTB) would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill. (General Fund).
Author Amendments:
- Provide that the credit would be able to reduce Tentative Minimum Tax to zero, as specified.
- Modify the "applicable period" to start when the credit is allocated.
- Change to the definition of "editorial post-production" to include "digital and film dailies color and processing, cloud workflow and data management." Remove "music composition" from the definition.
- Delete a requirement for a minimum spend for visual effects.
- Clarify that "qualified expenditures" include amounts paid for music orchestration services performed outside of the state if it is for music recorded in the state.
- Make various technical changes.
- END --
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 2319 (Schultz) - Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 2319 would enact the California Postproduction Tax Credit program, as specified.
Fiscal Impact:
- The California Film Commission (CFC) indicates that it would incur annual implementation costs of $672,000 (General Fund).
- Assuming $100 million in tax credit allocations are authorized beginning in 2027-28, the Department of Finance (DOF) estimates this bill would reduce General Fund revenues by $2 million in 2027-28, $9.4 million in 2028-29, and $18.1 million in 2029-30, with additional revenue losses in subsequent years. DOF also estimates the bill would reduce sales tax revenues deposited into the Local Revenue Fund 2011 by $18,000 in 2027-28, $86,000 in 2028-29, and $1.6 million in 2029-30, with additional revenue losses in subsequent years.
- The Franchise Tax Board (FTB) would incur administrative costs of $290,000 in 2026-27, $342,000 in 2027-28, and minor amounts annually thereafter, to implement the provisions of the bill. (General Fund).
Background:
Tax expenditure programs (TEPs) are special tax provisions that reduce the amount of revenues the “basic” tax system would otherwise generate in order to provide (1) benefits to certain groups of taxpayers, and/or (2) incentives to encourage certain types of behavior and activities, such as charitable giving. Specifically, current law provides for, among other things, various income and corporation tax credits and deductions, as well as exemptions from the sales and use tax. The Department of Finance is required to publish a list of TEPs (currently totaling several hundred), which currently exceed $94 billion annually.
California generally allows tax credits to reduce a taxpayer's liability on a dollar-for-dollar basis. With limited exceptions, including the Motion Picture and Television Production Tax Credit, business tax credits are nonrefundable. Current law also limits the use of most business tax credits to $5 million annually through the 2030 taxable year, after which credits generally are limited to the greater of $5 million or 75 percent of tax liability. Taxpayers whose credits are limited may irrevocably elect to receive refundable credits in future years for the disallowed amounts.
California established its Motion Picture and Television Tax Credit Program in 2009 to encourage film and television production to remain in or relocate to California in response to competing incentive programs offered by other states and countries. The program has been reauthorized and expanded several times, culminating in Motion Picture Tax Credit 4.0, which authorizes CFC to allocate tax credits and made the program California's first refundable business tax credit. In 2025, the Legislature further expanded the program by increasing the annual allocation from $330 million to $750 million for 2025-26 through 2029-30 and broadening eligibility for qualified productions. Separate legislation also established the Soundstage Program, which provides tax credits for qualified productions filmed at newly constructed or renovated certified soundstages.
Despite these incentives, California's film and television industry has experienced a sustained decline in production activity and employment. According to the Legislative Analyst's Office, California's share of domestic film industry employment fell from more than 54% in 2010 to 46% in 2023, while recent disruptions—including the COVID-19 pandemic, the 2023 labor strikes, and the 2025 Los Angeles wildfires—have further reduced production. CFC estimates that runaway productions have resulted in approximately $1.5 billion in lost production spending, while reports on Motion Picture Pension Plan contributions indicate a loss of more than 17,000 full-time equivalent union jobs in 2022 and 2024.
Post-production activities—including editing, visual effects, sound design, music scoring, color grading, and finishing—represent a significant segment of California's film industry, employing more than 12,000 workers at over 1,800 businesses statewide. However, California's share of U.S. post-production work declined from approximately 53% in 2005 to 42% in 2025, even as nationwide post-production activity increased. Although post-production expenditures may qualify for existing film tax credits when associated with an approved California production, California does not offer a standalone post-production incentive. By contrast, competing jurisdictions, including New York, the United Kingdom, British Columbia, and Australia, provide dedicated post-production tax credits.
Proposed Law:
This bill, among other things, would do the following:
- Allow a credit against the personal income tax and corporation tax in an amount between 35 percent and 50 percent of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by CFC, as specified.
- Require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified.
- Allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayer’s tax liability for the taxable year, as specified.
Related Legislation:
AB 2403 (Elhawary) would authorize, under the Personal Income Tax Law and Corporation Tax Law, a credit for commercial production companies that produce commercials in California. The bill is currently pending in this Committee.
Staff Comments:
CFC estimates it would require five additional positions to administer the increased application workload, review and certify eligible productions, and oversee credit allocations. CFC estimates ongoing General Fund costs of $672,000 annually for eight fiscal years (2026-27 through 2033-34). Although the program would sunset on January 1, 2032, administrative workload would continue for several years thereafter as productions complete postproduction activities and CFC verifies eligibility before awarding previously allocated credits.
-- END --
SENATE COMMITTEE ON REVENUE AND TAXATION
Senator Jerry McNerney, Chair
2025 - 2026 Regular
Bill No: | AB 2319 | Hearing Date: | 6/24/26 |
Author: | Schultz | Tax Levy: | No |
Version: | 5/21/26 Amended | Fiscal: | Yes |
Consultant: | Summers | ||
Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production
Enacts the California Postproduction Tax Credit program, authorizing a credit under the Personal Income Tax Law and the Corporation Tax Law, for qualified expenses relating to the postproduction of a qualified motion picture in California.
Background
Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts tax incentives to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something they would otherwise not do, but for the tax benefit. The Department of Finance is required to publish annually a list of tax expenditures, which currently totals around $94.2 billion in forgone general fund revenue.
Credits. Tax credits reduce the amount of tax owed by a taxpayer on a dollar-for-dollar basis. Credit amounts that exceed the taxpayer’s current tax year liability can either be refunded to the taxpayer or carried forward to reduce tax in future years. However, except for the Earned Income Tax Credit, the Young Child Tax Credit, the Foster Youth Tax Credit, and the Motion Picture and Television Production Credit, all credits against California Personal Income and Corporation Tax are nonrefundable.
Credit Limitation. In 2024, the Legislature limited the total of all business credits, with some exceptions, including credit carry forwards, to $5,000,000 in the 2024, 2025, and 2026 taxable years, unless the Director of Finance determines that General Fund money over the multiyear forecast is sufficient without the revenue impact of the net operating loss suspension and credit limitation (SB 167 and SB 175, Committee on Budget & Fiscal Review). Taxpayers can make an irrevocable election to receive an annual refundable credit claimed in future tax years for business credits equal to credit amounts not claimed due to the limitation.
In his 2026-27 May Revision to the Governor’s Budget, Governor Newsom proposed to permanently limit tax credit use to $5 million or 50% of liability, whichever is greater, effective in the 2027 taxable year and thereafter. This week, the Legislature approved SB 122 (Committee on Budget & Fiscal Review), which extends the current temporary limitation while maintaining the refundable credit election until the 2030 taxable year, with some modifications, after which time credits are limited to 75% of liability or $5 million, whichever is greater.
Motion picture and television production tax credit. The Legislature enacted the Motion Picture, Television, and Commercial Industries Act of 1984, creating the California Film Commission (CFC) to coordinate state and local government efforts to cultivate a successful environment for the film industry. Today, the Governor, the Senate Pro Tempore, and the Speaker of the Assembly appoint CFC’s 26 members from the film industry, private sector, and state and local governments.
The Legislature enacted a tax credit for qualified motion picture production in California, commonly known as “Film and TV Tax Credit 1.0,” directing CFC to annually allocate $100 million in credits until the 2012-13 fiscal year (SBx3 15, Calderon and ABx3 15, Krekorian, 2009). In 2011, the Legislature extended the program until 2014-15 (AB 1069, Fuentes), and again until 2016-17 (AB 2026, Fuentes, 2012; and SB 1197, Calderon, 2012).
In 2014, the Legislature enacted “Film and TV Tax Credit 2.0,” increasing the amount of credit CFC allocates to $330 million in credits each fiscal year through 2019-20 (AB 1839, Gatto). The Legislature designed Film and TV Tax Credit 1.0 and 2.0 in very similar ways, but 2.0 contained several key differences in credit mechanics, including higher credit percentages – known as “uplifts” – for certain categories of expenditures, among other changes. In 2018, the Legislature enacted “Film and TV Credit 3.0,” authorizing CFC to allocate $330 million in tax credits each fiscal year from 2020-21 to 2024-25 (SB 878, Committee on Budget & Fiscal Review).
In 2021, the Legislature enacted SB 144 (Portantino, 2021), allocating an additional $150 million in film tax credits for productions filmed at new or renovated soundstages. When a taxpayer constructs or renovates a soundstage, they automatically qualify for production credits, notwithstanding the allocation process for the general credit. Taxpayers can claim credits beginning in the 2022 taxable year and until the 2031 taxable year. SB 144 directs CFC to identify and certify qualified soundstage construction projects, thereby making taxpayers eligible for the credit. According to its 2023 progress report, CFC has certified thirteen soundstages – eight newly constructed and five renovated – with a combined size of over 200,000 sq. ft.
In 2023, the Legislature enacted “Film and TV Credit 4.0,” which authorizes CFC to allocate $330 million annually for an additional five years, starting in 2025-26 and ending in 2029-30 (SB 132, Committee on Budget & Fiscal Review). SB 132 also makes the credit California’s first refundable business entity tax credit, which allows firms with no income or sales tax liability to receive a cash refund from the state.
In 2025, Governor Newsom proposed to increase the total annual California Film and Television Tax Credit 4.0 award cap from $330 million to $750 million for fiscal years 2025-26 through 2029-30. The Senate Committee on Revenue & Taxation and Budget and Fiscal Review Subcommittee #4 held a joint oversight hearing to assess the Governor’s proposal on March 26, 2025. In June, the Legislature enacted SB 132 (Committee on Budget & Fiscal Review, 2025), which, among other provisions, increases the cap on 4.0 credits from $330 million to $750 million for fiscal years 2025-26 through 2029-30.[1]
Post-production in California. According to the Assembly Committee on Arts, Entertainment, Sports, and Tourism, based on data provided by CVL Economics, California’s post-production sector, which includes editing, visual effects, sound design, music scoring, color grading, and finishing, employs over 12,000 workers at more than 1,800 firms statewide. However, between 2005 and 2025, the state lost approximately 1,874 direct jobs in the sector. This decline occurred while overall U.S. post-production employment grew by approximately 10%.
