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<ns0:Id>20250AB__240398AMD</ns0:Id>
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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
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<ns0:ActionText>AMENDED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2026-03-19</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Elhawary</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_ORIGINATING">(Coauthor: Assembly Member Schiavo)</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Elhawary</ns0:Name>
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<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Schiavo</ns0:Name>
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<ns0:Title>An act to add Sections 17053.98.5 and 23698.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.</ns0:Title>
<ns0:RelatingClause>taxation, to take effect immediately, tax levy</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Income tax: credits: commercial production.</ns0:Subject>
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<ns0:DigestText>
<html:p>The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including numerous motion picture credits.</html:p>
<html:p>This bill, for taxable years beginning on or after January 1, 2027, would allow a credit against the taxes imposed by those laws to a qualified taxpayer that produces qualified commercials, as defined, in the state in an amount equal to 20% or 30% of the qualified production costs attributable to the production of a qualified commercial, as specified. The bill would exclude any commercial that is created entirely by generative artificial intelligence, as specified, and would require the qualified commercial to adhere to specified labor standards. The bill would require the California Film Commission to
establish an application process and allocate the credits on or after July 1 each year, in accordance with certain requirements. The bill would limit the aggregate amount of credits that may be allocated for a fiscal year under these provisions to $15,000,000. The bill would require specified certifications under penalty of perjury. By expanding the scope of a crime, this bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
<html:p>This bill would take effect immediately as a tax levy.</html:p>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
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<ns0:Num>SECTION 1.</ns0:Num>
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Section 17053.98.5 is added to the
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, to read:
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<ns0:LawSection id="id_7B71A744-E61E-447F-8DA4-109B1910B181">
<ns0:Num>17053.98.5.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
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 the requirements of this section, in an amount equal to the following, as applicable:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Twenty percent of the qualified production costs attributable to the production of a qualified commercial, if the qualified commercial is filmed inside the Los Angeles zone, as defined in Section 17053.98.1.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Thirty percent of the qualified production costs attributable to the production of a qualified commercial, if the qualified commercial is filmed outside the Los Angeles zone, as defined in Section
17053.98.1.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section, the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Advertisement” means an openly and identifiably sponsored public promotion or announcement of goods, services, companies, or ideas. For the purposes of this definition, advertisement shall not include music videos or infomercials.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Covered worker” means all individuals employed or engaged in the state by a qualified commercial production company in connection with the production of a qualified commercial, including, but not limited to, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Cast and background performers.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Production and postproduction crew.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Production assistants.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Technical, creative, and craft classifications.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Any individual whose services constitute employment.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“Generative artificial intelligence” means a computational system or model capable of generating text, images, audio, video, performances, or other expressive content based on training data, algorithms, or machine learning techniques, without direct contemporaneous creative control by a natural person over the expressive output.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified commercial” means an advertisement of any length that satisfies the requirements of subdivisions (c) and (d) and is recorded on film, audiotape, videotape, or digital medium in the state for multimarket distribution by way of radio,
television networks, cable, satellite, motion picture theaters, or internet.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified commercial” shall include a package of commercials which includes two or more commercials that are bid and produced under a single agency or client contract in which a specified number of deliverables are produced together within a defined timeframe by a qualified commercial production company.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
“Qualified commercial” shall not include either of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A news or current affairs program, interview or talk program, network promotional, such as a commercial promoting a television series or movie, “how-to” or instructional commercial or program, commercial or program consisting entirely of stock footage, trailer promoting a theatrical film, sporting event or sporting program, game show, award ceremony, or daytime
drama, including a daytime soap opera or reality program.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A production involving sexually explicit conduct subject to the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Qualified commercial production company” means a person that meets both of the following requirements:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Is responsible for the direct payment of production expenses and is a signatory to the qualified commercial’s contracts with its payroll company and facility operators.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Is neither the distributor or the contracting entity for production of the qualified commercial described in subparagraph (A), nor a variable interest entity of the distributor or contracting entity.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified production costs” means all expenditures made in the state directly attributable to the production of a qualified commercial.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified production costs” shall not include either of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Costs for a story, script, or scenario to be used for a qualified commercial.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Wages, salaries, or other compensation for writers, directors, including music directors, producers, and performers other than musicians and background actors with no scripted lines who are employed by a qualified company.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
“Qualified taxpayer” means a qualified commercial production company that produces qualified commercials in the state and is allocated a credit by the California Film Commission pursuant to
this section.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A production shall not be deemed a qualified commercial and shall not be eligible for the credit if the commercial is created entirely by means of generative artificial intelligence.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For purposes of this subdivision, a commercial is deemed to be created entirely by means of generative artificial intelligence if both of the following are satisfied:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
