Bill Text

PDF |Add To My Favorites |Track Bill | print page

AB-1300 Income taxes: credits: motion pictures.(2017-2018)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 04/27/2017 09:00 PM
AB1300:v97#DOCUMENT

Amended  IN  Assembly  April 27, 2017
Amended  IN  Assembly  April 03, 2017

AB 1300, as amended, Burke Calderon. Income and corporation taxes: credits: federal work opportunity credit: qualified employees. Income taxes: credits: motion pictures.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including motion picture credits for taxable years beginning on or after January 1, 2016, to be allocated by the California Film Commission on or after July 1, 2015, and before July 1, 2020. Existing law limits the aggregate amount of these credits allocated in each fiscal year to $330 million and, subject to a computation and ranking of applicants based on a jobs ratio, requires the California Film Commission to allocate credit amounts for, among others, a specified category of qualified motion pictures in an amount equal to 20% of qualified expenditures for the production of that motion picture in California. Existing law allows additional credits for such a qualified motion picture for, among other things, 5% of the qualified expenditures related to music scoring and music track recording by musicians attributable to the production of the qualified motion picture in California.
This bill would delete that additional credit for that music. The bill would require the California Film Commission to allocate a credit amount for postproduction music scoring or recording in an amount equal to 30% or 25% of qualified expenditures attributable to the production of a motion picture filmed outside of California if a specified number of employees are employed and at least 75% of the music scoring or recording occurs within California.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allowed a credit against specified corporate and personal income taxes for an amount equal to 10% of the wages paid to each employee who was certified by the Employment Development Department to meet eligibility requirements, subject to certain exceptions, in modified conformity to the federal Work Opportunity credit. These credits do not apply to wages paid or incurred to an individual who begins to work for an employer after December 31, 1993.

This bill, under both laws, for taxable years beginning on or after January 1, 2017, would allow a credit of $2,000 for each qualified employee, who meets a specified requirement, hired or in continued employment during the taxable year, to qualified taxpayers that are allowed a federal Work Opportunity credit.

This bill would take effect immediately as a tax levy.

Vote: MAJORITY2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17053.95 of the Revenue and Taxation Code is amended to read:

17053.95.
 (a) (1) For taxable years beginning on or after January 1, 2016, there shall be allowed to a qualified taxpayer a credit against the “net tax,” as defined in Section 17039, subject to a computation and ranking by the California Film Commission in subdivision (g) and the allocation amount categories described in subdivision (i), in an amount equal to 20 percent or 25 percent, whichever is the applicable credit percentage described in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. A credit shall not be allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under Section 17053.85.
(2) 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 (g) for the qualified motion picture, but in no instance prior to July 1, 2016, 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) 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 (g).
(4) For purposes of paragraphs (1) and (2), the applicable credit percentage shall be:
(A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California, including, but not limited to, a feature, up to one hundred million dollars ($100,000,000) in qualified expenditures, or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation pursuant to this section or Section 17053.85.
(B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California in its first year of receiving a tax credit allocation pursuant to this section.
(C) Twenty-five percent of the qualified expenditures, up to ten million dollars ($10,000,000), attributable to the production of a qualified motion picture that is an independent film.
(D) Additional credits shall be allowed to a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (A), in an aggregate amount not to exceed 5 percent of the qualified expenditures under that subparagraph, as follows:
(i) (I) Five percent of qualified expenditures relating to original photography outside the Los Angeles zone.
(II) For purposes of this clause:
(ia) “Applicable period” means the period that commences with preproduction and ends when original photography concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(ib) “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 Lake Castaic, Leo Carillo 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.
(ic) “Original photography” includes principal photography and reshooting original footage.
(id) “Qualified expenditures relating to original photography 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 original photography outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone.

(ii)Five percent of the qualified expenditures relating to music scoring and music track recording by musicians attributable to the production of a qualified motion picture in California.

(iii)