Every major competitor jurisdiction, including New York (30% standalone post-production credit), the United Kingdom (25.5% Audio Visual Expenditure Credit), British Columbia (16 to 25% VFX credit), and Australia (30% Post, Digital & Visual Effects Offset), offers a standalone post-production credit pathway. As a result, a project that films elsewhere but completes its post-production in California receives no incentive for that California-based work. When that work leaves, California workers lose jobs and local businesses lose income. This work will continue to migrate to other jurisdictions that offer a standalone post-production credit.
Although post-production costs may qualify under the Film and Television Tax Credit 4.0 when tied to a California-based qualified motion picture, those benefits are generally not available until productions are selected and incur qualifying expenditures.
The author wants to authorize a standalone post-production credit to provide more immediate and targeted financial support for California post-production businesses that face layoffs, lost work, or business closures due to the delay in realizing Program 4.0 benefits.
Proposed Law
AB 2319 enacts the California Postproduction Tax Credit program, authorizing a credit under the Personal Income and the Corporation Taxes, to a “qualified taxpayer” of “qualified expenses” relating to the postproduction of a “qualified motion picture” in California, to be allocated by the CFC, to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year (FY). The bill also:
- Requires the credit to be administered in the same manner as the Film Tax Credit 4.0, except as specified.
- Specifies that the credit shall not be allowed for a “qualified motion picture” for which a credit has been claimed under the Film Tax Credit 4.0 program.
- Caps the aggregate amount of credits that may be allocated per FY, at an unspecified amount, for FY 2027-28 and through FY 2032-33.
- Requires CFC to allocate the credit amounts pursuant to the following categories:
- 50% to features, independent films, and animated films.
- 50% to television series, miniseries, limited series, and animated series.
The measure further provides that the credit shall be an amount equal to the sum of:
- 35% of qualified expenditures attributable to “qualified editorial expenditures,” as defined, of the postproduction of a qualified motion picture in California, subject to the following limitations:
- In the case of qualified expenditures, excluding those relating to visual effects, up to $6,000,000.
- In the case of qualified expenditures relating to visual effects, up to $6,000,000.
- An aggregate amount, not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures for expenditures relating to postproduction outside the Los Angeles zone, as specified;
- 10% of qualified expenditures for qualified wages paid for services performed relating to postproduction outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone; and,
- 15% of qualified expenditures for expenditures relating to qualified music scoring.
AB 2319 further provides that a qualified taxpayer may make a one-time election to make the credit refundable for each taxable year of the “refundable period,” not to exceed the “annual refundable amount.”
- The “refundable period” means the first taxable year that the credit certificate is issued to the qualified taxpayer by the CFC, and the succeeding four taxable years; and
- The “annual refundable amount” is 20% of the “total refundable amount.”
- The “total refundable amount” is equal to 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
The bill also defines several terms, including:
- “Qualified taxpayer” as a taxpayer, or a single-member limited liability company that is disregarded for tax purposes, that has:
- Paid or incurred “qualified expenditures;”
- Participated in the Career Readiness requirement; and
- Been issued a credit certificate by the CFC.
- “Qualified expenditures” as amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction of a “qualified motion picture” and payments, including “qualified wages,” as defined, for services performed within this state in the postproduction of a “qualified motion picture.”
- “Qualified motion picture” as a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of $1 million;
- A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of $1 million per episode; or,
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
The measure further specifies that, to qualify as a “qualified motion picture,” all of the following conditions must be satisfied:
- At least 75%, or $1 million, whichever is greater, of postproduction expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- Postproduction of the qualified motion picture is completed within 30 months of the date on which the CFC approves the qualified taxpayer’s application;
- The copyright for the motion picture is registered with the United States Copyright Office;
- Principal photography of the qualified motion picture commences after the date on which the CFC approves the application, but no later than specified;
- Provides a diversity workplan checklist; and
- Pays a prevailing wage rate determined by the Director of Industrial Relations under Labor Code Sections 1773 and 1773.9, where a rate has been established for that position. This requirement also applies to services performed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.
The bill also provides that the credit shall be allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture; that the amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the CFC; makes other technical and conforming changes, and contains legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill. According to the author, “California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work. AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program. A significant portion of the post-production industry has always relied on productions that are based overseas or otherwise outside of California coming back to California for post. This work sustains thousands of good, middle-class jobs. As proposed to be amended, a large share of the tax credit allocated under AB 2319 will go to jobs that uphold industry standards. However, credits will also be available to make AB 2319 accessible to emerging voices and artists who have traditionally struggled to find an entry point into the entertainment industry. These individuals often represent members of diverse backgrounds and underserved communities, and this portion of the bill provides them with an opportunity to contribute to California’s creative economy. AB 2319 is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create. California’s post-production infrastructure represents a century of investment and tens of thousands of skilled jobs, and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of California is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer possible.”
2. “Windfall” or “but for” tax benefit? Tax expenditures produce two different outcomes. The first outcome is a “windfall,” in which the tax expenditure rewards behavior that would have occurred even without the tax benefit. The second outcome is a “but for tax benefit,” where a particular activity would not have occurred without the incentive created by the tax expenditure. Here, the credit is designed to influence the location of post-production expenditures, wages, and vendor work, rather than merely subsidize productions already fully committed to completing that work in California. Thus, this is largely a “but for” tax benefit because the credit seeks to make California financially competitive for post-production activity that may not occur here absent the incentive. However, some portion of the credit may operate as a windfall to the extent it is claimed for post-production work that would have occurred in California regardless of the credit due to existing infrastructure, workforce, creative relationships, or business needs. On balance, this credit serves primarily as a “but for” tax benefit because its structure is designed to attract or retain mobile post-production activity that existing film credit programs may not reach.
3. Revenue loss. Existing tax law provides various credits, deductions, exclusions, and exemptions for certain taxpayers. By authorizing a credit against personal income tax, AB 2319 will result in the State General Fund receiving less revenue. As a result, the state will have to reduce spending or increase taxes to offset the loss. Additionally, because Proposition 98 establishes a minimum funding guarantee for K-14 education in California, which generally represents roughly 40% of the state’s General Fund revenues, every dollar of General Fund loss results in approximately 40 cents less of funding for K-14 education.
4. Do positive economic effects of the credit offset lost revenue? Experts disagree on this question. At the 2025 Joint Oversight Hearing of the Senate Committee on Revenue & Taxation and Budget & Fiscal Review Subcommittee #4: “Assessing the Governor’s Proposal to Further Expand the Motion Picture and Television Production Tax Credit,” the Legislative Analyst’s Office (LAO), the California Budget and Policy Center, and the Los Angeles County Economic Development Commission (LAEDC) spoke to the economic and fiscal effects of the Governor’s proposal to increase the credit authorization amount.
LAEDC estimated the total economic impact from the 169 productions that were allocated 2.0 tax credits is $7.4 billion in production in exchange for a total of $915 million in tax credits.4 LAEDC stated that at least $24.40 in output, $16.14 in gross domestic product, $8.60 in wages, and $1.07 in initial state and local tax revenue resulted from every dollar of tax credit allocated.
Among other findings, LAO stated that there is good evidence that the credit increases production activity and the size of the industry, but the credit does not pay for itself:[2]
Film tax credits generally have a negative overall effect on state revenues. Evidence from academic research and state evaluations in places such as Georgia and New York find that every $1 of credit allocated returns significantly less than $1 in state revenue. One notable outlier to this pattern is a report from the Los Angeles County Economic Development Corporation, who claim to find a small fiscal benefit associated with the film tax credit. The Los Angeles County Economic Development Corporation estimates, however, very likely are overstated. These estimates ignore some of the important offsetting factors discussed above, specifically that some productions receiving the credit would have filmed here anyway and revenues lost to the film tax credit could have been used to fund other economically beneficial programs.
The economic effects of a post-production credit may differ from those of a general film production credit because post-production work is often performed in established facilities staffed by specialized employees, resulting in longer employment opportunities than temporary on-site film production. However, according to an independent study commissioned by the state Department of Taxation and Finance, New York’s post-production credit, funded at $45 million annually through 2036, found a low fiscal return of 31 cents per dollar of credit but also noted that the jobs subsidized by the credit are “high-paying” and thus create “enduring value.”[3]
5. Equity. AB 2319 may advance social equity by supporting a segment of the entertainment workforce that is often less visible than principal photography but includes a broad range of skilled below-the-line workers, small businesses, vendors, musicians, editors, sound professionals, and visual effects workers. By targeting post-production work that may otherwise leave California, the credit could help preserve middle-class creative and technical jobs and sustain local businesses that depend on consistent production activity. Further, AB 2319 requires applicants to provide a diversity workplan checklist, which the CFC would develop by regulation. The bill also ties part of the credit certification to diversity compliance: Generally, CFC certifies 96% of the allocated credit but may certify the remaining 4% if the taxpayer submits a diversity workplan, interim assessment, and final diversity assessment showing that the project met or made a good-faith effort to meet its diversity goals.
6. Section 41. Section 41 of the Revenue and Taxation Code requires any bill enacting a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). A bill that would authorize a new gross income exclusion is exempt from the requirement that the bill contain detailed performance indicators and data collection reporting if the Legislature determines there is no available data to collect and report (AB 3289, Committee on Revenue and Taxation, 2024). To satisfy these requirements, AB 2319 states that the specific goal of this credit are to:
- To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California;
- To keep California’s Film Tax Credit competitive with post-production incentives offered by other states and other countries; and,
- To increase the competitiveness of the tax credits allowed relative to previous California motion picture tax credit programs by allowing the tax credit to be refundable.
The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
- The number and types of post-productions that apply for the tax credits allowed;
- The total amount of credit allocations applied for;
- The total amount of credits allocated;
- The total amount of credits certified as eligible to be claimed on a tax return;
- The number of jobs included in the budgets of post-productions receiving the tax credits allocated;
- A comparison of the performance indicators specified, with results from California motion picture tax credit programs authorized by existing law; and,
- The total amount of credits allocated by this bill that are claimed as a refund on a tax return.
