AB 2319

AB2319:v96#DOCUMENT

Bill Start

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Assembly Bill

No. 2319

An act to add Sections 17053.98.5 and 23698.5 to the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.

LEGISLATIVE COUNSEL'S DIGEST

AB 2319, as amended, Schultz. Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including various motion picture credits, commonly referred to as motion picture credit 1.0, 2.0, 3.0, and 4.0, and the certified studio credit, to be allocated by the California Film Commission in differing amounts equal to specified percentages of the qualified expenditures of a qualified motion picture in this state. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.

This bill would allow a credit against those taxes in an amount between 35% and 50% of qualified expenses relating to the post-production of a qualified motion picture in California to be allocated by the California Film Commission, as specified. The bill would require the credit to be administered in the same manner as the motion picture credit 4.0, except as specified. This bill would allow a qualified taxpayer to elect to be paid a refund if the amount allowable as a credit exceeds the qualified taxpayer’s tax liability for the taxable year, as specified. By requiring moneys to be paid from the Tax Relief and Refund Account, the bill would make an appropriation.

Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.

This bill would include findings and reporting requirements in compliance with this requirement.

Digest Key

Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NO

Bill Text

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

SECTION 1.

(a) The Legislature finds and declares all of the following:

(1) California film and TV productions greatly benefit from the current motion picture tax credit 4.0.

(2) That credit does not cover post-production when principal photography takes place outside of California or the project otherwise did not qualify for a motion picture tax credit, leaving a significant gap in the state’s incentive framework.

(3) Post-production expenditures have increasingly migrated to competing domestic and international jurisdictions offering targeted incentives. These jurisdictions include New York, Louisiana, New Mexico, New Jersey, Georgia, Pennsylvania, the United Kingdom, Ireland, Canada, Australia, Spain, France, Italy, and Qatar. This ever-increasing migration is resulting in reduced utilization of California’s existing post-production ecosystem and a massive decline in taxable wages.

(4) Major scoring facilities and stages, such as Sony, Fox, Warner Brothers, and Skywalker, are not generating as much revenue as in previous years and are at risk of closure. Editorial houses are also losing revenue and talent due to projects posting out of state.

(5) Editorial houses and post-production service companies throughout California are losing revenue and skilled workers to out-of-state productions.

(6) Protecting the future of California’s film and television industry aligns with the California Jobs First State Economic Blueprint, which recognizes that targeted incentive programs produce substantial returns on public investment by supporting good-paying jobs, increasing taxable wages, expanding local vendor spending, and generating broader economic activity.

(7) The tax credit program created by this act is not intended to compete with or replace California’s principal photography incentive, but to complement it by capturing post-production activity not otherwise eligible for existing credits.

(b) This act shall be known as the “California Post-production Tax Credit,” a standalone, post-only tax credit program to incentivize film and television productions to choose to complete their post-production work within California, wherein the project either did not film principal photography in California or otherwise did not receive the California Film and Television Tax Credit.

SEC. 2.

Section 17053.98.5 is added to the Revenue and Taxation Code, to read:

17053.98.5.

(a) (1) For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the “net tax,” as defined in Section 17039, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 17053.98.1.

(2) Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.

(3) (A) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).

(B) In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:

(i) In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).

(ii) In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).

(4) For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:

(A) Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the post-production of a qualified motion picture in California.

(B) (i) Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:

(I) Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in subclause (II).

(II) Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.

(III) Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.

(ii) The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.

(C) An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.

(b) For purposes of this section:

(1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.

(2) “Applicable period” means the period that commences with the first day of principal photography and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.

(3) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.

(4) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.

(5) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).

(6) “Diversity workplan checklist” means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.

(7) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following:

(i) Employer contributions under any pension, profit sharing, annuity, or similar plan.

(ii) Employer-provided coverage under any accident or health plan for employees.

(iii) The 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 (23) shall not be taken into account under this paragraph.

(8) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.

(9) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part.

(10) “Los Angeles zone” means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.

(11) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created.

(12) “Pension” means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.

(12)

(13) “Pilot for a new television series” means the initial episode produced for a proposed television series.

(13)

(14) (A) “Post-production” means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:

(i) “Editorial post-production” means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.

(ii) “Visual effects” has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.

(B) “Post-production” does not include the manufacture or shipping of release prints or their equivalent.

(14)

(15) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space.

(15)

(16) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.

(16)

(17) “Production period” means the period beginning with preproduction and ending upon completion of post-production.

(17)

(18) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.

(18)

(19) (A) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.

(B) “Qualified expenditures” includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).

(C) “Qualified expenditures” shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.

(19)

(20) “Qualified expenditures relating to post-production outside the Los Angeles zone” means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.

(20)

(21) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the post-production of a qualified motion picture.

(B) “Qualified individual” shall not include either of the following:

(i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code.

(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer.

(21)

(22) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following:

(i) A feature, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).

(ii) A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.

(iii) A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).

(iv) A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.

(v) A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.

(B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied:

(i) At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.

(ii) Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission.

(iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.

(iv) Provides a diversity workplan checklist.

(v) Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.

(C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.

(D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.

(22)

(23) (A) “Qualified taxpayer” means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 17053.95, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).

(B) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation.

(23)

(24) (A) “Qualified wages” means all of the following:

(i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the post-production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state.

(ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the post-production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv).

(iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (20). (21).

(iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual.

(B) “Qualified wages” shall not include any of the following:

(i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser.

(ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto.

(iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture.

(iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, producers, and on camera performers.

(24)

(25) (A) “Recurring television allocation amount” means the sum of the base year allocation and the product of all of the following:

(i) The base year allocation.

(ii) The number of subsequent years.

(iii) Three percent.

(B) For purposes of this paragraph, the following definitions apply:

(i) “Base year allocation” means the amount received by the recurring television series in its fiscal year 2025–26 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 2025–26, in the next fiscal year in which a Credit Allocation Letter or Letters were received.

(ii) “The number of subsequent years” means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.