(ii) Five percent of the qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California.
(E) (i) (I) Notwithstanding any other law, 30 percent of the qualified expenditures relating to postproduction music scoring or recording attributable to the production of a motion picture where the motion picture is filmed outside of North America and employs 35 or more scoring or recording musicians for postproduction music scoring or recording and at least 75 percent of the postproduction music or scoring occurs within California.
(II) Notwithstanding any other law, 25 percent of the qualified expenditures relating to postproduction music scoring or recording attributable to the production of a motion picture irrespective of where the motion picture is filmed and the motion picture has a total budget of five million dollars ($5,000,000) or less and employs nine or more scoring or recording musicians for postproduction music scoring or recording and at least 75 percent of the postproduction music or scoring occurs within California.
(ii) (I) Notwithstanding any other law, for the purposes of this subparagraph, qualified expenditures shall be limited to wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, benefits, and payroll expenses paid to or on behalf of instrumental musicians, vocalists, music arrangers, orchestrators, Musical Instrument Digital Interface (MIDI) transcribers, music copyists, librarians, conductors, and musician and choral contractors employed solely for the purpose of recording music for the qualified motion picture.
(II) Notwithstanding any other law, for the purposes of this subparagraph, qualified expenditures do not include any fees paid to composers, composer’s staff, or agents, or fees paid to scoring stages, recording studios, engineers, music editors, music supervisors, or fees paid for any preexisting music licensed for use in a qualified motion picture.
(iii) Nothing in this subparagraph shall be construed to place a limitation on any other credit that a qualified motion picture may receive pursuant to this section, but any postproduction music scoring or recording receiving a credit pursuant to this subparagraph shall not be eligible for any other credit pursuant to this section.
(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) “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.
(3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (g).
(5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following:
(i) Employer contributions under any pension, profit-sharing, annuity, or similar plan.
(ii) Employer-provided coverage under any accident or health plan for employees.
(iii) The employer’s cost of life or disability insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (21) shall not be taken into account under this paragraph.
(6) “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 25 percent of the producing company.
(7) “Jobs ratio” means the amount of qualified wages paid to qualified individuals divided by the amount of tax credit, not including any additional credit allowed pursuant to subparagraph (D) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(8) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part.
(9) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created.
(10) “Pilot for a new television series” means the initial episode produced for a proposed television series.
(11) (A) “Postproduction” means 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.
(B) “Postproduction” does not include the manufacture or shipping of release prints or their equivalent.
(12) “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.
(13) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction.
(14) “Production period” means the period beginning with preproduction and ending upon completion of postproduction.
(15) “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.
(16)  “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture.
(17) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture.
(B) “Qualified individual” shall not include either of the following:
(i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer.
(18) (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 with a minimum production budget of one million dollars ($1,000,000).
(ii) A movie of the week or miniseries with a minimum production budget of five hundred thousand dollars ($500,000).
(iii) A new television series of episodes longer than 40 minutes each of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iv) An independent film.
(v) A television series that relocated to California.
(vi) A pilot for a new television series that is longer than 40 minutes of running time, exclusive of commercials, that is produced in California, and with a minimum production budget of one million dollars ($1,000,000).
(B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied:
(i) At least 75 percent of the principal photography days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished.
(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) 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 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 production’s ability to begin principal photography within the prescribed 180-day commencement period.
(C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the 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, clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, one-half hour (air time) episodic television shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(19) (A) “Qualified taxpayer” means a taxpayer who has paid or incurred qualified expenditures, participated in the Career Readiness requirement, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g).
(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.
(20) “Qualified visual effects” means visual effects where at least 75 percent or a minimum of ten million dollars ($10,000,000) of the qualified expenditures for the visual effects is paid or incurred in California.
(21) (A) “Qualified wages” means all of the following:
(i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state.
(ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv).
(iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (17).
(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.
(22) “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.
(23) “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.
(24) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(25) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode, that filmed its most recent season outside of California or has filmed all seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California.
(26) “Visual effects” means 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.
(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 (6) of subdivision (b), to an unrelated party.
(2) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit.
(3) 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 five taxable years, if necessary, until the credit has been exhausted.
(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 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) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.
(10) For purposes of this subdivision, the unrelated party or parties that purchase a credit pursuant to this subdivision shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(d) (1) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission:
(A) Identification of each qualified individual.
(B) The specific start and end dates of production.
(C) The total wages paid.
(D) The total amount of qualified wages paid to qualified individuals.
(E) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit.
(F) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture.
(G) Information to substantiate its qualified expenditures.
(H) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed.
(I) Provides documentation verifying completion of the Career Readiness requirement.
(2) (A) Based on the information provided in paragraph (1), the California Film Commission shall recompute the jobs ratio previously computed in subdivision (g) and compare this recomputed jobs ratio to the jobs ratio that the qualified taxpayer previously listed on the application submitted pursuant to subdivision (g).
(B) (i) If the California Film Commission determines that the jobs ratio has been reduced by more than 10 percent for a qualified motion picture other than an independent film, 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 jobs ratio reduction.
(ii) If the California Film Commission determines that the jobs ratio has been reduced by more than 20 percent for a qualified motion picture other than an independent film, the California Film Commission shall not accept an application described in subdivision (g) from that qualified taxpayer or any member of the qualified taxpayer’s 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 jobs ratio reduction.
(C) If the California Film Commission determines that the jobs ratio has been reduced by more than 30 percent for an independent film, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, plus 10 percent of the amount of credit that would otherwise have been allowed, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs 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 (e).
(e) (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 adopt rules and regulations to implement a Career Readiness requirement by which the California Film Commission shall identify training and public service opportunities that may include, but not be limited to, hiring interns, public service announcements, and community outreach and may prescribe rules and regulations to carry out the purposes of this section, including, subparagraph (D) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g), and including any rules and regulations necessary to establish procedures, processes, requirements, application fee structure, and rules identified in or required to implement this section, including credit and logo requirements and credit allocation procedures over multiple fiscal years where the qualified taxpayer is producing a series of features that will be filmed concurrently.