AB 2319 further provides that, on or before May 1, 2030, the Legislative Analyst’s Office (LAO) shall provide to this Committee, the Senate Committee on Governance and Finance, and the public, a report evaluating the effectiveness of the tax credits allowed by this bill in achieving the metrics outlined above, including an assessment of the refundability of the tax credit in achieving those metrics.
7. Related legislation. Also set to be heard at the Committee’s June 24th hearing is AB 2403, which authorizes, under the Personal Income Tax Law and Corporation Tax Law, a credit for commercial production companies that produce commercials in California.
8. Committee amendments. The Committee could amend AB 2319 in the following ways:
- Limit the amount of credit the CFC may allocate in a fiscal year to the amount authorized in the Budget Act.
- Revise the criteria CFC will consider when allocating credits by categorizing applicants as either Tier 1 or Tier 2 applicants.
- Specify that to be categorized as Tier 1, an applicant must:
- Demonstrate that specified labor standards have been satisfied, specifically by providing CFC with documentation to verify the applicant:
- Paid wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.
- Provided, or contributed to, employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California.
- Participates in a career-based learning and training program approved by CFC.
- Comply with workforce reporting requirements established by the CFC, including reporting related to diversity, anti-harassment policies, and workforce composition, consistent with the existing Film and TV Tax Credit Program.
- Directly employ at least one employee providing services in California.
- Demonstrate that specified labor standards have been satisfied, specifically by providing CFC with documentation to verify the applicant:
- Provide that deviation from any of Tier 1 criteria is due to compliance with a valid collective bargaining agreement alone shall not disqualify the applicant from being categorized as Tier 1.
- Provide that a maximum of 15% of credit allocation per FY can be awarded to Tier 2 applicants.
- Provide a 5% uplift on post-production wages paid to California workers, if 50% or more of “below-the-line” production wages, excluding post-production wages, are paid to California taxpayers.
- Specify that the 5% uplift shall not be deemed an increase to 1) the $6 million cap for qualified expenditures, excluding those relating to visual effects; or the 2) the $6 million cap for qualified expenditures relating to visual effects.
- Provide that employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California shall be treated as qualified expenditures.
- Make technical and conforming changes.
Assembly Actions
Assembly Arts, Entertainment, Sports, and Tourism 8-0
Assembly Revenue & Taxation Committee: 6-1
Assembly Appropriations Committee: 15-0
Assembly Floor: 73-3
Support and Opposition
(6/18/2026)
Support: California Post Alliance (Co-Sponsor)
Motion Picture Editors Guild (Co-Sponsor)
California State Treasurer Fiona Ma
Tracy Park, Councilmember District 11, City of Los Angeles
Karen Bass, Mayor, City of Los Angeles
#MakeItBay
California Arts Advocates
California IATSE Council
City of Burbank
City of Emeryville
City of Los Angeles
City of Santa Monica
City of West Hollywood
Company 3
Crafty Apes, LLC
Engine Room, LLC
Exceptional Minds
Film Liaisons in California Statewide
Formosa Group, LLC
GSK Talent
Kincade Productions, LLC
Monkeyland Audio, Inc.
Point 360
Santa Monica Pier Restoration Corporation
Santa Monica Travel & Tourism
Showrunnr, Inc.
Signature Post Services LLC
Television Academy
The Society of Composers and Lyricists
YouthBeat
61 Individuals
Opposition: None received.
-- END --
For a description of the aspects of the credit not related to Career Pathways and diversity requirements, as well as the changes made by AB 1138, please see the Committee and Senate Floor Analysis of AB 1138 here: https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=202520260AB1138 ↑
https://srev.senate.ca.gov/system/files/2025-03/film-tax-credit-022825-lao.pdf ↑
https://www.empirecenter.org/publications/billions-in-film-tv-subsidies-yield-zero-or-less-for-ny-economy-state-sponsored-study-finds/ ↑
ASSEMBLY THIRD READING
ATR Bill Id:AB 2319
Author:(Schultz)
As Amended Ver:May 21, 2026
2/3 vote
SUMMARY
AB 2319 bill creates a standalone California Post-production Tax Credit for qualified post-production expenses under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law in an amount between 35% and 50% of "qualified expenses" relating to the post-production of a "qualified motion picture" in California, of both non-visual effects-related expenses and visual effects-related expenses up to $6 million, to be allocated by the California Film Commission (CFC).
Major Provisions
- Allows, for taxable years starting on or after January 1, 2027, the California Film Commission (CFC) to issue a tax credit to qualified taxpayers for qualified expenditures for the post-production of a qualified motion picture in California, if the qualified motion picture did not claim the production tax credit.
- Post-production is defined to mean editorial post-production and visual effects, including picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.
- Limits the CFC to the following credit certificate amounts of qualified expenditures for each qualified motion picture:
- In the case of qualified expenditures, excluding those relating to visual effects, up to six- million dollars ($6,000,000).
- In the case of qualified expenditures relating to visual effects, up to six-million dollars ($6,000,000).
- Allows for bonus credits up to an additional 15% over the six-million-dollar ($6,000,000) cap on qualified expenditures.
- 5% for post-production outside of the "Los Angeles zone."
- 10% for qualified wages paid to California residents outside of the "Los Angeles zone."
- 15% for qualifies music scoring expenditures.
- Aligns numerous provisions, including definitions, the Career Pathways Training Program, diversity workplan, and processes for CFC to allocate the credit, with the existing structure of the motion picture tax credit.
COMMENTS
Background. California's Film and Television Tax Credit Program was first established in 2009 during the aftermath of the Great Recession, when lawmakers became increasingly concerned that film and television production was leaving California for states and countries offering more aggressive financial incentives. The original program, often referred to as "Program 1.0," authorized $100 million annually in tax credits beginning in fiscal year 2009–10 and continuing through 2014–15. The program was administered by the California Film Commission and was designed primarily to retain middle-class entertainment industry jobs and related economic activity within the state. Early eligibility rules were relatively narrow, excluding many big-budget studio films and one-hour television dramas, and credits were awarded largely through a lottery system.
In 2014, the Legislature enacted a major expansion known as "Program 2.0," increasing annual funding to $330 million and broadening eligibility to include higher-budget films, television series, pilots, and streaming productions. The revised program also replaced the lottery system with a "jobs ratio" ranking methodology intended to prioritize projects generating the greatest in-state economic impact. Subsequent legislation extended and modified the program through "Program 3.0" in 2020 and "Program 4.0" in 2025, reflecting ongoing concern over production flight to states such as Georgia and New York, as well as to Canada and the United Kingdom. The 2025 legislation, including Assembly Bill 1138, significantly expanded the program to $750 million annually through 2030, broadened eligibility to include animation and certain competition shows, and increased credit percentages for qualifying productions. Supporters have argued the credit is essential to preserving California's entertainment workforce and economic ecosystem, while critics have questioned whether the fiscal benefits justify the public cost.
Post-production in California. According to data provided by CVL Economics, California's post-production sector, which includes editing, visual effects (VFX), sound design, music scoring, color grading, and finishing, is a distinct economic asset employing over 12,000 workers at more than 1,800 firms statewide. However, the state's share of U.S. post-production employment has fallen from approximately 53% to 42% between 2005 and 2025, representing a loss of roughly 1,874 direct jobs and 11.2 percentage points of national market share. This decline occurred while U.S. post-production employment overall grew by approximately 10%.
A project that films elsewhere but completes its post-production in California receives no incentive for that California-based work. Every major competitor jurisdiction, including New York (30% standalone post-production credit), the United Kingdom (25.5% Audio Visual Expenditure Credit), British Columbia (16 to 25% VFX credit), and Australia (30% PDV Offset), offers a standalone credit pathway for post-production.
Five major unions represent post-production workers in California: IATSE Local 700 (Motion Picture Editors Guild), IATSE Local 839 (Animation Guild), American Federation of Musicians Local 47 (AFM), SAG-AFTRA (Singers), IATSE Local 871(Post-production Accountants). AFM Local 47 membership declined 37.4% from 8,474 in 2008 to 5,305 in 2024, coinciding with the migration of film scoring work to London, Vienna, and Eastern Europe. Only four scoring stages remain active in California (Sony's Streisand Stage, Fox/Disney's Newman Stage, Warner Brothers' Clint Eastwood Stage and Skywalker Sound's Scoring Stage).
According to the Author
"California is home to the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work.
"AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skilled jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program.
"This bill is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create.
California's post-production infrastructure represents a century of investment and tens of thousands of skilled jobs and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of Los Angeles is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer happen."
Arguments in Support
According to the California Post Alliance (Sponsor), "California-headquartered companies, such as Netflix, Apple, Disney, and the independent production sector that anchors much of the state's creative economy, are among the primary financiers of American film and television content.
"When those productions choose to complete post-production in another jurisdiction because that jurisdiction offers an incentive which California does not, California-sourced capital generates jobs, wages, and tax revenue for someone else's economy. The workers who would have edited that film in Burbank, scored its music on a stage in Hollywood, or mixed its sound in Northern California instead do that work somewhere else, and the income tax, the vendor spending, and the economic multiplier effect follows.
"AB 2319 does not solve every competitive variable in the global production landscape, but it does close the specific policy gap that is causing work to leave that would otherwise stay here.
"It has support from post-production facilities, music scoring stages, editorial houses, and VFX companies that have watched their booking calendars thin as work migrates to incentivized jurisdictions."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Committee on Appropriations:
- Ongoing General Fund costs of approximately $665,000 for CFC to hire additional staff to manage increased volume of applications and provide technical assistance.
- Potential General Fund revenue loss of an unknown amount, likely in the millions of dollars ongoing annually, depending on the amount of the cap placed on aggregate credits per fiscal year and how many projects qualify for credits.