(25)

(26) “Recurring television series” means any television series that was previously approved and issued a credit allocation letter under this section.

(26)

(27) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.

(27)

(28) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.

(28)

(29) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.

(c) (1) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.

(A) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit.

(B) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party.

(C) A party that has acquired tax credits under this subdivision shall be subject to the requirements of this section.

(D) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.

(E) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.

(F) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision.

(G) Subdivision (g) of Section 17039 shall not apply to any credit sold pursuant to this subdivision.

(H) For purposes of this subdivision, the unrelated party or parties that purchase a credit pursuant to this subdivision shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).

(2) In the case where the credit allowed under this section exceeds the “net tax,” the excess credit may be carried over to reduce the “net tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.

(d) (1) (A) Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:

(i) Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).

(ii) Any rules and regulations necessary to establish procedures, processes, requirements, and applications.

(iii) (I) Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.(II) Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.(III) (ia) Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature. (ib) Independent films are not subject to an increase to the fee pursuant this subclause.

(B) Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the 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 (g).

(2) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.

(e) For purposes of this section, the California Film Commission shall do all of the following:

(1) (A) Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.

(B) The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.

(2) (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:

(i) The budget for the motion picture production.

(ii) The number of post-production days.

(iii) A financing plan for the post-production.

(iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.

(v) The amount of qualified wages the applicant expects to pay to qualified individuals.

(vi) The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).

(vii) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.

(viii) The applicant’s written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.

(ix) If applicable, summary of the applicant’s voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.

(x) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.

(B) Establish criteria, consistent with the requirements of this section, for allocating tax credits.

(C) Determine and designate applicants who meet the requirements of this section.

(D) For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:

(i) Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 23698.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.

(ii) Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.

(iii) The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.

(iv) In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:

(I) Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.

(II) Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 2029–30 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 2029–30 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 2029–30 fiscal year shall not be certified until July 1, 2030, or later.

(III) The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.

(E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 23698.5.

(3) Certify tax credits allocated to qualified taxpayers and do all of the following:

(A) Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.

(B) Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.

(C) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.

(D) (i) Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).

(ii) The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:

(I) A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of California’s population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:

(ia) A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.

(ib) A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.

(ic) A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).

(id) Other requirements as the California Film Commission shall determine by regulation.

(II) An interim assessment on the qualified taxpayer’s efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.

(III) A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.

(iii) The California Film Commission, in consultation with the Governor’s Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commission’s internet website.

(iv) The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.

(v) This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.

(4) Obtain, when possible, the following information from applicants that do not receive an allocation of credit:

(A) Whether the qualified motion picture that was the subject of the application was completed.

(B) If completed, in which state or foreign jurisdiction was post-production completed.

(C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.

(5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analyst’s Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).

(6) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.

(7) (A) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.

(B) For purposes of this section, “previously allocated credits not certified” means either of the following:

(i) Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.

(ii) The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).

(8) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.

(9) The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.

(f) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, Office and the Franchise Tax Board, and the California Department of Tax and Fee Administration Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer.

(2) (A) Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:

(i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.

(ii) A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit.

(iii) The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).

(B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).

(g) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5, is ____ dollars ($____), 23698.5 shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 2027–28 fiscal year and each fiscal year thereafter, through and including the 2032–33 fiscal year, except as provided in paragraph (7) of subdivision (e).

(B) The unused allocation credit amount, if any, for the preceding fiscal year.

(C) The amount of previously allocated credits not certified.

(2) (A) For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate credits allocable pursuant to this section and Section 23698.5, for allocation to applicants that satisfy all of the following:(i) The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.(ii) The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.(iii) The applicant participates in a career-based learning and training program approved by the California Film Commission.(iv) The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.(v) The applicant directly employs at least one employee providing qualified services in the state.(B) Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.

(2)

(3) Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:

(A) Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).

(B) A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).

(3)

(4) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article 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.

(h) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.

(i) (1) A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.

(2) For purposes of this subdivision, the following definitions shall apply:

(A) “Annual refundable amount” means 20 percent of the total refundable amount.

(B) (i) “Credit amount” means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).

(ii) In the case of a pass-thru entity, the “credit amount” described in paragraphs (2) and (3) means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. For purposes of this subclause, the term “pass-thru entity” means any partnership, “S” corporation, or limited liability company treated as a partnership.

(iii) In the case of an assigned credit, the “credit amount” means the credit amount that was assigned to the taxpayer.

(C) “Refundable period” means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.

(D) “Total refundable amount” means 90 percent of the credit amount that exceeds the “net tax” in the first taxable year of the refundable period.

(3) The refund shall be computed as follows:

(A) (i) In the first taxable year of the refundable period, the credit amount shall be allowed against the “net tax” computed under this part for the taxable year.

(ii) If the credit allowed by this section exceeds the “net tax” in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.

(B) (i) In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the “net tax” computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.

(ii) If the qualified taxpayer’s tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayer’s “net tax.”

(4) (A) In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.

(B) In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayer’s “net tax” or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.

(C) Notwithstanding paragraph (2) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.

(5) Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer upon their election.

(6) An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.

(7) A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.

(j) For the purposes of complying with Section 41 with respect to this section and Section 23698.5, the Legislature finds and declares all of the following:

(1) The specific goals, purposes, and objectives that the credits allowed by this section and Section 23698.5 will achieve include all of the following:

(A) To maintain and expand motion picture and television post-production, and the quality of the jobs they provide, in California.

(B) To keep California’s Film Tax Credit competitive with post-production incentives offered by other states and other countries.

(C) To increase the competitiveness of the tax credits allowed by this section and Section 23698.5 relative to previous California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 23685, 23695, and 23698 by allowing the tax credit to be refundable.

(2) The performance indicators for the Legislature to use in determining if the credits accomplish the specific goals, purposes, and objectives may include, but are not limited to, all of the following:

(A) The number and types of post-production that apply for the tax credits allowed by this section and Section 23698.5.

(B) The total amount of credit allocations applied for under this section and Section 23698.5.

(C) The total amount of credits allocated under this section and Section 23698.5.

