IATSE Labor News

Readers React: California film tax credit is money well spent (LA Times, Sept. 3rd, 2014)
Are film tax credits cost effective? (LA Times, Aug. 30th, 2014)
Governor and Legislature Reach a Deal (Variety, Aug. 27th, 2014

What bill AB 1839 will do:

Summary of AB 1839 (Gatto-Bocanegra)

The bill creates a 5 year program, beginning July 1, 2015 and sunsets on June 30, 2020.

The bill allocates $230 million in the first year (July 1, 2015-June 30, 2016) and $330 million in each of the next 4 fiscal years. (There is still $100 million to be allocated on July 1, 2015 in the existing program, which is why the 1st year funding is $230 million).

The bill provides a 20% tax credit on most qualified in-state expenditures (Above-the-line wages are excluded).  Productions can earn an additional 5% credit amount on qualified expenditures related to filming outside the Los Angeles zone, on qualified expenditures for music scoring/music tracking and on qualified expenditures for visual effects.   The maximum tax credit amount is 25% of qualified expenditures; these additional 5% amounts do not aggregate.

The bill expands eligibility to:

  • all features of any budget size(minimum budget of $1 million),with qualified expenditures limited to $100 million;
  • new TV shows of at least 40 minutes shown on any platform (minimum episode budget of $1 million);
  • pilots for a new TV series of at least 40 minutes (minimum budget of $1 million).

The bill continues the eligibility for relocating TV shows, defined as a TV show of any length (minimum episode budget of $1 million) that filmed its most recent season or all of its seasons outside of CA.

The bill continues the eligibility of movies of the week and mini-series with a minimum budget of $500,000 and independent films (produced by non-publicly traded companies), for the first $10 million of the indie’s qualified expenditures.  Indies receive a 25% tax credit.

The bill replaces the allocation system of “first come, first serve” (the lottery) with a jobs ratio, defined as Qualified Wages divided by the tax credit amount.  Productions will be ranked from highest to lowest based upon the jobs ratio, and will be ranked within separate categories, with a specific amount of credits reserved for different genres:

  • 35% for feature films  – $80.5 M in Year 1, $115.5 M in out years
  • 20% for relocating TV series  – $46 M in Year 1, $66 M in out years
  • 40% for pilots, new TV series, and renewed/recurring TV series, including subsequent years of a relocated TV series -$92M in Year 1, $132M in out years
  • 5% for independent films – $11.5M in Year 1, $16.5M in out years.

The CA Film Commission will award tax credits to those productions in each category with the highest jobs ratio.  The CFC will, by regulation, be authorized to increase the jobs ratio according to criteria it develops, such as production and post-production expenditures, use of CA production facilities, and other criteria measuring economic impact.  In addition, any additional tax credit amount for filming outside the Los Angeles area, music scoring, or visual effects will be added after the jobs ratio is computed.

The bill also requires productions “certify” that the tax credit was a significant factor in the choice of location, that without the CA tax credit the production was at risk for not being made or would be filmed in another specified jurisdiction without the tax credit.

The bill also requires participation in the Career Readiness initiative, which will be administered by the CA Film Commission.  The CFC will adopt rules/regulation related to career training and public service opportunities, including hiring of interns and providing other assistance to workforce training programs.

As in the current program, tax credit certificates earned by productions can be used as an offset of corporate income taxes owed or to claim a refund of sales tax paid. Companies may carry forward unused tax credit certificates for 5 years.   Independent film companies are authorized to sell their tax credits to other CA taxpayers.

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