VOTES
ASM ARTS, ENTERTAINMENT, SPORTS, AND TOURISM: 8-0-1
YES: Ward, Lackey, Elhawary, Jeff Gonzalez, McKinnor, Ortega, Valencia, Zbur
ABS, ABST OR NV: Quirk-Silva
ASM REVENUE AND TAXATION: 6-1-0
YES: Gipson, Sanchez, Carrillo, McKinnor, Quirk-Silva, Michelle Rodriguez
NO: DeMaio
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
UPDATED
VERSION: May 21, 2026
CONSULTANT: Brian V. Anderson, Jr. / A.,E.,S., & T. / (916) 319-3450 FN: 0003101
ASSEMBLY THIRD READING
ATR Bill Id:AB 2319
Author:(Schultz)
As Amended Ver:March 19, 2026
2/3 vote
SUMMARY
AB 2319 bill creates the California Postproduction Tax Credit for qualified postproduction expenses under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law in an amount between 35% and 50% of "qualified expenses" relating to the postproduction of a "qualified motion picture" in California, of both non-visual effects-related expenses and visual effects-related expenses up to $6 million, to be allocated by the California Film Commission (CFC)
Major Provisions
- Allows, for taxable years starting on or after January 1, 2027, the California Film Commission (CFC) to issue a tax credit to qualified taxpayers for qualified expenditures for the postproduction of a qualified motion picture in California, if the qualified motion picture did not claim the production tax credit.
- Limits the CFC to the following credit certificate amounts of qualified expenditures for each qualified motion picture:
- In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
- Aligns numerous provisions, including definitions, the Career Pathways Training Program, diversity workplan, and processes for CFC to allocate the credit, with the existing structure of the motion picture tax credit.
COMMENTS
Background. California's Film and Television Tax Credit Program was first established in 2009 during the aftermath of the Great Recession, when lawmakers became increasingly concerned that film and television production was leaving California for states and countries offering more aggressive financial incentives. The original program, often referred to as "Program 1.0," authorized $100 million annually in tax credits beginning in fiscal year 2009–10 and continuing through 2014–15. The program was administered by the California Film Commission and was designed primarily to retain middle-class entertainment industry jobs and related economic activity within the state. Early eligibility rules were relatively narrow, excluding many big-budget studio films and one-hour television dramas, and credits were awarded largely through a lottery system.
In 2014, the Legislature enacted a major expansion known as "Program 2.0," increasing annual funding to $330 million and broadening eligibility to include higher-budget films, television series, pilots, and streaming productions. The revised program also replaced the lottery system with a "jobs ratio" ranking methodology intended to prioritize projects generating the greatest in-state economic impact. Subsequent legislation extended and modified the program through
"Program 3.0" in 2020 and "Program 4.0" in 2025, reflecting ongoing concern over production flight to states such as Georgia and New York, as well as to Canada and the United Kingdom. The 2025 legislation, including Assembly Bill 1138, significantly expanded the program to $750 million annually through 2030, broadened eligibility to include animation and certain competition shows, and increased credit percentages for qualifying productions. Supporters have argued the credit is essential to preserving California's entertainment workforce and economic ecosystem, while critics have questioned whether the fiscal benefits justify the public cost.
Post-production in California. According to data provided by CVL Economics, California’s post-production sector, which includes editing, visual effects (VFX), sound design, music scoring, color grading, and finishing, is a distinct economic asset employing over 12,000 workers at more than 1,800 firms statewide. However, the state’s share of U.S. post-production employment has fallen from approximately 53% to 42% between 2005 and 2025, representing a loss of roughly 1,874 direct jobs and 11.2 percentage points of national market share. This decline occurred while U.S. post-production employment overall grew by approximately 10%.
A project that films elsewhere but completes its post-production in California receives no incentive for that California-based work. Every major competitor jurisdiction, including New York (30% standalone post-production credit), the United Kingdom (25.5% Audio Visual Expenditure Credit), British Columbia (16 to 25% VFX credit), and Australia (30% PDV Offset), offers a standalone credit pathway for post-production.
Five major unions represent post-production workers in California: IATSE Local 700 (Motion Picture Editors Guild), IATSE Local 839 (Animation Guild), American Federation of Musicians Local 47 (AFM), SAG-AFTRA (Singers), IATSE Local 871(Postproduction Accountants). AFM Local 47 membership declined 37.4% from 8,474 in 2008 to 5,305 in 2024, coinciding with the migration of film scoring work to London, Vienna, and Eastern Europe. Only four scoring stages remain active in California (Sony’s Streisand Stage, Fox/Disney's Newman Stage, Warner Brothers’ Clint Eastwood Stage and Skywalker Sound's Scoring Stage).
According to the Author
"California is home to the most experienced postproduction workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work.
"AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skilled jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program.
"This bill is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create.
California's post-production infrastructure represents a century of investment and tens of thousands of skilled jobs and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of Los Angeles is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer happen."
Arguments in Support
According to the California Post Alliance (Sponsor), "California-headquartered companies, such as Netflix, Apple, Disney, and the independent production sector that anchors much of the state's creative economy, are among the primary financiers of American film and television content.
"When those productions choose to complete post-production in another jurisdiction because that jurisdiction offers an incentive which California does not, California-sourced capital generates jobs, wages, and tax revenue for someone else's economy. The workers who would have edited that film in Burbank, scored its music on a stage in Hollywood, or mixed its sound in Northern California instead do that work somewhere else, and the income tax, the vendor spending, and the economic multiplier effect follows.
"AB 2319 does not solve every competitive variable in the global production landscape, but it does close the specific policy gap that is causing work to leave that would otherwise stay here.
"It has support from post-production facilities, music scoring stages, editorial houses, and VFX companies that have watched their booking calendars thin as work migrates to incentivized jurisdictions."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Committee on Appropriations:
- Ongoing General Fund costs of approximately $665,000 for CFC to hire additional staff to manage increased volume of applications and provide technical assistance.
- Potential General Fund revenue loss of an unknown amount, likely in the millions of dollars ongoing annually, depending on the amount of the cap placed on aggregate credits per fiscal year and how many projects qualify for credits.
VOTES
ASM ARTS, ENTERTAINMENT, SPORTS, AND TOURISM: 8-0-1
YES: Ward, Lackey, Elhawary, Jeff Gonzalez, McKinnor, Ortega, Valencia, Zbur
ABS, ABST OR NV: Quirk-Silva
ASM REVENUE AND TAXATION: 6-1-0
YES: Gipson, Sanchez, Carrillo, McKinnor, Quirk-Silva, Michelle Rodriguez
NO: DeMaio
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
UPDATED
VERSION: March 19, 2026
CONSULTANT: Brian V. Anderson, Jr. / A.,E.,S., & T. / (916) 319-3450 FN: 0002732
Date of Hearing: May 6, 2026
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 2319
Author:(Schultz) – As Amended Ver:March 19, 2026
Policy Committee: | Arts, Entertainment, Sports, and Tourism | Vote: | 8 - 0 |
Revenue and Taxation | 6 - 1 | ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill creates the California Postproduction Tax Credit for qualified postproduction expenses, on or after January 1, 2027, for projects not principally filmed in California or projects not otherwise receiving the California Film and Television Tax Credit, administered by the California Film Commission (CFC). The bill provides for credits of 35% of both non-visual effects-related expenses and visual effects-related expenses up to $6 million, respectively, and additional credits between 5% and 15% for specified costs, up to a still unspecified amount of aggregate credits per fiscal year.
FISCAL EFFECT:
- Ongoing General Fund costs of approximately $665,000 for CFC to hire additional staff to manage increased volume of applications and provide technical assistance.
- Potential General Fund revenue loss of an unknown amount, likely in the millions of dollars ongoing annually, depending on the amount of the cap placed on aggregate credits per fiscal year and how many projects qualify for credits.
COMMENTS:
- Purpose. According to the author:
California is home to the most experienced postproduction workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for postproduction work. AB 2319 fills a gap in our current tax credit program by creating a post-only incentive that keeps high-skilled jobs, small-business vendors, and production spending in California while complementing our existing film and television tax credit.
- Background. California’s Iconic Film Industry. California’s film and television industry is a key part of the state’s cultural identity, as well a key source of tourism revenue. Concentrated in the Los Angeles region, the industry provides work for actors and entertainers and generates production and on-set jobs for union laborers. Despite the industry’s importance in the state, the Legislative Analyst’s Office (LAO) notes that from 2010 to 2023, California's share of domestic film industry employment decreased from over 54% to 46%, and also underscores that recent disruptions, including the COVID-19 pandemic, the 2023 labor strikes, and the 2025 Los Angeles wildfires, have depressed production activity.
A 2023 report by the CFC found that runaway projects to other locations accounted for $1.5 billion in production spending loss. Reports on contributions to the Motion Picture Pension Plan suggest that the decline in production has led to a sharp drop in union jobs, particularly in 2022 and 2024, during which reported hours to the Motion Picture Pension Plan dropped by over 34 million. This represents a loss of over 17,000 full-time equivalent jobs.
Motion Picture Tax Credits 1.0 through 4.0. California first established the Motion Picture Tax Credit program in 2009 to compete with similar programs in other states and countries using tax credits to incentivize production relocation. Since then, California has enacted several iterations of the program. SB 132 (Committee on Budget and Fiscal Review), Chapter 56, Statutes of 2023, enacted the Motion Picture Tax Credit 4.0 that reauthorized the Motion Picture Tax Credit program for $330 million in tax credits to be allocated by the CFC on or after July 1, 2025 and before July 1, 2030, and authorized the state's first refundable credit for business taxpayers. SB 144 (Portantino), Chapter 114, Statutes of 2021, created the similar Soundstage Program, which allows, for taxable years beginning on or after January 1, 2022 and before January 1, 2032, a tax credit for a qualified motion picture produced at a certified studio construction project.
Most recently, AB 1138 (Zbur), Chapter 27, Statutes of 2025, modifies the Motion Picture Tax Credit 4.0 and Soundstage Program by expanding the definition of a qualified motion picture and increasing the total amount of credits awarded to further incentivize film and television projects to remain in or relocate to California.
Post-Production. Post-production activities includes editing, visual effects, sound design, music scoring, color grading, and finishing. While California’s existing Film Tax Credits have successfully incentivized projects to remain in California, according to CVL Economics, between 2005 and 2025 California’s share of total post-production occurring in the United States decreased from approximately 53% to 42% even as post-production nationwide increased by approximately 10%. Other major competitor jurisdictions for film projects, New York, the United Kingdom, British Columbia, and Australia, all offer a standalone post-production credit.
- Related Legislation. AB 2403 (Elhawary), of the current legislative session, creates the commercial production tax credit. AB 2403 is pending hearing in this committee.
Analysis Prepared by: Aaron Heredia / APPR. / (916) 319-2081
Date of Hearing: April 20, 2026
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Mike Gipson, Chair
ABPCA Bill Id:AB 2319 (
Author:Schultz) – As Amended Ver:March 19, 2026
2/3 vote. Fiscal committee.