(D) The total amount of credits certified as eligible to be claimed on a tax return under this section and Section 23698.5.

(E) The number of jobs included in the budgets of post-productions receiving the tax credits allocated by this section and Section 23698.5.

(F) A comparison of the performance indicators specified in paragraphs (1) to (6), inclusive, with results from California motion picture tax credit programs authorized by Sections 17053.85, 17053.95, 17053.98, 17053.98.1, 23685, 23695, 23698, and 23698.1.

(G) The total amount of credits allocated by this section and Section 23698.5 that are claimed as a refund on a tax return.

(3) On or before May 1, 2030, the Legislative Analyst’s Office shall provide to the Assembly Committee on Revenue and Taxation, the Senate Committee on Governance and Finance, Revenue and Taxation, and the public a report evaluating the effectiveness of the tax credits allowed by this section and Section 23698.5 in achieving the metrics outlined in subdivision (a), including an assessment of the refundability of the tax credit in achieving those metrics. In researching the reports, the Legislative Analyst’s Office may do all of the following:

(A) Request and receive all information of California Film Commission applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation, provided to the California Film Commission pursuant to subdivision (e) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, and 23698.1.

(B) Request and receive all information provided to the Franchise Tax Board relating to the sale or assignment of credits pursuant to paragraph (1) of subdivision (c) of this section and Sections 17053.95, 17053.98, 17053.98.1, 23695, 23698, 23698.1, and 23698.5.

(C)Request and receive all information provided to the California Department of Tax and Fee Administration pursuant to subdivisions (c) and (g) of Section 6902.5.

(4) Notwithstanding Section 19542, the California Film Commission, the California Department of Tax and Fee Administration, the Franchise Tax Board, the Employment Development Department, and all other relevant state agencies shall provide additional information, as requested by the Legislative Analyst’s Office, as necessary to research the report required by this subdivision.

(5) (A) The information received by the Legislative Analyst’s Office pursuant to this section shall be considered confidential taxpayer information subject to Sections 7056, 7056.5, and 19542 of this code and Section 1094 of the Unemployment Insurance Code, and shall be subject to the appropriate confidentiality requirements of the participating state agency.

(B) The Legislative Analyst’s Office may publish statistics in conjunction with the reports required by this section that are derived from information provided to the Legislative Analyst’s Office pursuant to this section, if the published statistics are classified to prevent the identification of particular taxpayers, reports, and tax returns and the publication of the percentage of dividends paid by a corporation that is deductible by the recipient under Part 11 (commencing with Section 23001) of Division 2.

SEC. 3.

Section 23698.5 is added to the Revenue and Taxation Code, to read:

23698.5.

(a) (1) For taxable years beginning on or after January 1, 2027, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, subject to a computation by the California Film Commission in subdivision (e) and the allocation amount categories described in subdivision (g), in an amount described in paragraph (4), of the qualified expenditures for the post-production of a qualified motion picture in California. A credit shall not be allowed under this section for a qualified motion picture for which a credit has been claimed under Section 23698.1.

(2) Except as otherwise provided in this section, the credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (e) for the qualified motion picture, but in no instance prior to July 1, 2027, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture.

(3) (A) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).

(B) In determining the amount specified in the credit certificate in subparagraph (A), the California Film Commission shall be limited to the following amounts of qualified expenditures for each qualified motion picture:

(i) In the case of qualified expenditures, excluding those relating to visual effects, up to six million dollars ($6,000,000).

(ii) In the case of qualified expenditures relating to visual effects, up to six million dollars ($6,000,000).

(4) For purposes of paragraphs (1) and (2), the credit shall be in an amount equal to the sum of the following:

(A) Thirty-five percent of qualified expenditures attributable to qualified editorial expenditures of the post-production of a qualified motion picture in California.

(B) (i) Additional credits shall be allowed for the post-production of a qualified motion picture in an aggregate amount not to exceed 15 percent of qualified expenditures, as follows:

(I) Five percent of qualified expenditures for expenditures relating to post-production outside the Los Angeles zone, excluding qualified wages described in clause (ii).

(II) Ten percent of qualified expenditures for qualified wages paid for services performed relating to post-production outside of the Los Angeles zone to qualified individuals who reside in California but outside the Los Angeles zone.

(III) Fifteen percent of qualified expenditures for expenditures relating to qualified music scoring.

(ii) The additional credit amounts provided in this subparagraph shall not be subject to the limitations stated in subparagraph (B) of paragraph (3), and shall not be considered in determining whether those limitations have been reached or exceeded.

(C) An additional 5 percent of qualified expenditures if at least 50 percent of below-the-line production wages are for services performed in the state.

(b) For purposes of this section:

(1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture.

(2) “Applicable period” means the period that commences with the first day of principal photography and ends when post-production concludes. The applicable period includes the time necessary to strike a remote location and return to the Los Angeles zone.

(3) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes.

(4) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture.

(5) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (D) of paragraph (3) of subdivision (e).

(6) “Diversity workplan checklist” means a checklist developed by regulation by the California Film Commission that may include consideration of inclusive hiring above the line, inclusive hiring below the line, equity education, industry capacity building and supplier diversity as part of any diversity workplan.

(7) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following:

(i) Employer contributions under any pension, profit sharing, annuity, or similar plan.

(ii) Employer-provided coverage under any accident or health plan for employees.

(iii) The 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 (23) shall not be taken into account under this paragraph.

(8) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 30 percent of the producing company.

(9) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part.

(10) “Los Angeles zone” means the area within a circle 30 miles in radius from Beverly Boulevard and La Cienega Boulevard, Los Angeles, California, and includes Agua Dulce, Castaic, including Castaic Lake, Leo Carrillo State Beach, Ontario International Airport, Piru, and Pomona, including the Los Angeles County Fairgrounds. The Metro-Goldwyn-Mayer, Inc. Conejo Ranch property is within the Los Angeles zone.

(11) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created.