All principal expressive elements, including, but not limited to, script, dialogue, visual imagery, animation, performances, voices, music, and sound design, are generated by generative artificial intelligence.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
No natural person performs a principal creative role in the origination, performance, or fixation of those expressive elements, other than de
minimis technical prompting, selection, or compilation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
This subdivision shall not exclude a production from eligibility for any of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Use of generative artificial intelligence as a tool in support of human creative decisionmaking.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Use of artificial intelligence-assisted processes in preproduction, production, or postproduction, provided that natural persons exercise principal creative control.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Incorporation of artificial intelligence for technical, logistical, or efficiency purposes that do not replace principal creative roles performed by natural persons.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
The production of a qualified commercial shall satisfy one of the following for covered workers:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The covered workers are employed pursuant to a valid and applicable collective bargaining agreement with a labor organization recognized under state or federal law.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The covered workers are employed under terms and conditions that, taken as a whole, are no less favorable than those provided under the most comparable collective bargaining agreement applicable to similar motion picture production work in the state, including all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Minimum wage rates.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Overtime premiums.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Meal and rest period protections.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Health and welfare contributions.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Pension or retirement contributions, where applicable.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
For purposes of this section, the California Film Commission shall do all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Establish an application process and allocate tax credits to applicants in accordance with the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A qualified production company may submit a credit application to the California Film Commission between January 1 and April 1 of the calendar year succeeding the year in which the production of the qualified commercial occurred.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The application shall be submitted in a form and manner determined by the California Film Commission.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The California Film Commission
shall approve applications and allocate credit amounts beginning July 1 of each year.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
Require, as part of the application process, a certification under penalty of perjury that the production is not created entirely by means of generative artificial intelligence and that the labor standards described in subdivision (d) are satisfied.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For purposes of verifying compliance with the requirements of subdivision (d), the California Film Commission may require the following documentation:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Payroll records.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Benefit contribution reports.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Copies of applicable collective bargaining agreements.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Attestations from payroll service providers.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Adopt regulations to implement this section. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the California Film Commission is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code. For purposes of subdivision (e) of Section 11346.1 of the Government Code, the 180-day period, as applicable to the effective period of an emergency regulatory action and submission of specified materials to the Office of Administrative Law, is hereby extended to 240 days.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 23698.5 is fifteen million dollars
($15,000,000), plus any amount unallocated in any prior fiscal years.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information subject to Section 19542.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
Section 41 shall not apply to the credits allowed by this section or Section 23698.5.
</html:p>
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<ns0:Num>SEC. 2.</ns0:Num>
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Section 23698.5 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:LawSection id="id_5DAA52C1-3CA5-4083-89B8-D15E38E86A28">
<ns0:Num>23698.5.</ns0:Num>
<ns0:LawSectionVersion id="id_9064FFFA-9B75-4EF3-A295-86041CD10149">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
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 the requirements of this section, in an amount equal to the following, as applicable:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Twenty percent of the qualified production costs attributable to the production of a qualified commercial, if the qualified commercial is filmed inside the Los Angeles zone, as defined in Section 23698.1.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Thirty percent of the qualified production costs attributable to the production of a qualified commercial, if the qualified commercial is filmed outside the Los Angeles zone, as defined in Section 23698.1.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section, the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Advertisement” means an openly and identifiably sponsored public promotion or announcement of goods, services, companies, or ideas. For the purposes of this definition, advertisement shall not include music videos or infomercials.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Covered worker” means all individuals employed or engaged in the state by a qualified commercial production company in connection with the production of a qualified commercial, including, but not limited to, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Cast and background performers.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Production and postproduction crew.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Production
assistants.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Technical, creative, and craft classifications.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Any individual whose services constitute employment.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“Generative artificial intelligence” means a computational system or model capable of generating text, images, audio, video, performances, or other expressive content based on training data, algorithms, or machine learning techniques, without direct contemporaneous creative control by a natural person over the expressive output.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified commercial” means an advertisement of any length that satisfies the requirements of subdivisions (c) and (d) and is recorded on film, audiotape, videotape, or digital medium in the state for multimarket distribution by way of radio, television networks, cable,
satellite, motion picture theaters, or internet.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified commercial” shall include a package of commercials which includes two or more commercials that are bid and produced under a single agency or client contract in which a specified number of deliverables are produced together within a defined timeframe by a qualified commercial production company.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
“Qualified commercial” shall not include either of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A news or current affairs program, interview or talk program, network promotional, such as a commercial promoting a television series or movie, “how-to” or instructional commercial or program, commercial or program consisting entirely of stock footage, trailer promoting a theatrical film, sporting event or sporting program, game show, award ceremony, or daytime drama, including a daytime