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: postproduction
SUMMARY: Allows a credit under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law in an amount between 35% and 50% of "qualified expenses" relating to the postproduction of a "qualified motion picture" in California, to be allocated by the California Film Commission (CFC), as specified. Specifically, this bill:
- Contains the following legislative findings and declarations:
- California film and TV productions greatly benefit from the current motion picture tax credit 4.0 (Film Tax Credit 4.0);
- That credit does not cover postproduction when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the state's incentive framework;
- Postproduction expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of California's existing postproduction ecosystem and a massive decline in taxable wages;
- Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state;
- Editorial houses and postproduction service companies throughout California are losing revenue and skilled workers to out-of-state productions;
- Protecting the future of California's film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity; and,
- The tax credit program created by this bill is not intended to compete with or replace California's principal photography incentive, but to complement it by capturing postproduction activity not otherwise eligible for existing credits.
- Enacts the California Postproduction Tax Credit program.
- Allows, for taxable years beginning on or after January 1, 2027, a credit to a "qualified taxpayer" equal to a specified percentage of "qualified expenditures" for the postproduction of a "qualified motion picture" in California.
- Specifies that the credit shall not be allowed for a "qualified motion picture" for which a credit has been claimed under the Film Tax Credit 4.0 program.
- Defines a "qualified taxpayer" as a taxpayer, or a single member limited liability company that is disregarded for tax purposes, that has:
- Paid or incurred "qualified expenditures";
- Participated in the Career Readiness requirement; and,
- Been issued a credit certificate by the CFC.
- Defines "qualified expenditures" as amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the postproduction of a "qualified motion picture" and payments, including "qualified wages", for services performed within this state in the postproduction of a "qualified motion picture".
- Defines a "qualified motion picture" as a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following:
- A feature, including an animated film and an independent film, with a minimum production budget of $1 million;
- A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of $1 million per episode;
- A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of $1 million;
- A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of $1 million per episode; or,
- A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of $1 million per episode.
- Specifies that, to qualify as a "qualified motion picture" all of the following conditions must be satisfied:
- At least 75%, or $1 million, whichever is greater, of postproduction expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state;
- Postproduction of the qualified motion picture is completed within 30 months of the date on which the qualified taxpayer's application is approved by the CFC;
- The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code;
- Except as provided, principal photography of the qualified motion picture commences after the date on which the application is approved by the CFC, but no later than specified;
- Provides a diversity workplan checklist; and,
- Pays a prevailing wage rate determined by the Director of Industrial Relations under Labor Code Sections 1773 and 1773.9 where a rate has been established for that position. This requirement shall applly to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in Califorina.
- Defines "qualified wages" to mean all of the following:
- Any wages subject to withholding under Unemployment Insurance Code Section 13000 et seq. that were paid or incurred by any taxpayer involved in the postproduction of a qualified motion picture with respect to a "qualified individual" for services performed on the qualified motion picture production within this state;
- The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the postproduction of the qualified motion picture that are properly allocable to qualified wage amounts, as specified;
- Any payments made to a "qualified entity" for services performed in this state by "qualified individuals", as specified; and,
- Remuneration paid to an independent contractor who is a "qualified individual" for services performed within this state by that "qualified individual".
- Excludes certain expenses from the definition of "qualified wages", including:
- 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;
- Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto;
- Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture; and,
- 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.
- Defines a "qualified individual" as any individual who performs services during the production period in an activity related to the postproduction of a qualified motion picture.
- Defines a "qualified entity" as a personal service corporation as defined in Internal Revenue Code Section 269A(b)(1), a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.
- Specifies that, except as otherwise provided, the credit shall be allowed for the taxable year in which the CFC issues the credit certificate for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.
- Provides that the amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the CFC.
- Requires the CFC to allocate tax credits to applicants on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year (FY).
- Provides that the credit shall be an amount equal to the sum of the following:
- 35% of qualified expenditures attributable to qualified editorial expenditures of the postproduction of a qualified motion picture in California; and,
- Additional credits shall be allowed for the postproduction of a qualified motion picture in an aggregate amount not to exceed 15% of qualified expenditures, as follows:
- 5% of qualified expenditures for expenditures relating to postproduction outside the Los Angeles zone, as specified;
- 10% of qualified expenditures for qualified wages paid for services performed relating to postproduction outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone; and,
- 15% of qualified expenditures for expenditures relating to qualified music scoring.
- Provides that, unless otherwise specified, the CFC shall allocate the credit amounts subject to the following categories:
- Features, independent films, and animated films shall be allocated 50%, as specified; and,
- A television series, miniseries, limited series, and animated series shall be allocated 50%, as specified.
- Caps the aggregate amount of credits that may be allocated per FY, except as provided, to ___[1] for FY 2027-28 and each FY thereafter, through and including FY 2032-33, as specified.
- Provides that a qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the "refundable period", not to exceed the "annual refundable amount".
- Defines the "refundable period" as the first taxable year that the credit certificate is issued to the qualified taxpayer by the CFC, and the succeeding four taxable years.
- Defines the "annual refundable amount" as 20% of the "total refundable amount".
- Defines the "total refundable amount" as 90% of the credit amount that exceeds the tax liability in the first taxable year of the refundable period.
- Requires the credit to be administered in the same manner as the Film Tax Credit 4.0, except as specified.
- Provides that, for purposes of complying with Revenue and Taxation Code (R&TC) Section 41, the Legislature finds and declares all of the following:
- The specific goals, purposes, and objectives that the credits will achieve include all of the following:
- To maintain and expand motion picture and television postproductions, and the quality of the jobs they provide, in California;
- To keep California's Film Tax Credit competitive with postproduction incentives offered by other states and other countries; and,
- To increase the competitiveness of the tax credits allowed relative to previous California motion picture tax credit programs by allowing the tax credit to be refundable.
- The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:
- The number and types of postproductions that apply for the tax credits allowed;
- The total amount of credit allocations applied for;
- The total amount of credits allocated;
- The total amount of credits certified as eligible to be claimed on a tax return;
- The number of jobs included in the budgets of postproductions receiving the tax credits allocated;
- A comparison of the performance indicators specified, with results from California motion picture tax credit programs authorized by existing law; and,
- The total amount of credits allocated by this bill that are claimed as a refund on a tax return.
- The specific goals, purposes, and objectives that the credits will achieve include all of the following:
- Provides that, on or before May 1, 2030, the Legislative Analyst's Office (LAO) shall provide to this Committee, the Senate Committee on Governance and Finance, and the public, a report evaluating the effectiveness of the tax credits allowed by this bill in achieving the metrics outlined above, including an assessment of the refundability of the tax credit in achieving those metrics.
EXISTING LAW:
- Allows various tax credits under both the PIT Law and the CT Law. These credits are generally designed to encourage socially beneficial behavior or to provide relief to taxpayers that incur specified expenses. (R&TC Sections 17041 et seq. and 23608 et seq.)
- Requires any bill authorizing a new credit to contain all of the following:
- Specific goals, purposes, and objectives that the tax credit will achieve;
- Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill; and,
- Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the credit is in effect, for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data. (R&TC Section 41.)
FISCAL EFFECT: Unknown, but in excess of this Committee's Suspense File threshold.
COMMENTS:
- The author has provided the following statement in support of this bill:
California has the most experienced post-production workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for post-production work.
AB 2319 fills a gap in our current tax credit program by creating a post-production incentive that keeps high-skill jobs, small-business vendors, and production spending in California while complementing, not replacing, the existing Film and Television Tax Credit Program.
This bill is designed to capture economic activity that would otherwise leave the state and to ensure that California remains competitive in an industry we helped create.
California's post-production infrastructure represents a century of investment and tens of thousands of skilled jobs and it is sitting underutilized while other states and countries capture work that belongs here. Every qualified project that completes post-production in New York or London instead of Los Angeles is a direct transfer of high-wage jobs and taxable income out of this state. AB 2319 closes the incentive gap that is making that transfer happen.
- This bill is sponsored by the California Post Alliance, which notes:
California-headquartered companies, such as Netflix, Apple, Disney, and the independent production sector that anchors much of the state's creative economy, are among the primary financiers of American film and television content.
When those productions choose to complete post-production in another jurisdiction because that jurisdiction offers an incentive which California does not, California-sourced capital generates jobs, wages, and tax revenue for someone else's economy. The workers who would have edited that film in Burbank, scored its music on a stage in Hollywood, or mixed its sound in Northern California instead do that work somewhere else, and the income tax, the vendor spending, and the economic multiplier effect follows.
AB 2319 does not solve every competitive variable in the global production landscape, but it does close the specific policy gap that is causing work to leave that would otherwise stay here.
It has support from post-production facilities, music scoring stages, editorial houses, and VFX companies that have watched their booking calendars thin as work migrates to incentivized jurisdictions.
- This bill is supported by Los Angeles City Mayor Karen Bass, who notes the following:
While California's Motion Picture Tax Credit Program has helped retain principal photography, it does not extend to post-production when projects film outside the state or do not qualify for the credit. As a result, post-production work is increasingly being done in other jurisdictions that offer targeted incentives.
Post-production is a critical part of California's entertainment economy, supporting thousands of high-skill jobs – including editors, sound engineers, visual effects artists, composers, musicians, technicians, and many small businesses. Without a competitive incentive, we risk losing this talent to other states.
AB 2319 addresses this gap by creating a post-production-specific credit that complements California's existing program and helps retain economic activity that would otherwise be exported elsewhere. This measure will help sustain jobs, keep facilities active, and ensure California remains the global leader in entertainment production and innovation.
- The Motion Picture Editors Guild has registered a support if amended position, noting the following:
[W]e strongly support the creation of a post-production tax credit. However, it is essential that any such credit supports good, union jobs that uphold long-established industry standards. As currently drafted, AB 2319's "prevailing wage" language applies only to construction and offers no meaningful protection for post-production workers. That creates a loophole that can be exploited by employers who will not create the middle-class jobs – with health and pension benefits that have long been the standard in our industry – vital to a strong California economy.
- Committee Staff Comments:
- What is a "tax expenditure"? Existing law provides various credits, deductions, exclusions, and exemptions for particular taxpayer groups. In the late 1960s, United States Treasury officials began arguing that these features of the tax law should be referred to as "expenditures" since they are generally enacted to accomplish some governmental purpose and there is a determinable cost associated with each (in the form of foregone revenues).