(12) “Pension” means a traditional pension plan, and does not include defined contribution plans as that term is defined in Section 414(i) of the Internal Revenue Code.

(12)

(13) “Pilot for a new television series” means the initial episode produced for a proposed television series.

(13)

(14) (A) “Post-production” means both editorial post-production and visual effects. For purposes of this paragraph, the following definitions apply:

(i) “Editorial post-production” means picture editing, sound design, foley recording, automatic dialogue replacement, sound mixing and engineering, music editing, creation of screen credits, conform and online assembly, negative cutting, film-to-tape transfers, encoding, color correction, and mastering. It also includes music composition and scoring, recording sessions performed by musicians, and related audio production services.

(ii) “Visual effects” has the same meaning as that term is defined in subdivision (v) of Section 5550 of Title 10 of the California Code of Regulations.

(B) “Post-production” does not include the manufacture or shipping of release prints or their equivalent.

(14)

(15) “Preproduction” means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment, or is greenlit, with, for example, the establishment of a dedicated production office, the hiring of key crew members, and includes, but is not limited to, activities that include location scouting and execution of contracts with vendors of equipment and stage space.

(15)

(16) “Principal photography” means the phase of production during which the motion picture is actually shot, as distinguished from preproduction and post-production.

(16)

(17) “Production period” means the period beginning with preproduction and ending upon completion of post-production.

(17)

(18) “Qualified entity” means a personal service corporation as defined in Section 269A(b)(1) of the Internal Revenue Code, a payroll services corporation, or any entity receiving qualified wages with respect to services performed by a qualified individual.

(18)

(19) (A) “Qualified expenditures” means amounts paid or incurred for tangible personal property purchased or leased, and used, within this state in the post-production of a qualified motion picture and payments, including qualified wages, for services performed within this state in the post-production of a qualified motion picture.

(B) “Qualified expenditures” includes only those amounts paid or incurred after filing an application with the California Film Commission pursuant to subdivision (e).

(C) “Qualified expenditures” shall not include expenditures relating to visual effects unless at least 75 percent, or five hundred thousand dollars ($500,000), of those visual effects expenditures are incurred for payment for services performed within the state and the purchase or rental of property used within the state.

(19)

(20) “Qualified expenditures relating to post-production outside the Los Angeles zone” means amounts paid or incurred during the applicable period for tangible personal property purchased or leased and used or consumed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone and qualified wages paid for services performed outside the Los Angeles zone and relating to post-production outside the Los Angeles zone.

(20)

(21) (A) “Qualified individual” means any individual who performs services during the production period in an activity related to the post-production of a qualified motion picture.

(B) “Qualified individual” shall not include either of the following:

(i) Any individual related to the qualified taxpayer as described in subparagraph (A), (B), or (C) of Section 51(i)(1) of the Internal Revenue Code.

(ii) Any 5-percent owner, as defined in Section 416(i)(1)(B) of the Internal Revenue Code, of the qualified taxpayer.

(21)

(22) (A) “Qualified motion picture” means a motion picture that is produced for distribution to the general public, regardless of medium, that is one of the following:

(i) A feature, including an animated film and an independent film, with a minimum production budget of one million dollars ($1,000,000).

(ii) A miniseries or limited series consisting of two or more episodes, each longer than 40 minutes of running time, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.

(iii) A pilot for a new live action or animated television series that is at least 20 minutes of running time, exclusive of commercials, and with a minimum production budget of one million dollars ($1,000,000).

(iv) A live action or animated series, averaging across a season at least 20 minutes of running time per episode, exclusive of commercials, with a minimum production budget of one million dollars ($1,000,000) per episode.

(v) A large-scale competition show, not including traditional reality, game shows, talk shows, or docufollow television programming, with a minimum production budget of one million dollars ($1,000,000) per episode.

(B) To qualify as a “qualified motion picture,” all of the following conditions shall be satisfied:

(i) At least 75 percent, or one million dollars ($1,000,000), of editorial post-production expenses are incurred for payment for services performed within the state and the purchase or rental of property used within the state.

(ii) Post-production of the qualified motion picture is completed within 30 months from the date on which the qualified taxpayer’s application is approved by the California Film Commission.

(iii) The copyright for the motion picture is registered with the United States Copyright Office pursuant to Title 17 of the United States Code.

(iv) Provides a diversity workplan checklist.

(v) Pays a prevailing wage rate determined by the Director of Industrial Relations under Sections 1773 and 1773.9 of the Labor Code where a rate has been established for that position. This requirement shall apply to services performed by a workforce that is employed directly, indirectly through a motion picture payroll services company, or through a loan-out corporation where the underlying services are performed in California.

(C) For the purposes of subparagraph (A), in computing the total wages paid or incurred for the post-production of a qualified motion picture, all amounts paid or incurred by all persons or entities that share in the costs of the qualified motion picture shall be aggregated.

(D) “Qualified motion picture” shall not include commercial advertising, music videos, a motion picture produced for private noncommercial use, such as weddings, graduations, or as part of an educational course and made by students, a news program, current events or public events program, talk show, game show, sporting event or activity, awards show, telethon or other production that solicits funds, reality television program, except as specified in clause (v) of subparagraph (A), clip-based programming if more than 50 percent of the content is comprised of licensed footage, documentaries, variety programs, daytime dramas, strip shows, or any production that falls within the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.

(22)

(23) (A) “Qualified taxpayer” means a taxpayer, or a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, who has paid or incurred qualified expenditures, participated in the Career Readiness requirement in Section 23695, and has been issued a credit certificate by the California Film Commission pursuant to subdivision (e).

(B) In the case of any pass-thru entity, the determination of whether a taxpayer is a qualified taxpayer under this section shall be made at the entity level and any credit under this section is not allowed to the pass-thru entity, but shall be passed through to the partners or shareholders in accordance with applicable provisions of Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001). For purposes of this paragraph, “pass-thru entity” means any entity taxed as a partnership or “S” corporation.

(C) In the case of an “S” corporation, the credit allowed under this section shall not be used by an “S” corporation against a tax imposed under Chapter 4.5 (commencing with Section 23800).