(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 Governor’s 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 (i), computing the jobs ratio as described in subdivisions (d) and (g), and defining “reasonable cause” pursuant to subparagraph (E) of paragraph (2) of subdivision (d).
(2) (A) Implementation of this section for the 2015–16 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Film Commission is hereby authorized to adopt emergency regulations to implement this section during the 2015–16 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(B) Nothing in this paragraph shall be construed to require the Governor’s Office of Business and Economic Development to approve emergency regulations adopted pursuant to this paragraph.
(3) 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.
(f) If the qualified taxpayer fails to provide the copyright registration number as required in subparagraph (E) of paragraph (1) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied.
(g) For purposes of this section, the California Film Commission shall do the following:
(1) Subject to the requirements of subparagraphs (A) through (E), inclusive, of paragraph (2), on or after July 1, 2015, and before July 1, 2016, in one or more allocation periods per fiscal year, allocate tax credits to applicants.
(2) On or after July 1, 2016, and before July 1, 2020, in two or more allocation periods per fiscal year, allocate tax credits to applicants.
(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, the following information:
(i) The budget for the motion picture production.
(ii) The number of production days.
(iii) A financing plan for the 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 production of the qualified motion picture, to the extent possible.
(v) All members of a combined reporting group, if known at the time of the application.
(vi) Financial information, if available, including, but not limited to, the most recently produced balance sheets, annual statements of profits and losses, audited or unaudited financial statements, summary budget projections or results, or the functional equivalent of these documents of a partnership or owner of a single member limited liability company that is disregarded pursuant to Section 23038. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure.
(vii) The names of all partners in a partnership not publicly traded or the names of all members of a limited liability company classified as a partnership not publicly traded for California income tax purposes that have a financial interest in the applicant’s qualified motion picture. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure.
(viii) The amount of qualified wages the applicant expects to pay to qualified individuals.
(ix) The amount of tax credit the applicant computes the qualified motion picture will receive, applying the applicable credit percentages described in paragraph (4) of subdivision (a).
(x) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for 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 qualified motion picture will be located in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(xi) 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) (i) 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:
(ii) For each allocation date and for each category, list each applicant from highest to lowest according to the jobs ratio as computed by the California Film Commission.
(iii) Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest jobs ratio, working down the list, until the credit amount is exhausted.
(iv) Pursuant to regulations adopted pursuant to subdivision (e), the California Film Commission may increase the jobs ratio by up to 25 percent if a qualified motion picture increases economic activity in California according to criteria developed by the California Film Commission that would include, but not be limited to, such factors as, the amount of the production and postproduction spending in California, the utilization of production facilities in California, and other criteria measuring economic impact in California as determined by the Film Commission.
(v) Notwithstanding any other provision, any television series, relocating 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, Section 23695, 17053.85, or 23685 shall be issued a credit for each subsequent year, for the life of that television series whenever credits are allocated within a fiscal year.
(E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (i), allocate an aggregate amount of credits under this section and Section 23695, and allocate any carryover of unallocated credits from prior years and the amount of any credits reduced pursuant to paragraph (2) of subdivision (d).
(3) Certify tax credits allocated to qualified taxpayers.
(A) Establish a verification procedure for the amount of qualified expenditures paid or incurred by the applicant, including, but not limited to, updates to the information in subparagraph (A) of paragraph (2) of subdivision (g).
(B) Establish audit requirements that must be satisfied before a credit certificate may be issued by the California Film Commission.
(C) (i) Establish a procedure for a qualified taxpayer to report to the California Film Commission, prior to the issuance of a credit certificate, the following information:
(I) If readily available, a list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer that, in the preceding calendar year, has produced a qualified motion picture intended for release in the United States market. For purposes of this clause, “qualified motion picture” shall not include any episodes of a television series that were complete or in production prior to July 1, 2016.
(II) Whether a qualified motion picture described in subclause (I) was awarded any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location.
(ii) The California Film Commission may provide that the report required by this subparagraph be filed in a single report provided on a calendar year basis for those qualified taxpayers that receive multiple credit certificates in a calendar year.
(D) 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 jobs ratio computed under this section. The amount of credit shown in the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(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 the primary principal photography completed.
(C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location.
(5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, the applicants, in electronic format when available, including, but not limited to, information provided pursuant to clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).
(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.
(h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the board 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 (g), the California Film Commission shall annually post on its Internet Web site and make available for public release 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 production, and the total amount of qualified expenditures expected to be spent by the production.
(ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit.
(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.
(3) The California Film Commission shall provide each city and county in California with an instructional guide that includes, but is not limited to, a review of best practices for facilitating motion picture production in local jurisdictions, resources on hosting and encouraging motion picture production, and the California Film Commissions’ Model Film Ordinance. The California Film Commission shall maintain on its Internet Web site a list of initiatives by locality that encourage motion picture production in regions across the state. The list shall be distributed to each approved applicant for the program to highlight local jurisdictions that offer incentives to facilitate film production.
(i) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23695 is the applicable amount described in the following, plus any amount described in subparagraph (B), (C), or (D):
(i) Two hundred thirty million dollars ($230,000,000) in credits for the 2015–16 fiscal year.
(ii) Three hundred thirty million dollars ($330,000,000) in credits for the 2016–17 fiscal year and each fiscal year thereafter, through and including the 2019–20 fiscal year.
(B) The unused allocation credit amount, if any, for the preceding fiscal year.
(C) The amount of previously allocated credits not certified.
(D) The amount of any credits reduced pursuant to paragraph (2) of subdivision (d).
(2) (A) Notwithstanding the foregoing, the California Film Commission shall allocate the credit amounts subject to the following categories:
(i) Independent films shall be allocated 5 percent of the amount specified in paragraph (1).
(ii) Features shall be allocated 35 percent of the amount specified in paragraph (1).
(iii) A relocating television series shall be allocated 20 percent of the amount specified in paragraph (1).
(iv) A new television series, pilots for a new television series, movies of the week, miniseries, and recurring television series shall be allocated 40 percent of the amount specified in paragraph (1).
(B) Within 60 days after the allocation period, any unused amount within a category or categories shall be first reallocated to the category described in clause (iv) of subparagraph (A) and, if any unused amount remains, reallocated to another category or categories with a higher demand as determined by the California Film Commission.
(C) Notwithstanding the foregoing, the California Film Commission may increase or decrease an allocation amount in subparagraph (A) by 5 percent, if necessary, due to the jobs ratio, the number of applications, or the allocation credit amounts available by category compared to demand.
(D) With respect to a relocating television series issued a credit in a subsequent year pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), that subsequent credit amount shall be allowed from the allocation amount described in clause (iv) of subparagraph (A).
(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 XIII A 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.
(j) 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 (e) upon adoption.

