Personal Income Tax Law: Corporation Tax Law: credits: qualified motion picture: post-production.

New Section 2.5 added, providing an alternative version of Section 17039 (credit ordering) that incorporates changes proposed by AB 2222. This version adds a new paragraph (13) for the credit under Section 17053.76 (taxable years 2027-2031) and adjusts cross-references throughout the ordering list. The provision is operative only if both AB 2319 and AB 2222 are enacted and AB 2319 is enacted last.

The state-mandated local program designation in the fiscal analysis changed from 'no' to 'yes,' indicating the bill now imposes obligations on local governments that were not present in the prior version.

The anti-double-dipping provision in Section 17053.98.5(a)(1) was broadened: a credit is now denied if one has been claimed under Section 17053.98, 17053.98.1, 23698, or 23698.1 (previously only 17053.98.1 was referenced), preventing projects from stacking the post-production credit on top of other film-related credits.

The definition of 'independent film' was revised to remove the prior language about being 'not publicly traded' and replace it with a new ownership threshold: publicly traded companies must not own, directly or indirectly, more than 30 percent of the producing company.

The definition of 'Post-Production Services Ratio' (formerly paragraph 15) was removed from Section 17053.98.5, along with its associated calculation methodology for qualified wages and visual effects exclusions.

The state-mandated local program designation changed from 'no' to 'yes,' meaning the bill now imposes obligations on local agencies that were not present in the prior version.

Senator Grayson was added as a coauthor alongside Senator Allen, indicating additional Senate sponsorship of the bill.

The prohibition on claiming this credit for a motion picture already credited under another program was expanded. Previously it only barred stacking with Section 17053.98.1 (the personal income tax version of the motion picture credit). Now it also bars stacking with Sections 17053.98, 23698, and 23698.1 (the corporate tax equivalents), closing a potential loophole where a production could claim both this post-production credit and a corporate-level principal photography credit.

The definition of 'applicable period' was simplified. It previously began on the first day of principal photography when the credit is allocated and included time to strike a remote location and return to the Los Angeles zone. Now it simply begins when the credit is allocated and ends when post-production concludes, removing the tie to principal photography start date.

The condition for the additional 5 percent credit (for in-state work) was modified. The prior version required at least 50 percent of below-the-line production wages to be for services performed in the state. The new text appears to reference 'principal photography days' in addition to wages, though the language is garbled and may reflect a drafting error.

The reference for the credit certificate changed from subparagraph (D) to subparagraph (C) of paragraph (3) of subdivision (e), likely reflecting renumbering of provisions in the allocation section.

The requirement that principal photography must commence within 180 days (budgets under $100M) or 240 days (budgets of $100M or more) after application approval was removed entirely, along with related exceptions for death, disability, acts of God, and special provisions for recurring TV series. This removes a major eligibility condition that could have disqualified productions from receiving the credit.

The requirement that at least 75 percent of post-production music scoring labor be performed at an in-state facility, with minimum dollar thresholds ($2,500 for budgets under $15M and $10,000 for budgets of $15M or more), was removed. Music scoring expenditures are now eligible as qualified expenditures without these additional conditions.

The phrase 'whichever is greater' was removed from the 75 percent / $1,000,000 threshold for editorial post-production expenses incurred in-state. This changes how the minimum in-state spending requirement is calculated for qualifying as a qualified motion picture.

A new definition of 'Pension' was added, specifying it means a traditional pension plan and does not include defined contribution plans as defined in Section 414(i) of the Internal Revenue Code.

The definition of 'Post-production' was restructured to explicitly mean both 'editorial post-production' and 'visual effects,' with separate sub-definitions. The editorial post-production definition now includes mastering, music composition and scoring, recording sessions performed by musicians, and related audio production services, which were not as clearly enumerated before.

New definitions for 'Recurring television allocation amount' and 'Recurring television series' were added. The allocation amount is calculated as the base year allocation plus 3 percent of the base year allocation for each subsequent fiscal year, creating a growing credit allocation mechanism for TV series that return for additional seasons.

The term 'postproduction' was standardized to 'post-production' throughout the entire bill, and coauthors Assembly Member Schiavo and Senator Allen were added.

The bill now amends Section 17039 of the Revenue and Taxation Code, which governs how all personal income tax credits are ordered and applied against a taxpayer's net tax. The new post-production credit is placed ninth in the priority order (after carryover and refundable credits but before some others) for taxable years 2027 through 2032.

The bill now appropriates from both the Tax Relief and Refund Account and the Corporation Tax Fund, rather than only the Tax Relief and Refund Account. This expands the pool of money available to pay out credits.

The definition of 'editorial post-production' was expanded to explicitly include music orchestration, digital and film dailies color and processing, cloud workflow and data management, use of off-camera talent after principal photography, and music supervision.