(23)

(24) (A) “Qualified wages” means all of the following:

(i) Any wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code that were paid or incurred by any taxpayer involved in the post-production of a qualified motion picture with respect to a qualified individual for services performed on the qualified motion picture production within this state.

(ii) The portion of any employee fringe benefits paid or incurred by any taxpayer involved in the post-production of the qualified motion picture that are properly allocable to qualified wage amounts described in clauses (i), (iii), and (iv).

(iii) Any payments made to a qualified entity for services performed in this state by qualified individuals within the meaning of paragraph (20).

(iv) Remuneration paid to an independent contractor who is a qualified individual for services performed within this state by that qualified individual.

(B) “Qualified wages” shall not include any of the following:

(i) Expenses, including wages, related to new use, reuse, clip use, licensing, secondary markets, or residual compensation, or the creation of any ancillary product, including, but not limited to, a soundtrack album, toy, game, trailer, or teaser.

(ii) Expenses, including wages, paid or incurred with respect to acquisition, development, turnaround, or any rights thereto.

(iii) Expenses, including wages, related to financing, overhead, marketing, promotion, or distribution of a qualified motion picture.

(iv) Expenses, including wages, paid per person per qualified motion picture for writers, directors, music directors, music composers, producers, and on camera performers.

(24)

(25) (A) “Recurring television allocation amount” means the sum of the base year allocation and the product of all of the following:

(i) The base year allocation.

(ii) The number of subsequent years.

(iii) Three percent.

(B) For purposes of this paragraph, the following definitions apply:

(i) “Base year allocation” means the amount received by the recurring television series in its fiscal year 2025–26 Credit Allocation Letter or Letters, or if no amounts were reserved in fiscal year 2025–26, in the next fiscal year in which a Credit Allocation Letter or Letters were received.

(ii) “The number of subsequent years” means the number of full or partial fiscal years that have elapsed since the fiscal year in which the base year allocation was made.

(25)

(26) “Recurring television series” means any television series that was previously approved and issued a credit allocation letter under this section.

(26)

(27) “Residual compensation” means supplemental compensation paid at the time that a motion picture is exhibited through new use, reuse, clip use, or in secondary markets, as distinguished from payments made during production.

(27)

(28) “Reuse” means any use of a qualified motion picture in the same medium for which it was created, following the initial use in that medium.

(28)

(29) “Secondary markets” means media in which a qualified motion picture is exhibited following the initial media in which it is exhibited.

(c) (1) (A) A qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations for each taxable year in which the credit is allowed. In the event the qualified taxpayer is a single member limited liability company that is disregarded for tax purposes pursuant to Section 23038, the qualified taxpayer may elect to assign any portion of the credit allowed under this section to one or more affiliated corporations as if that single member limited liability company made the federal election to be classified as an association taxable as a corporation.

(B) For purposes of the election provided in subparagraph (A), all of the following shall apply:

(i) The election may be based on any method selected by the qualified taxpayer that originally receives the credit.

(ii) Once the election is made, it shall be irrevocable for the taxable year the credit is allowed.

(iii) The election may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits.

(iv) The election shall be reported to the Franchise Tax Board, in the form and manner specified by the Franchise Tax Board, along with all required information regarding the assignment of the credit, including the corporation number, the federal employer identification number, or other taxpayer identification number of the assignee, and the amount of the credit assigned.

(C) For purposes of this paragraph, “affiliated corporation” has the same meaning provided in subdivision (b) of Section 25110, as of the last day of the taxable year in which the credit is allowed, except that “100 percent” is substituted for “more than 50 percent” wherever it appears in the section, and “voting common stock” is substituted for “voting stock” wherever it appears in the section.

(2) Notwithstanding any other law, a qualified taxpayer may sell any credit allowed under this section that is attributable to an independent film, as defined in paragraph (8) of subdivision (b), to an unrelated party.

(3) The qualified taxpayer shall report to the Franchise Tax Board prior to the sale of the credit, in the form and manner specified by the Franchise Tax Board, all required information regarding the purchase and sale of the credit, including the social security or other taxpayer identification number of the unrelated party to whom the credit has been sold, the face amount of the credit sold, and the amount of consideration received by the qualified taxpayer for the sale of the credit.

(4) A credit shall not be sold pursuant to this subdivision to more than one taxpayer, nor may the credit be resold by the unrelated party to another taxpayer or other party.

(5) A party that has been assigned or acquired tax credits under this subdivision shall be subject to the requirements of this section.

(6) In no event may a qualified taxpayer assign or sell any tax credit to the extent the tax credit allowed by this section is claimed on any tax return of the qualified taxpayer.

(7) In the event that both the taxpayer originally allocated a credit under this section by the California Film Commission and a taxpayer to whom the credit has been sold both claim the same amount of credit on their tax returns, the Franchise Tax Board may disallow the credit of either taxpayer, so long as the statute of limitations upon assessment remains open.

(8) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this subdivision.

(9) Subdivision (g) or (i) of Section 23036 shall not apply to any credit sold or assigned pursuant to this subdivision.

(10) For purposes of this subdivision, the following shall apply:

(A) The unrelated party or parties that purchase a credit pursuant to paragraphs (2) to (9), inclusive, shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).

(B) An affiliated corporation or corporations that are assigned a credit pursuant to paragraph (1) shall be treated as a qualified taxpayer pursuant to paragraph (1) of subdivision (a).

(11) In the case where the credit allowed under this section exceeds the “tax,” the excess credit may be carried over to reduce the “tax” in the following taxable year, and succeeding eight taxable years, if necessary, until the credit has been exhausted.

(d) (1) (A) Subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the California Film Commission shall prescribe rules and regulations to carry out the purposes of this section, including, but not limited to, the following:

(i) Subparagraph (B) of paragraph (4) of subdivision (a) and clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e).

(ii) Any rules and regulations necessary to establish procedures, processes, requirements, and applications.