SEC. 2.

 Section 23695 of the Revenue and Taxation Code is amended to read:

23695.
 (a) (1) For taxable years beginning on or after January 1, 2016, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to a computation and ranking by the California Film Commission in subdivision (g) and the allocation amount categories described in subdivision (i), in an amount equal to 20 percent or 25 percent, whichever is the applicable credit percentage described in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. A credit shall not be allowed under this section for any qualified expenditures for the production of a motion picture in California if a credit has been claimed for those same expenditures under Section 23685.
(2) 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 (g) for the qualified motion picture, but in no instance prior to July 1, 2016, 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) 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 (g).
(4) For purposes of paragraphs (1) and (2), the applicable credit percentage shall be:
(A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California, including, but not limited to, a feature, up to one hundred million dollars ($100,000,000) in qualified expenditures, or a television series that relocated to California that is in its second or subsequent years of receiving a tax credit allocation pursuant to this section or Section 23685.
(B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California in its first year of receiving a tax credit allocation pursuant to this section.
(C) Twenty-five percent of the qualified expenditures, up to ten million dollars ($10,000,000), attributable to the production of a qualified motion picture that is an independent film.
(D) Additional credits shall be allowed to a qualified motion picture whose applicable credit percentage is determined pursuant to subparagraph (A), in an aggregate amount not to exceed 5 percent of the qualified expenditures under that subparagraph, as follows:
(i) (I) Five percent of qualified expenditures relating to original photography outside the Los Angeles zone.
(II) For purposes of this clause:
(ia) “Applicable period” means the period that commences with preproduction and ends when original photography concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.
(ib) “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 Lake Castaic, Leo Carillo 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.
(ic) “Original photography” includes principal photography and reshooting original footage.
(id) “Qualified expenditures relating to original photography 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 original photography outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to original photography outside the Los Angeles zone.

(ii)Five percent of the qualified expenditures relating to music scoring and music track recording by musicians attributable to the production of a qualified motion picture in California.

(iii)