As the Department of Finance notes in its annual Tax Expenditure Report, there are several key differences between tax expenditures and direct expenditures. First, tax expenditures are typically reviewed less frequently than direct expenditures. Second, there is generally no control over the amount of revenue losses associated with any given tax expenditure. Finally, it should also be noted that, once enacted, it takes a two-thirds vote to rescind an existing tax expenditure absent a sunset date. This effectively results in a "one-way ratchet" whereby tax expenditures can be conferred by majority vote, but cannot be rescinded, irrespective of their efficacy or cost, without a supermajority vote.
- The motion picture industry in California: The motion picture business is, in many respects, a quintessential California industry. The state's film production workforce is by far the largest in the United States, and over 2.5 times the size of its nearest competitor (New York). The industry, however, is heavily concentrated in Southern California, with the vast majority of these California jobs located in Los Angeles County alone.
Despite its historical ties to California, the motion picture industry is inherently mobile, and has become increasingly so with the advent of advanced technology. As such, a number of other states (and foreign governments) have established public subsidies to attract film productions. States have done so in the hopes of developing a regional industry and stimulating film-related tourism. Louisiana was the first state to adopt tax incentives for film and television production in 1992. (National Conference of State Legislatures, State Film Production Incentives and Programs, February 5, 2018.) Ten years later, Louisiana expanded its program and the state's film industry began to experience significant growth. (Id.) By 2009, 44 states, along with Puerto Rico and Washington D.C., offered incentives for film and television productions.[2] (Id.) While filmmakers obviously consider a host of factors in deciding where to shoot, it would appear that the availability of financial incentives plays a role in many site selection decisions.
- California's first film tax credit program: Responding to the proliferation of financial incentives offered by other states, California adopted its first film and television production tax credit program in 2009. [SBx3 15 (Calderon), Chapter 17, Statutes of 2009, Third Extraordinary Session, and ABx3 15 (Krekorian), Chapter 10, Statutes of 2009, Third Extraordinary Session.] Originally, the program was scheduled to sunset after FY 2013-14, but was extended by the Legislature in 2011 for one additional year – through FY 2014-15. [AB 1069 (Fuentes), Chapter 731, Statutes of 2011.] In 2012, the program was further extended for two additional years – through FY 2016-17. [AB 2026 (Fuentes), Chapter 841, Statutes of 2012.]
Between FYs 2009-10 and 2016-17, this program provided $100 million per year, for a total of up to $800 million in tax credits. For most projects, the individual credit amount was equal to 20% of qualified expenditures. Television series relocating to California from other jurisdictions and independent film productions qualified for a more generous 25% credit.
Demand for the original tax credit exceeded the $100 million available in every year of the program's existence. The CFC, which was charged with administering the program, accepted applications on a first-come, first-served basis. After the program's first year, however, most applications were submitted on the first day of each application period. As a result, the CFC used a random selection process – often referred to as a "lottery" – to determine the order in which applications received on the same day would be processed.
- The Film Tax Credit 2.0: AB 1839 (Gatto), Chapter 413, Statutes of 2014, replaced the original film tax credit with an expanded credit program, referred to by many as the "Film Tax Credit 2.0". The new program allocated up to $330 million annually through FY 2019-20, and authorized a wider range of film and television projects to apply for the program.
The Film Tax Credit 2.0 was designed, in part, to improve some of the perceived issues with the first program. As noted above, under the first tax credit program, most credits were allocated randomly rather than on the basis of objective criteria. Instead of allocating credits on a first-come, first-served basis, the Film Tax Credit 2.0 program used a "jobs ratio" score and allocated credits to the highest scoring applications.
- The Film Tax Credit 3.0: In 2018, the Legislature and Governor extended the film tax credit program as part of the 2018 Budget Package. Specifically, SB 871 (Committee on Budget and Fiscal Review), Chapter 54, Statutes of 2018, established similar credits for the CFC to allocate on or after July 1, 2020, and before July 1, 2025. Among other things, SB 871 required credit applicants to include in the application the applicant's written policy against unlawful harassment and a summary of the applicant's voluntary programs to increase the representation of minorities and women in certain job classifications, as specified.
- SB 144 (Portantino): In 2021, the Legislature and Governor enacted additional modifications to the film tax credit program. Among other things, SB 144 (Portantino), Chapter 114, Statutes of 2021, did the following:
- Required a qualified taxpayer to provide additional information, including data regarding the diversity of the applicant's workforce, to be eligible for the credit;
- Required an applicant with a production that is an independent film to include, in its application, a summary of the applicant's voluntary programs to increase the representation of minorities and women in specified job classifications;
- Increased the aggregate amount of credits that may be allocated for FYs 2021-22 and 2022-23 by $15 million, making these amounts exclusively available to television series that relocate to California, as defined;
- Increased the aggregate amount of credits that may be allocated for FYs 2021-22 and 2022-23 by $75 million, making these amounts exclusively available to recurring television series, as defined; and,
- Allowed, for taxable years beginning on or after January 1, 2022, and before January 1, 2032, a credit for the production of a qualified motion picture in this state at a certified studio construction project.
- The Film Tax Credit 4.0: In 2023, the Legislature and Governor enacted SB 132 (Committee on Budget and Fiscal Review), Chapter 56, Statutes of 2023, which enacted the Film Tax Credit 4.0. Specifically, SB 132 authorized a new film tax credit program for taxable years beginning on or after January 1, 2025 to be allocated by the CFC on or after July 1, 2025 and before July 1, 2030. Importantly, SB 132 also authorized the state's first refundable credit for business taxpayers. As such, SB 132 allowed taxpayers without tax liability to make a one-time election to be paid a refund, spread out over a five-year period, of the "total refundable amount", defined as 90% of the credit amount exceeding the taxpayer's tax liability in the first taxable year of the refundable period. Put simply, this budget agreement authorized the very first refundable business credit but conditioned the credit on the taxpayer accepting a 10% "haircut" of the credit amount.
- AB 1138 (Zbur): Last year, the Legislature and Governor enacted AB 1138 (Zbur), Chapter 27, Statutes of 2025, which revised the expanded the Film Tax Credit 4.0 in numerous respects. Specifically, AB 1138:
- Increased the aggregate amount of credits that may be allocated in a FY to $750 million, and revised the allocation limitations for specified qualified motion pictures within that aggregate amount;
- Increased the credit amount allowed for a qualified motion picture to 35% or 40%, as specified;
- Increased the amount of qualified expenditures the CFC is allowed to consider when determining the credit amount allocated to a qualified motion picture;
- Included veteran status and ZIP Code in the diversity workplan and final diversity assessment;
- Revised the definition of a qualified motion picture to include live action and animated series with episodes averaging 20 minutes or more, animated films, and large-scale competition shows, as specified; and,
- Specified that a television series that completed principal photography on the previous season more than 48 months prior to applying for an allocation of this credit is considered a new television series for purposes of the definition of a qualified motion picture, unless certain conditions are met.
- What would this bill do? This bill would enact the California Postproduction Tax Credit program to encourage film and television productions to complete their postproduction work within California. Specifically, this bill would authorize a credit in an amount between 35% and 50% of qualified expenses relating to the postproduction of a qualified motion picture in California. The CFC would be responsible for allocating the new credit for postproduction activities. The credit would be allocated to applicants on or after
July 1, 2027, and before July 1, 2032, in four or more allocation rounds per FY. As with the Film Tax Credit 4.0, it appears that the author intends to cap the aggregate amount of credit per FY, but this bill currently includes a blank for the allocation cap.
In terms of intent, this bill's findings and declarations note that the Film Tax Credit 4.0 does not cover postproduction activities when principal photography takes place outside of California or the project in question otherwise did not qualify for a motion picture tax credit. According to the author, this framework leaves a significant gap in the state's incentive framework, which is being exploited by other states and foreign jurisdictions that have crafted targeted incentives for postproduction expenditures.
- CDTFA: This bill incorporates many, if not most, of the provisions contained in the existing Film Tax Credit 4.0 statute. Some of these provisions, however, do not appear to bear any relation to the proposed credit for postproduction activities. As an example, this bill makes repeated reference to the California Department of Tax and Fee Administration, despite the department not being tasked with any responsibilities under this bill. The Committee may wish to consider striking these provisions from the bill. In addition, Committee staff are available to work on refining the language to remove other potentially extraneous provisions as this bill progresses through the legislative process.
- Double referral: This bill was double-referred with the Committee on Arts, Entertainment, Sports, and Tourism, which passed this bill on April 7, 2026, by a vote of 8 to 0. For additional discussion of this bill, please refer to the analysis prepared by the Committee on Arts, Entertainment, Sports, and Tourism.
- Is this good public policy? Some critics question the wisdom of enacting industry-specific tax benefits, which tend to pit state against state and encourage a proverbial "race to the bottom". For this reason, the LAO has generally argued that such industry-specific inducements represent poor tax policy. That said, the LAO has also acknowledged that California's adoption of a film tax credit was understandable in light of the actions taken by other states to lure productions away from Hollywood.
In addition, both the film tax credit and the credit proposed by this bill contain many provisions to guard against some of the pitfalls that attend other tax expenditure programs. Unlike most other credits, this credit would ostensibly be capped annually, allowing the Legislature to weigh the program against other budgetary priorities and determine the state's maximum financial exposure. The credit is also allocated by the CFC which, by most accounts, has done a very good job administering the existing film incentive. In the end, the question is whether this bill's proposed credit will prove sufficient to shore up California's postproduction industry for the medium to long term or whether the state will, in short order, be called upon to provide even more generous incentives in response to the actions of other competing states and nations over which California has no control.
- Committee's tax expenditure policy: Both R&TC Section 41 and Committee policy require any tax expenditure bill to outline specific goals, purposes, and objectives that the tax expenditure will achieve, along with detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets those stated goals, purposes, and objectives. A tax expenditure bill will not be eligible for a Committee vote unless it has complied with these requirements.
In addition to the R&TC Section 41 requirements, this Committee's policy also requires that all tax expenditure proposals contain an appropriate sunset provision to be eligible for a vote. According to this policy, an "appropriate sunset provision" means five years, except in the case of a tax expenditure measure providing relief to California veterans, in which case "appropriate sunset provision" means ten years. This bill complies with both R&TC Section 41, and the Committee's policy on sunsets.