(iii) (I) Rules and regulations necessary to adapt the existing Career Pathways Program, established pursuant to subdivision (e) of Sections 17053.98 and 23698, to fund technical skills training for individuals from underserved communities for entry into post-production jobs. The program shall be funded by a fee equal to 0.5 percent of the approved credit amount pursuant to this section.(II) Notwithstanding subclause (I), independent films are required to pay a fee equal to 0.25 percent of the approved credit amount for a qualified motion picture.(III) (ia) Beginning January 1, 2028, the California Film Commission, in collaboration with labor and industry stakeholders, has the authority to increase the Career Pathways Training program fee by 0.25 percent per year, up to 1 percent of the approved credit amount for a qualified motion picture, based on evaluation of available information, including, but not limited to, the number of jobs available, job growth in the industry, and information included in the annual reports of the Career Pathways Training program required pursuant to paragraph (11) of subdivision (g) of Section 17053.98.1. The evaluation shall be included in the annual report to the Legislature.(ib) Independent films are not subject to an increase to the fee pursuant this subclause.

(B) Notwithstanding any other law, prior to preparing a notice of proposed action pursuant to Section 11346.4 of the Government Code and prior to making any revision to the proposed regulation other than a change that is nonsubstantial or solely grammatical in nature, the 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 (g).

(2) The California Film Commission shall not be required to prepare an economic impact analysis pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) with regard to any rules and regulations adopted pursuant to this subdivision.

(e) For purposes of this section, the California Film Commission shall do all of the following:

(1) (A) Subject to the requirements of subparagraphs (A) to (E), inclusive, of paragraph (2), on or after July 1, 2027, and before July 1, 2032, in four or more allocation periods per fiscal year, allocate tax credits to applicants.

(B) The California Film Commission shall increase the total credit amount allocated to an applicant by up to 2 percent of the initial credit amount allocated under this section, as determined by the California Film Commission, for qualified productions that employ trainees from a Career Pathways Program.

(2) (A) Establish a procedure for applicants to file with the California Film Commission a written application, on a form jointly prescribed by the California Film Commission and the Franchise Tax Board for the allocation of the tax credit. The application shall include, but not be limited to, all of the following information:

(i) The budget for the motion picture production.

(ii) The number of post-production days.

(iii) A financing plan for the post-production.

(iv) The diversity of the workforce employed by the applicant, including, but not limited to, the ethnic and racial makeup of the individuals employed by the applicant during the post-production of the qualified motion picture, to the extent possible.

(v) The amount of qualified wages the applicant expects to pay to qualified individuals.

(vi) The amount of tax credit the applicant computes the qualified motion picture will receive pursuant to paragraph (4) of subdivision (a).

(vii) A statement establishing that the tax credit described in this section is a significant factor in the applicant’s choice of location for the post-production of the qualified motion picture. The statement shall specify the jurisdiction or jurisdictions in which the post-production will occur in the absence of the tax credit. The statement shall be signed by an officer or executive of the applicant.

(viii) The applicant’s written policy against unlawful harassment, including, but not limited to, sexual harassment, which includes procedures for reporting and investigating harassment claims, a phone number for an individual who will be responsible for receiving harassment claims, and a statement that the company will not retaliate against an individual who reports harassment. The applicant shall also indicate how the policy will be distributed to employees and include a summary of education training resources, including the prohibition against, and prevention and correction of, sexual harassment and remedies available.

(ix) If applicable, summary of the applicant’s voluntary programs to increase the representation of minorities and women in the job classifications that are not included in qualified wages as set forth in clause (iv) of subparagraph (B) of paragraph (23) of subdivision (b) and information about how these programs are publicized to interested parties. The officer or executive referenced in clause (vii) who is signing the statement shall provide additional information about these programs, if needed and upon request, to the California Film Commission.

(x) Any other information deemed relevant by the California Film Commission or the Franchise Tax Board.

(B) Establish criteria, consistent with the requirements of this section, for allocating tax credits.

(C) Determine and designate applicants who meet the requirements of this section.

(D) For purposes of allocating the credit amounts subject to the categories described in subdivision (i) in any fiscal year, the California Film Commission shall do all of the following:

(i) Notwithstanding any other law, any television series or any new television series based on a pilot for a new television series that has been approved and issued a credit allocation by the California Film Commission under this section or Section 17053.98.5 shall be issued a credit for each subsequent season, for the life of that television series whenever credits are allocated within a fiscal year.

(ii) Notwithstanding clause (i), a recurring television series that does not request a credit allocation within 18 months from the date of completion of principal photography of the previous season is deemed to have waived the credit allocation guarantee provided by this clause and must reapply for a credit allocation. The California Film Commission may by regulation determine the appropriate priority to be given in a reapplication process for a recurring series reapplying pursuant to this clause.

(iii) The California Film Commission shall limit the amount of credits any recurring television series receives in a subsequent season to no more than the recurring television allocation amount.

(iv) In the event that insufficient tax credits are available to fund all recurring television series pursuant to this clause for any fiscal year or in the event the California Film Commission projects, in collaboration with the Department of Finance, that there will be insufficient tax credits available to fund all recurring television series in either of the subsequent two fiscal years, the California Film Commission shall make the following adjustments in the order given until the shortfall, or any projected shortfall for the two subsequent fiscal years, for recurring television series is eliminated:

(I) Notwithstanding paragraph (2) of subdivision (g), the California Film Commission may redirect any of the credit allocations from the features category to the television series category for that fiscal year until the shortfall is eliminated.

(II) Allocate up to 25 percent of total credit allocations that would otherwise be allocated in the 2029–30 fiscal year to recurring television series in the current fiscal year until the shortfall is eliminated. Any amounts transferred for allocation in the current fiscal year shall be subtracted from the amount allowed to be allocated in the 2029–30 fiscal year as specified in subdivision (g). Notwithstanding paragraph (3), the credit allocations that are subtracted from the 2029–30 fiscal year shall not be certified until July 1, 2030, or later.