(ii) Five percent of the qualified expenditures relating to qualified visual effects attributable to the production of a qualified motion picture in California.
(E) (i) (I) Notwithstanding any other law, 30 percent of the qualified expenditures relating to postproduction music scoring or recording attributable to the production of a qualified motion picture where the qualified motion picture is filmed outside of North America and employs 35 or more scoring or recording musicians for postproduction music scoring or recording and at least 75 percent of the postproduction music or scoring occurs within California.
(II) Notwithstanding any other law, 25 percent of the qualified expenditures relating to postproduction music scoring or recording attributable to the production of a qualified motion picture irrespective of where the qualified motion picture is filmed and the qualified motion picture has a total budget of five million dollars ($5,000,000) or less and employs nine or more scoring or recording musicians for postproduction music scoring or recording and at least 75 percent of the postproduction music or scoring occurs within California.
(ii) (I) Notwithstanding any other law, for the purposes of this subparagraph, qualified expenditures shall be limited to wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, benefits, and payroll expenses paid to or on behalf of instrumental musicians, vocalists, music arrangers, orchestrators, Musical Instrument Digital Interface (MIDI) transcribers, music copyists, librarians, conductors, and musician and choral contractors employed solely for the purpose of recording music for the qualified motion picture.
(II) Notwithstanding any other law, for the purposes of this subparagraph, qualified expenditures do not include any fees paid to composers, composer’s staff, or agents, or fees paid to scoring stages, recording studios, engineers, music editors, music supervisors, or fees paid for any preexisting music licensed for use in a qualified motion picture.
(iii) Nothing in this subparagraph shall be construed to place a limitation on any other credit that a qualified motion picture may receive pursuant to this section, but any postproduction music scoring or recording receiving a credit pursuant to this subparagraph shall not be eligible for any other credit pursuant to this section.
(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) “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.
(3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.
(4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (3) of subdivision (g).
(5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following:
(i) Employer contributions under any pension, profit-sharing, annuity, or similar plan.
(ii) Employer-provided coverage under any accident or health plan for employees.
(iii) The employer’s cost of life or disability insurance provided to employees.
(B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (21) shall not be taken into account under this paragraph.
(6) “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 25 percent of the producing company.
(7) “Jobs ratio” means the amount of qualified wages paid to qualified individuals divided by the amount of tax credit, not including any additional credit allowed pursuant to subparagraph (D) of paragraph (4) of subdivision (a), as computed by the California Film Commission.
(8) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part.
(9) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created.
(10) “Pilot for a new television series” means the initial episode produced for a proposed television series.
(11) (A) “Postproduction” means 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.
(B) “Postproduction” does not include the manufacture or shipping of release prints or their equivalent.
(12) “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.
(13) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and postproduction.
(14) “Production period” means the period beginning with preproduction and ending upon completion of postproduction.
(15) “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.
(16) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the production of a qualified motion picture.
(17) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the production of a qualified motion picture.
(B) “Qualified individual” shall not include either of the following:
(i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code.
(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer.
(18) (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 with a minimum production budget of one million dollars ($1,000,000).
(ii) A movie of the week or miniseries with a minimum production budget of five hundred thousand dollars ($500,000).
(iii) A new television series of episodes longer than 40 minutes each of running time, exclusive of commercials, that is produced in California, with a minimum production budget of one million dollars ($1,000,000) per episode.
(iv) An independent film.
(v) A television series that relocated to California.
(vi) A pilot for a new television series that is longer than 40 minutes of running time, exclusive of commercials, that is produced in California, and with a minimum production budget of one million dollars ($1,000,000).
(B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied:
(i) At least 75 percent of the principal photography days occur wholly in California or 75 percent of the production budget is incurred for payment for services performed within the state and the purchase or rental of property used within the state.
(ii) Production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission. For purposes of this section, a qualified motion picture is “completed” when the process of postproduction has been finished.
(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) 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 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 production’s ability to begin principal photography within the prescribed 180-day commencement period.
(C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the 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, clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, one-half hour (air time) episodic television shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
(19) (A) “Qualified taxpayer” means a taxpayer who has paid or incurred qualified expenditures, participated in the Career Readiness requirement, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (g).
(B) (i) 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.
(ii) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation as a credit against a tax imposed under Chapter 4.5 (commencing with Section 23800) of Part 11 of Division 2.
(20) “Qualified visual effects” means visual effects where at least 75 percent or a minimum of ten million dollars ($10,000,000) of the qualified expenditures for the visual effects is paid or incurred in California.
(21) (A) “Qualified wages” means all of the following:
(i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state.
(ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv).
(iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (17).
(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.
(22) “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.
(23) “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.
(24) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.
(25) “Television series that relocated to California” means a television series, without regard to episode length or initial media exhibition, with a minimum production budget of one million dollars ($1,000,000) per episode, that filmed its most recent season outside of California or has filmed all seasons outside of California and for which the taxpayer certifies that the credit provided pursuant to this section is the primary reason for relocating to California.
(26) “Visual effects” means 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.
(c) (1) Notwithstanding subdivision (i) of Section 23036, in the case where the credit allowed by this section exceeds the taxpayer’s tax liability computed under this part, 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. For purposes of this subdivision, “affiliated corporation” has the meaning provided in subdivision (b) of Section 25110, as that section was amended by Chapter 881 of the Statutes of 1993, 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) The election provided in paragraph (1):
(A) May be based on any method selected by the qualified taxpayer that originally receives the credit.
(B) Shall be irrevocable for the taxable year the credit is allowed, once made.
(C) 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 taxpayer’s affiliated corporations that assign and receive the credits.
(D) 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.
(3) (A) 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 (6) of subdivision (b), to an unrelated party.
(B) 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) 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 five taxable years, if necessary, until the credit has been exhausted.
(5) 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.
(6) A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.
(7) 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.
(8) 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.
(9) 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.
(10) Subdivision (i) of Section 23036 shall not apply to any credit sold pursuant to this subdivision.
(11) For purposes of this subdivision:
(A) 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).
(B) The unrelated party or parties that purchase a credit pursuant to paragraphs (3) to (10), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).
(d) (1) No credit shall be allowed pursuant to this section unless the qualified taxpayer provides the following to the California Film Commission:
(A) Identification of each qualified individual.
(B) The specific start and end dates of production.
(C) The total wages paid.
(D) The total amount of qualified wages paid to qualified individuals.
(E) The copyright registration number, as reflected on the certificate of registration issued under the authority of Section 410 of Title 17 of the United States Code, relating to registration of claim and issuance of certificate. The registration number shall be provided on the return claiming the credit.
(F) The total amounts paid or incurred to purchase or lease tangible personal property used in the production of a qualified motion picture.
(G) Information to substantiate its qualified expenditures.
(H) Information required by the California Film Commission under regulations promulgated pursuant to subdivision (g) necessary to verify the amount of credit claimed.
(I) Provides documentation verifying completion of the Career Readiness requirement.
(2) (A) Based on the information provided in paragraph (1), the California Film Commission shall recompute the jobs ratio previously computed in subdivision (g) and compare this recomputed jobs ratio to the jobs ratio that the qualified taxpayer previously listed on the application submitted pursuant to subdivision (g).
(B) (i) If the California Film Commission determines that the jobs ratio has been reduced by more than 10 percent for a qualified motion picture other than an independent film, 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 jobs ratio reduction.
(ii) If the California Film Commission determines that the jobs ratio has been reduced by more than 20 percent for a qualified motion picture other than an independent film, the California Film Commission shall not accept an application described in subdivision (g) from that qualified taxpayer or any member of the qualified taxpayer’s 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 jobs ratio reduction.