REGISTERED SUPPORT / OPPOSITION:
Support
California Post Alliance (Sponsor)
California Arts Advocates
City of Burbank
City of Los Angeles Mayor Karen Bass
City of Santa Monica
Company 3
Crafty Apes LLC
Engine Room, LLC
Exceptional Minds
Formosa Group, LLC
GSK Talent
Kincade Productions, LLC
#MakeItBay
Monkeyland Audio, Inc.
Point 360
Santa Monica Pier
Santa Monica Travel & Tourism
Serrano Sound Inc.
Showrunnr, Inc.
Signature Post
Trevanna Post
8 individuals
Support if Amended
Motion Picture Editors Guild
Opposition
None on file
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098
Date of Hearing: April 7, 2026
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, AND TOURISM
Christopher M. Ward, Chair
ABPCA Bill Id:AB 2319 (
Author:Schultz) – As Amended Ver:March 19, 2026
SUBJECT: Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: postproduction
SUMMARY: AB 2319 creates the California Postproduction Tax Credit, a targeted incentive for qualified postproduction expenditures performed in California.
Specifically, this bill:
- Allows, for taxable years starting on or after January 1, 2027, the California Film Commission (CFC) to issue a tax credit to qualified taxpayers for qualified expenditures for the postproduction of a qualified motion picture in California, if the qualified motion picture did not claim the production tax credit.
- Limits the CFC to the following credit certificate amounts of qualified expenditures for each qualified motion picture:
- In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).
- In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).
- Aligns numerous provisions, including definitions, the Career Pathways Training Program, diversity workplan, and processes for CFC to allocate the credit, with the existing structure of the motion picture tax credit.
EXISTING LAW:
- Defines “postproduction” as the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring, music track recording by musicians and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, sound mixing, film-to-tape transfers, encoding, and color correction. (Revenue and Taxation Code (RTC) Section 17053.98.1 and 23698.1 (b))
- Requires, that in order to qualify as a “qualified motion picture” for the CFC motion picture tax credit, post production must be finished within 30 months from the date on which the qualified taxpayer’s application is approved by the CFC.
- Defines “visual effects” as the creation, alteration, or enhancement of images that cannot be captured on a set or location during live action photography and therefore is accomplished in postproduction. It includes, but is not limited to, matte paintings, animation, set extensions, computer-generated objects, characters and environments, compositing (combining two or more elements in a final image), and wire removals. “Visual effects” does not include fully animated projects, whether created by traditional or digital means.
- Allows the CFC, for the purpose of allocating credits, to increase the jobs ratio by up to 25% if a qualified motion picture increases economic activity in California according to criteria developed by the CFC that would include, but not be limited to, such factors as, the amount of the production and postproduction spending in California, the utilization of scoring musicians in California, and other criteria measuring economic impact in California as determined by the CFC.
- Allows, effective for taxable years starting on or after January 1, 2025, the California Film Commission (CFC) to issue a credit certificate to qualified taxpayers for a tax credit of either 35% or 40% of qualified expenditures for producing a qualified motion picture in California. (RTC 17053.98.1)
- A qualified motion picture is a feature with qualified expenditures of up to $120 million, a miniseries or limited series with qualified expenditures of up to $120 million, a television series with qualified expenditures of up to $120 million per season, or an independent film with qualified expenditures of up to $20 million.
- The applicable credit percentage of qualified expenditures is 35% for a feature or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation, 40% for a television series that relocated to California in its first year of receiving a tax credit allocation, and 35% for an independent film. An extra 5% credit is available for certain expenditures, such as those related to original photography outside the Los Angeles zone or qualified visual effects.
- In order to receive the credit, a qualified tax payer must provide information to CFC including the specific start and end dates of production; total wages paid; aggregate data for individuals whose wages are excluded from qualified wages including their gender, ethnic, and racial makeup; and data regarding the diversity of the workforce employed by an applicant on a qualified motion picture.
- Excluded from qualified wages are 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.
- If CFC determines that a qualified motion picture applicant has met or made a good faith effort to meet the diversity goals in its diversity workplan, an applicant’s credit percentage described will be increased by up to four percentage points.
- Allows a qualified taxpayer to make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount, which is 20% of the total refundable amount. “Total refundable amount” if defined to mean 90% of the credit amount that exceeds the “net tax” in the first taxable year of the refundable period.
- Requires CFC to collect information to the extent available and based on data provided by the Career Pathways Training program. This includes a breakdown of spending by the Career Pathways Program, how participation in the Career Pathways Program by both program partners and participants has changed in comparison to prior years, whether graduates of the program are accessing jobs in the film industry upon completion of the program, what projects the students have worked on, whether those projects received a tax credit, whether students are employed in California or another state, and the aggregated self-reported and voluntarily provided ethnic, racial, gender, and disability status of such individuals.
- Sets the aggregate amount of credits that may be allocated for the film tax credit per fiscal year at $750 million. (RTC 17053.98.1 and 23698.1 Sections (h)(3)(i)(1)(A))
FISCAL EFFECT: Unknown. This measure has been keyed fiscal by Legislative Counsel
COMMENTS:
- Author’s statement. According to the author, “California is home to the most experienced postproduction workforce in the world, but we are losing jobs and projects to other states and countries that offer targeted incentives for postproduction work. AB 2319 fills a gap in our current tax credit program by creating a post-only incentive that keeps high-skilled jobs, small-business vendors, and production spending in California while complementing our existing film and television tax credit.”
- Background. The California Film & Television Tax Credit Program was enacted as a part of an economic stimulus plan to promote production spending, jobs, and tax revenues in California. The program is administered by the CFC. The credit first became available in July of 2009. To be eligible for the credit, a project must have a minimum 75% of its production days or total production budget in California and must be a qualifying motion picture.
California's Film and TV Tax Credit Program has struggled to compete with more attractive incentives from states like New York and Georgia, along with the UK. The decline in production is impacting the state’s film industry and the cast and crew who depend on consistent work, prompting some to seek opportunities out of state. The Motion Picture Pension Plan reported a significant decrease in union jobs, with a loss of over 17,000 full-time jobs between 2022 and 2024. To revitalize California’s film industry, collective action is crucial to protect existing jobs and create new opportunities, restoring the state’s position as a hub of creativity and innovation.
Programs in New York, the United Kingdom, and Georgia have been particularly effective in drawing work away from California. In 2023, a report by the California Film Commission found that the state lost 74% of production spending by those projects that applied for but did not receive a California tax credit; 39 out of 66 projects that did not receive a tax credits, left California to be produced out-of-state. These runaway projects accounted for $1.5 billion in production spending loss. These figures however do not include jobs and economic losses for film and television production.
The LAEDC reported that the economic output from 2015-2020 showed that 157 out of the 312 projects that applied for but did not receive a California tax credit left California for another state. The loss of this spending in California cost the state $7.7 billion in generated economic activity, 28,000 total jobs, labor income of approximately $2.6 billion, and state and local tax revenues, which have totaled $345.4 million.
The loss of production and economic output harms one of California’s longest-standing industries and the hard-working cast and crew members who struggle to find work. Due to a lack of employment opportunities and high costs of living, workers are forced to work out of state or consider changing fields. According to reports on contributions to the Motion Picture Pension Plan, the decline in production in California has led to a sharp drop in union jobs, particularly in 2022 and 2024. In that same time frame, reported hours to the Motion Picture Pension Plan dropped by 34,654,648. This represents a loss of over 17,000 full-time equivalent jobs. It is critical that the state act to increase production to save and create jobs.
- Post production in California. According to data provided by CVL Economics, California’s post-production sector, which includes editing, visual effects (VFX), sound design, music scoring, color grading, and finishing, is a distinct economic asset employing over 12,000 workers at more than 1,800 firms statewide. However, the state’s share of U.S. post-production employment has fallen from approximately 53% to 42% between 2005 and 2025, representing a loss of roughly 1,874 direct jobs and 11.2 percentage points of national market share. This decline occurred while U.S. post-production employment overall grew by approximately 10%.
A project that films elsewhere but completes its post-production in California receives no incentive for that California-based work. Every major competitor jurisdiction, including New York (30% standalone post-production credit), the United Kingdom (25.5% Audio Visual Expenditure Credit), British Columbia (16 to 25% VFX credit), and Australia (30% PDV Offset), offers a standalone credit pathway for post-production.
Five major unions represent post-production workers in California: IATSE Local 700 (Motion Picture Editors Guild), IATSE Local 839 (Animation Guild), American Federation of Musicians Local 47 (AFM), SAG-AFTRA (Singers), IATSE Local 871(Postproduction Accountants). AFM Local 47 membership declined 37.4% from 8,474 in 2008 to 5,305 in 2024, coinciding with the migration of film scoring work to London, Vienna, and Eastern Europe. Only four scoring stages remain active in California (Sony’s Streisand Stage, Fox/Disney’s Newman Stage, Warner Brothers’ Clint Eastwood Stage and Skywalker Sound’s Scoring Stage ).
- Legislative Analyst Office (LAO). In February 2025, the LAO released a report on California’s film tax credit that raised a number of questions about its value to the state. In their assessment, they say that the evidence is clear that increasing the size of the credit will lead to an increase in the number of productions that choose to film in California; however, the evidence is lacking from their perspective that expanding the tax credit will have a benefit to the economy when compared to other economically beneficial programs. For example, according to their research on two of California’s U.S. competitors for film and production, New York and Georgia, every $1 of credit allocation provided significantly less than a $1 return in state revenue. Georgia has no cap on their film tax credit, whereas New York’s is $700 million, or $50 million less that California is proposing to increase the credit to under Program 4.0. California is also dealing with competition from outside of the U.S., with many productions choosing to film in Canada and the United Kingdom.
The LAEDC responded to the LAO reports, saying that their numbers reflect data provided by CFC from 169 productions that were allocated credits as of February 2020. They found that from $915 million in tax credits that these productions generated a total of $7.4 billion in production spending, and that for each $1 of credit allocated led to $24.40 in economic activity.
Of note, LAEDC’s data does not take into account the significant downturn in statewide film production due to disruptions, including the COVID-19 pandemic, the SAG-AFTRA and Writer’s Guild of America strikes, and the recent wildfires in the Los Angeles area.