(III) The California Film Commission shall consult with the qualified taxpayers who are producing the recurring television series for purposes of negotiating a minimally impactful reduction in the amount of credits awarded to each recurring television series for that fiscal year until the shortfall is eliminated.

(E) Subject to the annual cap and the allocation credit amounts based on categories described in subdivision (g), allocate an aggregate amount of credits under this section and Section 17053.98.5.

(3) Certify tax credits allocated to qualified taxpayers and do all of the following:

(A) Establish a verification procedure to update the information in subparagraph (A) of paragraph (2), including, but not limited to, the amounts of qualified expenditures paid or incurred by the applicant.

(B) Establish audit requirements that shall be satisfied before a credit certificate may be issued by the California Film Commission.

(C) Issue a credit certificate to a qualified taxpayer upon completion of the qualified motion picture reflecting the credit amount allocated after qualified expenditures have been verified. The amount of credit shown on the credit certificate shall not exceed the amount of credit allocated to that qualified taxpayer pursuant to this section.

(D) (i) Notwithstanding any other law, the California Film Commission shall certify a credit amount equal to 96 percent of the total credit allocated to the qualified taxpayer, unless the qualified taxpayer chooses to submit a diversity workplan and the California Film Commission determines that the qualified taxpayer has met or made a good-faith effort to meet the diversity goals in its diversity workplan, pursuant to clause (ii).

(ii) The California Film Commission shall certify an additional credit amount equal to 4 percent of the total credit allocated to the qualified taxpayer if a qualified taxpayer submits to the California Film Commission, in the form and manner required by the commission, all of the following:

(I) A diversity workplan within 30 days after receiving a credit allocation letter. The workplan shall be consistent with the diversity workplan checklist to address diversity and be broadly reflective of California’s population in terms of race, ethnicity, gender, disability status, and veteran status, and shall include all of the following:

(ia) A statement of the diversity goals the motion picture will seek to achieve in terms of qualified wages.

(ib) A statement of the diversity goals the motion picture will seek to achieve for individuals whose wages are excluded from qualified wages.

(ic) A plan of what strategies the motion picture will employ to achieve the goals in this subclause and subclause (II).

(id) Other requirements as the California Film Commission shall determine by regulation.

(II) An interim assessment on the qualified taxpayer’s efforts to meet the diversity workplan prior to the commencement of post-production. Upon review pursuant to a procedure prescribed in regulations, the California Film Commission shall determine whether the interim assessment indicates that the qualified motion picture is making a good-faith effort to meet the goals of the diversity workplan and shall notify the qualified motion picture of its findings.

(III) A final diversity assessment that includes information about how the project met or made a good-faith effort to meet the diversity workplan, including, but not limited to, aggregate data, voluntarily self-reported by individuals whose wages are included in qualified wages and individuals whose wages are excluded from qualified wages, with regard to their race, ethnicity, gender, disability status, veteran status, and ZIP Code.

(iii) The California Film Commission, in consultation with the Governor’s Office of Business and Economic Development, shall establish guidelines to evaluate diversity workplans as described in this subparagraph. The guidelines shall be posted on the California Film Commission’s internet website.

(iv) The California Film Commission shall approve or reject the diversity workplan of an applicant, to the extent allowed by federal and state law.

(v) This subparagraph shall not apply to an independent film with qualified expenditures of ten million dollars ($10,000,000) or less.

(4) Obtain, when possible, the following information from applicants that do not receive an allocation of credit:

(A) Whether the qualified motion picture that was the subject of the application was completed.

(B) If completed, in which state or foreign jurisdiction was post-production completed.

(C) Whether the applicant received any financial incentives from the state or foreign jurisdiction to complete post-production in that location.

(5) Provide the Legislative Analyst’s Office, upon request, any or all application materials or any other materials received from, or submitted by, applicants for which a credit allocation decision has been made, including, but not limited to, applicants that did not receive a credit allocation. Materials provided to the Legislative Analyst’s Office shall be in electronic format when available and include, but not be limited to, information provided pursuant to subclauses (I) to (III), inclusive, of clause (ii) of subparagraph (D) of paragraph (3).

(6) The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information for purposes of Article 2 (commencing with Section 19542) of Chapter 7 of Part 10.2.

(7) (A) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any previously allocated credits not certified that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.

(B) For purposes of this section, “previously allocated credits not certified” means either of the following:

(i) Credits allocated under paragraph (1) for which the qualified taxpayer to which the credit amounts were originally allocated has notified the California Film Commission in writing that the qualified taxpayer will not request certification for the allocated credits.

(ii) The difference between the amount of credits allocated under paragraph (1) to a qualified taxpayer and the amount of credits the California Film Commission certified, for that qualified taxpayer. For purposes of calculating the difference, the California Film Commission shall not consider any credit amounts for which the qualified taxpayer notifies the California Film Commission under clause (i).

(8) Notwithstanding any other law, on or after July 1, 2030, the California Film Commission may allocate, pursuant to this section, any credit amount described in subparagraph (B) of paragraph (1) of subdivision (g) that have not previously been added to credit amounts available for allocation under this section or a successor section or sections.

(9) The California Film Commission shall submit a report to the Legislature, on an annual basis beginning June 30, 2029, containing diversity data provided by the applicants. The report shall contain, in the aggregate and per project, an assessment of whether the diversity workplan goals required by this section were met for qualified motion pictures that submitted the final assessment to the California Film Commission in the prior fiscal year. The assessment shall contain an account of diversity workplans submitted, interim assessments submitted, and final assessments submitted, as well as which categories of the diversity workplan checklist established pursuant to paragraph (6) of subdivision (b) were included. In the event that a report is required pursuant to Section 17053.98 or 17053.98.1 and Section 23698 or 23698.1 in the same year as a report is required under this paragraph, the reports may be combined into one report. The California Film Commission shall submit each such assessment to the Legislature in compliance with Section 9795 of the Government Code.