(C) If the California Film Commission determines that the jobs ratio has been reduced by more than 30 percent for an independent film, the California Film Commission shall reduce the amount of credit allowed by an equal percentage, plus 10 percent of the amount of credit that would otherwise have been allowed, unless the qualified taxpayer demonstrates, and the California Film Commission determines, that reasonable cause exists for the jobs 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 (e).
(e) (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 adopt rules and regulations to implement a Career Readiness requirement by which the California Film Commission shall identify training and public service opportunities that may include, but not be limited to, hiring interns, public service announcements, and community outreach and may prescribe rules and regulations to carry out the purposes of this section, including, subparagraph (D) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (g), and including any rules and regulations necessary to establish procedures, processes, requirements, application fee structure, and rules identified in or required to implement this section, including credit and logo requirements and credit allocation procedures over multiple fiscal years where the qualified taxpayer is producing a series of features that will be filmed concurrently.
(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 Governor’s 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 (i), computing the jobs ratio as described in subdivisions (d) and (g), and defining “reasonable cause” pursuant to subparagraph (E) of paragraph (2) of subdivision (d).
(2) (A) Implementation of this section for the 2015–16 fiscal year is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Film Commission is hereby authorized to adopt emergency regulations to implement this section during the 2015–16 fiscal year in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(B) Nothing in this paragraph shall be construed to require the Governor’s Office of Business and Economic Development to approve emergency regulations adopted pursuant to this paragraph.
(3) 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.
(f) If the qualified taxpayer fails to provide the copyright registration number as required in subparagraph (E) of paragraph (1) of subdivision (d), the credit shall be disallowed and assessed and collected under Section 19051 until the procedures are satisfied.
(g) For purposes of this section, the California Film Commission shall do the following:
(1) Subject to the requirements of subparagraphs (A) through (E), inclusive, of paragraph (2), on or after July 1, 2015, and before July 1, 2016, in one or more allocation periods per fiscal year, allocate tax credits to applicants.
(2) On or after July 1, 2016, and before July 1, 2020, in two or more allocation periods per fiscal year, allocate tax credits to applicants.
(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, the following information:
(i) The budget for the motion picture production.
(ii) The number of production days.
(iii) A financing plan for the 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 production of the qualified motion picture, to the extent possible.
(v) All members of a combined reporting group, if known at the time of the application.
(vi) Financial information, if available, including, but not limited to, the most recently produced balance sheets, annual statements of profits and losses, audited or unaudited financial statements, summary budget projections or results, or the functional equivalent of these documents of a partnership or owner of a single member limited liability company that is disregarded pursuant to Section 23038. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure.
(vii) The names of all partners in a partnership not publicly traded or the names of all members of a limited liability company classified as a partnership not publicly traded for California income tax purposes that have a financial interest in the applicant’s qualified motion picture. The information provided pursuant to this clause shall be confidential and shall not be subject to public disclosure.
(viii) The amount of qualified wages the applicant expects to pay to qualified individuals.
(ix) The amount of tax credit the applicant computes the qualified motion picture will receive, applying the applicable credit percentages described in paragraph (4) of subdivision (a).
(x) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for 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 qualified motion picture will be located in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.
(xi) 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) (i) 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:
(ii) For each allocation date and for each category, list each applicant from highest to lowest according to the jobs ratio as computed by the California Film Commission.
(iii) Subject to the applicable credit percentage, allocate the credit to each applicant according to the highest jobs ratio, working down the list, until the credit amount is exhausted.
(iv) Pursuant to regulations adopted pursuant to subdivision (e), the California Film Commission may increase the jobs ratio by up to 25 percent if a qualified motion picture increases economic activity in California according to criteria developed by the California Film Commission that would include, but not be limited to, such factors as, the amount of the production and postproduction spending in California, the utilization of production facilities in California, and other criteria measuring economic impact in California as determined by the Film Commission.
(v) Notwithstanding any other provision, any television series, relocating 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, Section 17053.95, 17053.85, or 23685 shall be issued a credit for each subsequent year, for the life of that television series whenever credits are allocated within a fiscal year.
(E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (i), allocate an aggregate amount of credits under this section and Section 17053.95, and allocate any carryover of unallocated credits from prior years and the amount of any credits reduced pursuant to paragraph (2) of subdivision (d).
(3) Certify tax credits allocated to qualified taxpayers.
(A) Establish a verification procedure for the amount of qualified expenditures paid or incurred by the applicant, including, but not limited to, updates to the information in subparagraph (A) of paragraph (2) of subdivision (g).
(B) Establish audit requirements that must be satisfied before a credit certificate may be issued by the California Film Commission.
(C) (i) Establish a procedure for a qualified taxpayer to report to the California Film Commission, prior to the issuance of a credit certificate, the following information:
(I) If readily available, a list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer that, in the preceding calendar year, has produced a qualified motion picture intended for release in the United States market. For purposes of this clause, “qualified motion picture” shall not include any episodes of a television series that were complete or in production prior to July 1, 2016.
(II) Whether a qualified motion picture described in subclause (I) was awarded any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location.
(ii) The California Film Commission may provide that the report required by this subparagraph be filed in a single report provided on a calendar year basis for those qualified taxpayers that receive multiple credit certificates in a calendar year.
(D) 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 jobs ratio computed under this section. The amount of credit shown in the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.
(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 the primary principal photography completed.
(C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location.
(5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, the applicants, in electronic format when available, including, but not limited to, information provided pursuant to clauses (i) to (xi) inclusive, of subparagraph (A) of paragraph (2).
(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.
(h) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, the Franchise Tax Board, and the board 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 (g), the California Film Commission shall annually post on its Internet Web site and make available for public release 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 production, and the total amount of qualified expenditures expected to be spent by the production.
(ii) A narrative staff summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit.
(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.
(3) The California Film Commission shall provide each city and county in California with an instructional guide that includes, but is not limited to, a review of best practices for facilitating motion picture production in local jurisdictions, resources on hosting and encouraging motion picture production, and the California Film Commissions’ Model Film Ordinance. The California Film Commission shall maintain on its Internet Web site a list of initiatives by locality that encourage motion picture production in regions across the state. The list shall be distributed to each approved applicant for the program to highlight local jurisdictions that offer incentives to facilitate film production.
(i) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.95 is the applicable amount described in the following, plus any amount described in subparagraph (B), (C), or (D):
(i) Two hundred thirty million dollars ($230,000,000) in credits for the 2015–16 fiscal year.
(ii) Three hundred thirty million dollars ($330,000,000) in credits for the 2016–17 fiscal year and each fiscal year thereafter, through and including the 2019–20 fiscal year.
(B) The unused allocation credit amount, if any, for the preceding fiscal year.
(C) The amount of previously allocated credits not certified.
(D) The amount of any credits reduced pursuant to paragraph (2) of subdivision (d).
(2) (A) Notwithstanding the foregoing, the California Film Commission shall allocate the credit amounts subject to the following categories:
(i) Independent films shall be allocated 5 percent of the amount specified in paragraph (1).
(ii) Features shall be allocated 35 percent of the amount specified in paragraph (1).
(iii) A relocating television series shall be allocated 20 percent of the amount specified in paragraph (1).
(iv)  A new television series, pilots for a new television series, movies of the week, miniseries, and recurring television series shall be allocated 40 percent of the amount specified in paragraph (1).
(B) Within 60 days after the allocation period, any unused amount within a category or categories shall be first reallocated to the category described in clause (iv) of subparagraph (A) and, if any unused amount remains, reallocated to another category or categories with a higher demand as determined by the California Film Commission.
(C) Notwithstanding the foregoing, the California Film Commission may increase or decrease an allocation amount in subparagraph (A) by 5 percent, if necessary, due to the jobs ratio, the number of applications, or the allocation credit amounts available by category compared to demand.
(D) With respect to a relocating television series issued a credit in a subsequent year pursuant to clause (v) of subparagraph (D) of paragraph (2) of subdivision (g), that subsequent credit amount shall be allowed from the allocation amount described in clause (iv) of subparagraph (A).
(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 XIII   A 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.
(j) 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 (e) upon adoption.