The 'applicable period' definition was changed from commencing with 'the first day of principal photography' to 'the first day of principal photography when the credit is allocated,' tying the start of the qualifying period to the allocation decision rather than simply the start of filming.

A new exception allows amounts paid for music orchestration services performed outside California to count as qualified expenditures if the music is recorded in the state. This relaxes the general rule that expenditures must be for services performed within the state.

The reference in the qualified expenditures definition was changed from amounts paid after 'filing an application with the California Film Commission' to amounts paid after 'allocation of the credit,' reflecting a shift in the administrative process from application-based to allocation-based.

The definition of 'post-production' was restructured to explicitly include two components: 'editorial post-production' (picture editing, sound design, foley, mixing, music editing, scoring, mastering, etc.) and 'visual effects' (defined by reference to Title 10, Section 5550 of the California Code of Regulations). Previously, visual effects were not clearly delineated as a separate component within the definition.

A new requirement was added to the 'qualified expenditures' definition: visual effects expenditures are excluded unless at least 75 percent or $500,000 (whichever is greater) of those visual effects expenditures are incurred for services performed within California and purchase or rental of property used within the state.

The qualified motion picture condition requiring at least 75 percent or $1,000,000 of in-state spending was narrowed to apply only to 'editorial post-production' expenses, not to visual effects expenditures. This means a project could qualify even if its visual effects spending does not meet the 75 percent/$1 million threshold, as long as its editorial post-production spending does.

A new provision was added stating that the additional credit amounts (the 5 percent for work outside the Los Angeles zone, the 10 percent for qualified wages outside the zone, and the 15 percent for music scoring) are not subject to the $6 million per-project expenditure caps in paragraph (3)(B), and shall not be considered in determining whether those caps have been reached or exceeded. This effectively allows taxpayers to claim additional credit on top of the capped base amount.

The appropriation status changed from 'no' to 'yes,' and the fiscal committee designation changed from 'no' to 'yes.' The bill now formally appropriates moneys from the Tax Relief and Refund Account to pay refunds when a credit exceeds a taxpayer's liability.

The program is now described as a 'standalone, post-only tax credit program,' adding the word 'standalone' to emphasize it operates independently from the principal photography credit. The short name was changed from 'California Postproduction Tax Credit' to 'California Post-production Tax Credit.'

Throughout the bill, the term 'postproduction' was consistently replaced with 'post-production' (hyphenated) for standardization.

The bill now creates an actual tax credit program (Sections 17053.98.5 and 23698.5) rather than merely declaring legislative intent to create one. The introduced version contained only findings and a statement of intent; the amended version contains full operative provisions.

Expanded legislative findings to name specific facilities at risk of closure (Sony, Fox, Warner Brothers, Skywalker), add Georgia, Pennsylvania, UK, Ireland, and Italy to competing jurisdictions, reference the California Jobs First State Economic Blueprint, and clarify that the credit complements rather than replaces the principal photography incentive.

Establishes a credit equal to 35% of qualified editorial expenditures plus up to 15% in additional credits (5% for postproduction outside the LA zone, 10% for wages paid to CA residents outside the LA zone, 15% for music scoring), for a total range of 35-50%. Makes an appropriation from the Tax Relief and Refund Account.

Vote requirement changed from majority to two-thirds majority. Appropriation changed from 'no' to 'yes.' Fiscal committee changed from 'no' to 'yes.'

Sets eligibility requirements including: minimum $1 million production budget, at least 75% (or $1 million) of postproduction expenses in California, completion within 30 months of application approval, US copyright registration, principal photography commencement after approval (with exceptions), diversity workplan checklist, prevailing wage compliance, and Career Readiness participation.

Allows independent films (minimum $1 million budget, not publicly traded, no public company owns more than 30%) to sell their credits to unrelated parties, subject to reporting requirements and restrictions on resale.

Caps qualified expenditures at $6 million for non-visual effects and $6 million for visual effects per qualified motion picture. Defines the Los Angeles zone as a 30-mile radius from Beverly Boulevard and La Cienega Boulevard with specific inclusions.

Guarantees credit allocations for subsequent seasons of recurring television series using a formula of base year allocation plus 3% per subsequent year. Includes shortfall management mechanisms including redirecting up to an unspecified percentage from features to TV, pulling forward up to 25% of 2029-30 allocations, and negotiating reductions with producers.

Requires a 4% bonus credit for meeting diversity workplan goals (96% base certification plus 4% bonus). Independent films with $10 million or less in qualified expenditures are exempt from the diversity workplan requirement.

Credits are allocable on or after July 1, 2027 and before July 1, 2032, in four or more allocation periods per fiscal year. Excess credits carry forward up to 8 taxable years.