- Refundability. Starting with the Film and Television Tax Credit 4.0 when it goes into effect on July 1, 2025, regardless of changes made during the current legislative session, participants in programs with insufficient tax liability to make use of the certified tax credits awarded, may make a one-time election to utilize the refundability option. The election to utilize the refundability option must be made in the first taxable year in which the tax credit certificate is issued to the applicant. Refundability is not an option for an applicant allocated credits under any previous iteration of the program, such as Program 2.0 or Program 3.0, or under the Soundstage Filming Program.
Under the current law version of Program 4.0, the total amount of tax credits an applicant may elect to make refundable is 90% of the certified tax credit amount that exceeds the applicant’s tax liability in the first taxable year. Once the election has been made, tax credits will be refunded over five years (refundable period), including the year of election. This means that the permitted maximum annual amount is 20% of the total refundable amount, which effectively results in a maximum annual amount of 18% of the certified tax credit amount that exceeds the applicants tax liability in the first taxable year.
The election to utilize the refundability option is irreversible and must be made on the entity’s tax return filed with the California Franchise Tax Board (FTB) in accordance with FTB requirements. However, this bill would make the refundability of the credit 100%, meaning that there seems to be less risk in electing to choose that option.
If the taxpayer does not make the one-time irrevocable election to potentially get a refund, then the film tax credit will be administered similarly to prior versions of the program. The taxpayer will be able to use the credit against tax liability and to carry the credit forward in the following nine years following the first year.
Tax credits must be applied to any tax liability, annually, and only the excess is subject to refundability. If an applicant elects to utilize the refundability option, no amount of tax credits will be allowed after the maximum refundable period of five years, meaning the applicant cannot elect to hold on to tax credits for use against future liability.
- Impacts to tourism. Film and television production in California can boost the state's tourism industry by attracting visitors who are looking to visit the settings of their favorite movies and shows. Cities and various filming locations across California can become global landmarks, in part due to their frequent appearances on screen. Tourists visit places like Hollywood Boulevard, the Hollywood Walk of Fame, and film studios such as Universal and Warner Bros., where behind-the-scenes tours offer a glimpse into the filmmaking process. These attractions not only bring in revenue through ticket sales and merchandise but also support local hotels, restaurants, and other businesses.
The state's diverse geography enables filmmakers to shoot a wide array of scenes without leaving the state, and in turn, helps these areas gain recognition and tourist traffic. Local governments often embrace these opportunities by promoting their towns as filming-friendly and capitalizing on the resulting tourism. California also benefits from international exposure due to its prominence in global entertainment. As a result, the entertainment industry not only plays a key role in the state’s economy through direct employment and production, but also indirectly by driving significant revenue through tourism.
- History of the California Film Tax Credit. The Legislature first enacted a tax credit for qualified motion picture production in California, commonly known as “Film and TV Tax Credit 1.0,” directing CFC to annually allocate $100 million in credits until the 2012-13 fiscal year, commonly known as “Film and TV Tax Credit 1.0” (SB 15 X3, Calderon, Chapter 17, Statutes of 2009-10 Third Extraordinary Session and AB 15 X3, Krekorian, Chapter 10, Statutes of the 2009-10 Third Extraordinary Session). The Legislature extended the program for one year to 2014-15 (AB 1069, Fuentes, Chapter 731, Statutes of 2011), then extended it for two years until 2016-17 (AB 2026, Fuentes, Chapter 841, Statutes of 2012; SB 1197, Calderon, Chapter 840, Statutes of 2012).
In 2014, the Legislature enacted “Film and TV Tax Credit 2.0,” increasing the amount of credit CFC allocates to $330 million each fiscal year through 2019-20 (AB 1839, Gatto). The Legislature designed Film and TV Tax Credit 1.0 and 2.0 in very similar ways, but 2.0 contained several key differences in credit mechanics, including higher credit percentages – known as “uplifts” – for certain categories of expenditures, among other changes. 2.0 also replaced the previous “first-come, first-served” allocation process with the “jobs ratio,” which ranks projects based on the amount of wages paid and other expenses incurred over the credit amount requested.
In 2018, the Legislature enacted “Film and TV Credit 3.0” authorizing the CFC to allocate $330 million in tax credits each fiscal year from 2020-21 to 2024-25 (SB 878, Committee on Budget & Fiscal Review, Chapter 456, Statutes of 2018). 3.0 modified the jobs ratio and altered allocation percentages for each production category, among other changes.
In 2021, the Legislature enacted SB 144, allocating an additional $150 million in film tax credits for productions filmed at new or renovated soundstages. When a taxpayer constructs or renovates a soundstage, they automatically qualify for credits for productions, notwithstanding the allocation process for the general credit. Taxpayers can claim credits beginning in the 2022 taxable year and until the 2031 taxable year. SB 144 directs CFC to identify and certify qualified soundstage construction projects, which then makes taxpayers eligible for the credit. According to its 2023 progress report, CFC has certified thirteen soundstages – eight newly constructed and five renovated – with a combined size of over 200,000 sq. ft.
In 2023, the Legislature enacted “Film and TV Credit 4.0,” which authorizes CFC to allocate $330 million annually for an additional five years, starting in 2025-26 and ending in 2029-30, in SB 132. SB 132 also makes the credit California’s first refundable business entity tax credit, which allows firms with no income or sales tax liability to receive a cash refund from the state. The 2023-24 Budget Act included $4.5 million General Fund and two limited term (two-year) positions and five permanent positions in 2023-24; $1.0 million General Fund in 2024-25; $753,000 General Fund in 2025-26 and ongoing for the FTB to expand the tax systems necessary to support refundable credits for business entities.
In 2025, Governor Newsom proposed to increase the total annual California Film and Television Tax Credit 4.0 award cap from $330 million to $750 million for fiscal years 2025-26 through 2029-30. The Senate Committee on Revenue & Taxation and Budget & Fiscal Review Subcommittee #4 held a joint oversight hearing to assess the Governor’s proposal on March 26, 2025.
The Legislature enacted SB 132 (Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025), which among other provisions, increases the cap on 4.0 credits from $330 million to $750 million for fiscal years 2025-26 through 2029-30.
- Arguments in support. According to numerous letters in support from individuals representing the California Post Alliance (sponsors of the bill), over the past several years more and more post-production work has left the state for places like New York, Georgia, Canada, and the United Kingdom, where incentives are offered for editorial, sound, visual effects, and music scoring. When that work leaves, California workers lose jobs and local businesses lose income. This work will continue to migrate to other jurisdictions that offer a standalone post-only credit.
- Double-referral. Should the bill pass from this committee, it will be re-referred to the Assembly Committee on Revenue and Taxation.
- Policy considerations. This bill is a work in progress, requiring additional feedback and negotiation between studios, labor unions, and others involved with film and television production. The committee remains committed to stopping runaway production to other states and countries and keeping entertainment industry jobs in California. The committee will continue to monitor changes to the bill as it moves through the legislative process and hopes to see additional changes that will enhance the ways that this postproduction tax credit can provide benefits and protections to workers that play a vital role in the completion of film and television projects in the state.
- Prior and related legislation:
- AB 1138 (Zbur), Chapter 27, Statutes of 2025, increased the annual authorization amount under Film and Television Production Tax Credit 4.0 from $330 to $750 million, and made several programmatic changes to the 4.0 credit and SB 144 (Portantino, Chapter 114, Statutes of 2021) soundstage program to implement the increased authorization.
- AB 1377 (McKinnor), of 2025, for Film and Television Tax Credit 4.0, would remove the good faith effort standard if a qualified taxpayer chooses to submit a diversity workplan, and requires CFC to determine whether the diversity goals in the workplan were met. The bill is currently inactive in the Senate.
- SB 132 (Senate Committee on Budget and Fiscal Review), Chapter 56, Statutes of 2023, extended the authority for CFC to allocate, and for qualified taxpayers to claim, the Film and Television Tax Credit for an additional five years, starting in 2025-26, authorized at $330 million per year, and makes the credit. In addition, this bill made various changes to the current version of the credit (Film and Television Credit 3.0) and the California Soundstage Filming Tax Credit and includes set safety provisions.
- SB 144 (Portantino), Chapter 114, Statutes of 2021, made changes to the Film and Television Credit 3.0, including allocating an additional $90 million in the 2021-22 and 2022-23 fiscal years, and established a new credit for productions filmed at certified studio construction projects.
- SB 871 (Senate Committee on Budget and Fiscal Review), Chapter 54, Statutes of 2018, enacts Film and TV Tax Credit 3.0 from July 1, 2020 to July 1, 2025.
- AB 1839 (Gatto), Chapter 413, Statutes of 2014, increased the annual amount of tax credits available for film and television productions, from $100 million to $330 million per year, and extended the program for five more years. It also broadened the eligibility criteria to include big-budget feature films, network television shows, and pilots, which had previously been excluded.
- AB 2026 (Fuentes) Chapter 841, Statutes of 2012, extended the film production tax credit program for two years, until 2017.
- AB 1069 (Fuentes), Chapter 731, Statutes of 2011, extended the film production tax credit program for one year, until 2015.
- ABX3 15 (Krekorian), Chapter 10, Statutes of the 2009-10 Third Extraordinary Session, established a five-year $500M tax credit for qualified expenditures on qualified productions. Limited allocations to $100M/year.
REGISTERED SUPPORT / OPPOSITION:
Support
#makeitbay
California Arts Advocates
California Post Alliance
City of Burbank
City of Los Angeles
City of Santa Monica
Crafty Apes LLC
Engine Room, LLC
Exceptional Minds
Formosa Group, LLC
Gsk Talent
Monkeyland Audio, INC
Monkeyland Audio, INC.
MPEG 700
Santa Monica Travel & Tourism
Serrano Sound INC.
Signature Post Services LLC
Trevanna Post, INC.
533 Individuals
Support if Amended
Motion Picture Editors Guild
Opposition
1 Individual.
Analysis Prepared by: Brian V. Anderson, Jr. / A.,E.,S., & T. / (916) 319-3450
Discussed in Hearing
5MIN
Assembly Floor
3MIN
Senate Floor
2MIN
Senate Standing Committee on Appropriations
19MIN
Senate Standing Committee on Revenue and Taxation
2MIN
Assembly Floor
13MIN
Assembly Standing Committee on Revenue and Taxation
17MIN
Assembly Standing Committee on Arts, Entertainment, Sports, and Tourism
Bill Author