SEC. 3.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 17053.7 of the Revenue and Taxation Code is amended to read:
17053.7.

(a)(1)here shall be allowed as a credit against the “net tax,” as defined by Section 17039, an amount equal to 10 percent of the amount of wages paid to each employee who is certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code.

(2)The credit under this section shall not apply to an individual unless, on or before the day on which that individual begins work for the employer, the employer either:

(A)Has received a certification from the Employment Development Department.

(B)Has requested in writing that certification from the Employment Development Department.

(3)For the purposes of this subdivision, if on or before the day on which the individual begins work for the employer, the individual has received from the Employment Development Department a written preliminary determination that he or she is a member of a targeted group, then the requirement of paragraph (1) or (2) shall be applicable on or before the fifth day on which the individual begins work for the employer.

(b)The credit under this section shall not apply to wages paid in excess of three thousand dollars ($3,000) during a taxable year by a taxpayer to the same individual. With respect to each qualified employee, the aggregate credit under this section shall not exceed six hundred dollars ($600).

(c)The credit under this section shall not apply to wages paid to an individual who:

(1)Bears any of the relationships described in paragraphs (1) to (8), inclusive, of Section 152(a) of the Internal Revenue Code to the taxpayer.

(2)If the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in paragraphs (1) to (8), inclusive, of Section 152(a) of the Internal Revenue Code to a grantor, beneficiary, or fiduciary of the estate or trust

(3)Is a dependent, as described in Section 152(a)(9) of the Internal Revenue Code, of the taxpayer, or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or a fiduciary of the estate or trust.

(d)The credit under this section shall not apply to wages paid to an individual if, prior to the hiring date of that individual, that individual has been employed by the employer at any time during which he or she was not certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code.

(e)If the certification of an employment has been revoked pursuant to subdivision (c) of Section 328 of the Unemployment Insurance Code, the credit under this section shall not apply to wages paid by the employer after the date on which notice of revocation is received by the employer.

(f)The credit under this section shall be in addition to any deduction under this part to which the taxpayer may be entitled, if any.

(g)The credit provided by this section shall be applied to wages paid to each qualifying employee during the 24-month period beginning on the date the employee begins working for the taxpayer.

(h)(1)A taxpayer may elect to have this section not apply for any taxable year.

(2)An election under paragraph (1) for any taxable year may be made or revoked at any time before the expiration of the four-year period beginning on the last date prescribed by law for filing the return for that taxable year, determined without regard to extensions.

(3)An election under paragraph (1), or revocation thereof, shall be made in any manner which the Franchise Tax Board may prescribe.

(i)(1)In the case of a successor employer referred to in Section 3306(b)(1) of the Internal Revenue Code, the determination of the amount of the credit under this section with respect to wages paid by that successor employer shall be made in the same manner as if those wages were paid by the predecessor employer referred to in that section.

(2)No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by that employee for another person, unless the amount reasonably expected to be received by the employer for those services from that other person exceeds the remuneration paid by the employer to that employee for those services.

(j)The term “wages” shall not include either of the following:

(1)Payments defined in Section 51(c)(3) of the Internal Revenue Code, relating to payments for services during labor disputes.

(2)Any amounts paid or incurred to an individual who begins work for the employer after December 31, 1993.

(k)(1)For taxable years beginning on or after January 1, 2017, a qualified taxpayer that is allowed a credit pursuant to Section 51 of the Internal Revenue Code, relating to amount of credit, for the work opportunity credit shall be allowed a credit in an amount equal to two thousand dollars ($2,000) for each qualified employee hired by the taxpayer during the taxable year in which the credit is claimed and each subsequent taxable year in which the qualified employee is employed.

(2)For purposes of this subdivision:

(A)“Qualified employee” means a person who meets any of the following requirements:

(i)He or she has been terminated or laid off, or has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.

(ii)He or she has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.

(iii)He or she is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.

(iv)He or she was self-employed, including farmers and ranchers, and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.

(v)He or she was a civilian employee of the United States Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.

(vi)He or she was an active member of the Armed Forces or the National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.

(vii)He or she is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agricultural industry, aggravated by continual advancements in technology and mechanization.

(viii)He or she has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(ix)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed, a state rehabilitation plan or is a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(x)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilt.

(xi)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for or a recipient of any of the following:

(I)Federal Supplemental Security Income benefits.

(II)Temporary Aid to Needy Families.

(III)CalFresh benefits.

(IV)State and local general assistance.

(xii)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(xiii)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a resident of a targeted employment area, as the term was defined in former Section 7072 of the Government Code.

(xiv)He or she was an employee who qualified the taxpayer for the enterprise zone hiring credit under former Section 23622 or the program area hiring credit under former Section 23623.

(xv)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group, as defined in Section 51(d) of the Internal Revenue Code, relating to members of targeted groups, or its successor.

(B)“Qualified taxpayer” means a taxpayer with 150 or fewer employees.

(3)A qualified taxpayer shall prioritize hiring a qualified employee that either:

(A)Is hired to participate in a project affiliated with the Transformative Climate Communities Program run by the Governor’s Office of Planning and Research, pursuant to Section 75240 of the Public Resources Code.

(B)Has participated in the California Career Technical Education Incentive Grant Program established in Section 53070 of the Education Code.

(4)Section 41 does not apply to the credit allowed by this subdivision.

SEC. 2.Section 23621 of the Revenue and Taxation Code is amended to read:
23621.

(a)(1)here shall be allowed as a credit against the “tax,” as defined by Section 23036, an amount equal to 10 percent of the amount of wages paid to each employee who is certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code.

(2)The credit under this section shall not apply to an individual unless, on or before the day on which that individual begins work for the employer, the employer either:

(A)Has received a certification from the Employment Development Department.

(B)Has requested in writing that certification from the Employment Development Department.

(3)For purposes of this subdivision, if on or before the day on which the individual begins work for the employer, the individual has received from the Employment Development Department a written preliminary determination that he or she is a member of a targeted group, then the requirement of paragraph (1) or (2) shall be applicable on or before the fifth day on which the individual begins work for the employer.

(b)The credit under this section shall not apply to wages paid in excess of three thousand dollars ($3,000) during an taxable year by a taxpayer to the same individual. With respect to each qualified employee, the aggregate credit under this section shall not exceed six hundred dollars ($600).