(f) (1) The California Film Commission shall annually provide the Legislative Analyst’s Office, Office and the Franchise Tax Board, and the California Department of Tax and Fee Administration Board with a list each month of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission. The list shall include the names and taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, of the qualified taxpayer.

(2) (A) Notwithstanding paragraph (6) of subdivision (e), the California Film Commission shall annually post on its internet website and make available for public release all of the following:

(i) A table which includes all of the following information: a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer by the California Film Commission, the number of post-production days in California the qualified taxpayer represented in its application would occur, the number of California jobs that the qualified taxpayer represented in its application would be directly created by the post-production, and the total amount of qualified expenditures expected to be spent by the post-production.

(ii) A narrative staff summary describing the post-production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit.

(iii) The diversity report submitted annually to the Legislature described in paragraph (9) of subdivision (e) organized per production and an aggregate compilation describing the voluntary programs collected pursuant to clause (xiii) of subparagraph (A) of paragraph (2) of subdivision (e).

(B) Nothing in this subdivision shall be construed to make the information submitted by an applicant for a tax credit under this section a public record, including for the purposes of the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code).

(g) (1) (A) The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 is ____ dollars ($____), shall be determined by the Legislature in the annual Budget Act, plus any amount described in subparagraph (B) or (C) in credits for the 2027–28 fiscal year and each fiscal year thereafter, through and including the 2032–33 fiscal year, except as provided in paragraph (7) of subdivision (e).

(B) The unused allocation credit amount, if any, for the preceding fiscal year.

(C) The amount of previously allocated credits not certified.

(2) (A) For each fiscal year the California Film Commission shall reserve 85 percent of the total aggregate allocable pursuant to this section and Section 17053.98.5, for allocation to applicants that satisfy all of the following:(i) The applicant provides wages for employees in California that are, on average, equal to or more than the average weekly wage rate for similar workers in the same occupation.(ii) The applicant provides, or contributes to, employer-paid health and welfare benefits and pension contributions for employees performing qualified services in California. Such costs shall be treated as qualified expenditures for purposes of calculating the credit.(iii) The applicant participates in a career-based learning and training program approved by the California Film Commission.(iv) The applicant complies with workforce reporting requirements established by the California Film Commission, including reporting related to diversity, antiharassment policies, and workforce composition, consistent with the existing Film and Television Tax Credit Program.(v) The applicant directly employs at least one employee providing qualified services in the state.(B) Deviation from any of the criteria listed in subparagraph (A) shall not be disqualifying if such deviation is required to comply with a valid collective bargaining agreement.

(2)

(3) Subject to changes in allocations pursuant to clause (iv) of subparagraph (D) of paragraph (2) of subdivision (e), the California Film Commission shall allocate the credit amounts subject to the following categories, but shall have discretion to reallocate any of the funds within one category to the other category to maximize the amount of total credits allocated:

(A) Features, independent films, and animated films shall be allocated 50 percent of the amount specified in paragraph (1).

(B) A television series, miniseries, limited series, and animated series shall be allocated 50 percent of the amount specified in paragraph (1).

(3)

(4) Any act that reduces the amount that may be allocated pursuant to paragraph (1) constitutes a change in state taxes for the purpose of increasing revenues within the meaning of Section 3 of Article 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.

(h) The California Film Commission shall have the authority to allocate tax credits in accordance with this section and in accordance with any regulations prescribed pursuant to subdivision (d) upon adoption.

(i) (1) A qualified taxpayer may make a one-time election to be paid a refund for each taxable year of the refundable period, not to exceed the annual refundable amount.

(2) For purposes of this subdivision, the following definitions shall apply:

(A) “Annual refundable amount” means 20 percent of the total refundable amount.

(B) (i) “Credit amount” means the credit amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e).

(ii) In the case of a pass-thru entity, the “credit amount” means the pro rata share or distributive share of the credit passed through to the partner or shareholder of the qualified taxpayer. shareholder. For purposes of this clause, the term “pass-thru entity” means any partnership, “S” corporation, or limited liability company treated as a partnership.

(iii) In the case of an assigned credit, the “credit amount” means the credit amount that was assigned to the taxpayer.

(C) “Refundable period” means the first taxable year that the credit certificate is issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (e), and the succeeding four taxable years.

(D) “Total refundable amount” means 90 percent of the credit amount that exceeds the “tax” in the first taxable year of the refundable period.

(3) The refund shall be computed as follows:

(A) (i) In the first taxable year of the refundable period, the credit amount shall be allowed against the “tax” computed under this part for the taxable year.

(ii) If the credit allowed by this section exceeds the “tax” in the first taxable year of the refundable period, the annual refundable amount shall be refunded to the qualified taxpayer.

(B) (i) In each taxable year after the first taxable year of the refundable period, the annual refundable amount shall be allowed as a credit against the “tax” computed under this part for the taxable year, and the excess, if any, shall be refunded to the qualified taxpayer.

(ii) If the qualified taxpayer’s tax liability for the taxable year exceeds the annual refundable amount, only the annual refundable amount shall be allowed as a credit against the qualified taxpayer’s “tax.”

(4) (A) In the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount, shall be carried over to the succeeding taxable year.

(B) In each taxable year other than the first taxable year of the refundable period, the total refundable amount, less the annual refundable amount allowed as a credit against the qualified taxpayer’s “tax” or refunded in the current and prior taxable years in the refundable period, shall be carried over to the next succeeding year of the refundable period.

(C) Notwithstanding paragraph (11) of subdivision (c), if an election is made pursuant to this subdivision, no amount of credit shall be allowed after the refundable period.

(5) Any refund pursuant to this subdivision shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account Corporation Tax Fund and refunded to the qualified taxpayer upon their election.

(6) An election made pursuant to this subdivision shall be irrevocable and shall be made on an original, timely filed return required under Part 10.2 (commencing with Section 18401) for the taxable year that the credit certificate is issued in the form and manner as prescribed by the Franchise Tax Board.

(7) A taxpayer that purchases a credit pursuant to paragraph (1) of subdivision (c) cannot elect to be paid a refund pursuant to this subdivision.