(c)The credit under this section shall not apply to wages paid to an individual who:

(1)Is a dependent, as described in paragraphs (1) to (8), inclusive, of Section 152(a) of the Internal Revenue Code, of an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the taxpayer, determined with the application of Section 267(c) of the Internal Revenue Code.

(2)Is a dependent, as described in paragraph (9) of Section 152(a) of the Internal Revenue Code, of an individual described in paragraph (1).

(d)The credit under this section shall not apply to wages paid to an individual if, prior to the hiring date of that individual, that individual had been employed by the employer at any time during which he or she was not certified by the Employment Development Department to meet the requirements of Section 328 of the Unemployment Insurance Code.

(e)If the certification of an employee has been revoked pursuant to subdivision (c) of Section 328 of the Unemployment Insurance Code, the credit under this section shall not apply to wages paid by the employer after the date on which notice of revocation is received by the employer.

(f)The credit under this section shall be in addition to any deduction under this part to which the taxpayer may be entitled, if any.

(g)The credit provided by this section shall be applied to wages paid to each qualifying employee during the 24-month period beginning on the date the employee begins working for the taxpayer.

(h)(1)A taxpayer may elect to have this section not apply for any taxable year.

(2)An election under paragraph (1) for any taxable year may be made or revoked at any time before the expiration of the four-year period beginning on the last date prescribed by law for filing the return for that taxable year, determined without regard to extensions.

(3)An election under paragraph (1), or revocation thereof, shall be made in any manner which the Franchise Tax Board may prescribe.

(i)(1)In the case of a successor employer referred to in Section 3306(b)(1) of the Internal Revenue Code, the determination of the amount of the credit under this section with respect to wages paid by that successor employer shall be made in the same manner as if those wages were paid by the predecessor employer referred to in that section.

(2)No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by that employee for another person unless the amount reasonably expected to be received by the employer for those services from that other person exceeds the remuneration paid by the employer to that employee for those services.

(j)The term “wages” shall not include either of the following:

(1)Payments defined in Section 51(c)(3) of the Internal Revenue Code, relating to payments for services during labor disputes.

(2)Any amounts paid or incurred to an individual who begins work for an employer after December 31, 1993.

(k)(1)For taxable years beginning on or after January 1, 2017, a qualified taxpayer that is allowed a credit pursuant to Section 51 of the Internal Revenue Code, relating to amount of credit, for the work opportunity credit shall be allowed a credit in an amount equal to two thousand dollars ($2,000) for each qualified employee hired by the taxpayer during the taxable year in which the credit is claimed and each subsequent taxable year in which the qualified employee is employed.

(2)For purposes of this subdivision:

(A)“Qualified employee” means a person who meets any of the following requirements:

(i)He or she has been terminated or laid off, or has received a notice of termination or layoff from employment, is eligible for or has exhausted entitlement to unemployment insurance benefits, and is unlikely to return to his or her previous industry or occupation.

(ii)He or she has been terminated or has received a notice of termination of employment as a result of any permanent closure or any substantial layoff at a plant, facility, or enterprise, including an individual who has not received written notification but whose employer has made a public announcement of the closure or layoff.

(iii)He or she is long-term unemployed and has limited opportunities for employment or reemployment in the same or a similar occupation in the area in which the individual resides, including an individual 55 years of age or older who may have substantial barriers to employment by reason of age.

(iv)He or she was self-employed, including farmers and ranchers, and is unemployed as a result of general economic conditions in the community in which he or she resides or because of natural disasters.

(v)He or she was a civilian employee of the United States Department of Defense employed at a military installation being closed or realigned under the Defense Base Closure and Realignment Act of 1990.

(vi)He or she was an active member of the Armed Forces or the National Guard as of September 30, 1990, and was either involuntarily separated or separated pursuant to a special benefits program.

(vii)He or she is a seasonal or migrant worker who experiences chronic seasonal unemployment and underemployment in the agricultural industry, aggravated by continual advancements in technology and mechanization.

(viii)He or she has been terminated or laid off, or has received a notice of termination or layoff, as a consequence of compliance with the federal Clean Air Act.

(ix)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a disabled individual who is eligible for or enrolled in, or has completed, a state rehabilitation plan or is a service-connected disabled veteran, veteran of the Vietnam era, or veteran who is recently separated from military service.

(x)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was an ex-offender. An individual shall be treated as convicted if he or she was placed on probation by a state court without a finding of guilt.

(xi)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a person eligible for or a recipient of any of the following:

(I)Federal Supplemental Security Income benefits.

(II)Temporary Aid to Needy Families.

(III)CalFresh benefits.

(IV)State and local general assistance.

(xii)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a federally recognized Indian tribe, band, or other group of Native American descent.

(xiii)He or she, immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a resident of a targeted employment area, as the term was defined in former Section 7072 of the Government Code.

(xiv)He or she was an employee who qualified the taxpayer for the enterprise zone hiring credit under former Section 23622 or the program area hiring credit under former Section 23623.

(xv)Immediately preceding the qualified employee’s commencement of employment with the taxpayer, was a member of a targeted group, as defined in Section 51(d) of the Internal Revenue Code, relating to members of targeted groups, or its successor.

(B)“Qualified taxpayer” means a taxpayer with 150 or fewer employees.

(3)A qualified taxpayer shall prioritize hiring a qualified employee that either:

(A)Is hired to participate in a project affiliated with the Transformative Climate Communities Program run by the Governor’s Office of Planning and Research, pursuant to Section 75240 of the Public Resources Code.

(B)Has participated in the California Career Technical Education Incentive Grant Program established in Section 53070 of the Education Code.

(4)Section 41 does not apply to the credit allowed by this subdivision.

SEC. 3.

This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.