soap opera or reality program.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A production involving sexually explicit conduct subject to the recordkeeping requirements of Section 2257 of Title 18 of the United States Code.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
“Qualified commercial production company” means a corporation that meets both of the following requirements:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Is responsible for the direct payment of production expenses and is a signatory to the qualified commercial’s contracts with its payroll company and facility operators.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Is neither the distributor or the contracting entity for production of the qualified commercial described in subparagraph (A), nor a variable interest entity of the distributor or contracting entity.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Qualified production costs” means all expenditures made in the state directly attributable to the production of a qualified commercial.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
“Qualified production costs” shall not include either of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Costs for a story, script, or scenario to be used for a qualified commercial.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Wages, salaries, or other compensation for writers, directors, including music directors, producers, and performers other than musicians and background actors with no scripted lines who are employed by a qualified company.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
“Qualified taxpayer” means a qualified commercial production company that produces qualified commercials in the state and is allocated a credit by the California Film Commission pursuant to this section.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A production shall not be deemed a qualified commercial and shall not be eligible for the credit if the commercial is created entirely by means of generative artificial intelligence.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For purposes of this subdivision, a commercial is deemed to be created entirely by means of generative artificial intelligence if both of the following are satisfied:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
All principal expressive elements, including, but not limited to, script, dialogue, visual imagery, animation, performances, voices, music, and sound design, are generated by generative artificial intelligence.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
No natural person performs a principal creative role in the origination, performance, or fixation of those expressive elements, other than de minimis technical
prompting, selection, or compilation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
This subdivision shall not exclude a production from eligibility for any of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Use of generative artificial intelligence as a tool in support of human creative decisionmaking.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Use of artificial intelligence-assisted processes in preproduction, production, or postproduction, provided that natural persons exercise principal creative control.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Incorporation of artificial intelligence for technical, logistical, or efficiency purposes that do not replace principal creative roles performed by natural persons.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
The production of a qualified commercial shall satisfy one of the following for covered workers:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The covered workers are employed pursuant to a valid and applicable collective bargaining agreement with a labor organization recognized under state or federal law.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The covered workers are employed under terms and conditions that, taken as a whole, are no less favorable than those provided under the most comparable collective bargaining agreement applicable to similar motion picture production work in the state, including all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Minimum wage rates.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Overtime premiums.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Meal and rest period protections.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Health and welfare contributions.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Pension or retirement contributions, where applicable.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
For purposes of this section, the California Film Commission shall do all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Establish an application process and allocate tax credits to applicants in accordance with the following:
</html:p>
<html:p>
(A)
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A qualified production company may submit a credit application to the California Film Commission between January 1 and April 1 of the calendar year succeeding the year in which the production of the qualified commercial occurred.
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(B)
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The application shall be submitted in a form and manner determined by the California Film Commission.
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(C)
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The California Film Commission
shall approve applications and allocate credit amounts beginning July 1 of each year.
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(2)
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(A)
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Require, as part of the application process, a certification under penalty of perjury that the production is not created entirely by means of generative artificial intelligence and that the labor standards described in subdivision (d) are satisfied.
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(B)
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For purposes of verifying compliance with the requirements of subdivision (d), the California Film Commission may require the following documentation:
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(i)
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Payroll records.
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(ii)
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Benefit contribution reports.
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(iii)
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Copies of applicable collective bargaining agreements.
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(iv)
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Attestations from payroll service providers.
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(3)
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Adopt regulations to implement this section. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the California Film Commission is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code. For purposes of subdivision (e) of Section 11346.1 of the Government Code, the 180-day period, as applicable to the effective period of an emergency regulatory action and submission of specified materials to the Office of Administrative Law, is hereby extended to 240 days.
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(f)
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The aggregate amount of credits that may be allocated for a fiscal year pursuant to this section and Section 17053.98.5 is fifteen million dollars
($15,000,000), plus any amount unallocated in any prior fiscal years.
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(g)
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The information provided to the California Film Commission pursuant to this section shall constitute confidential tax information subject to Section 19542.
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<ns0:Num>SEC. 3.</ns0:Num>
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<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
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B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
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B of the California Constitution.
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<ns0:BillSection id="id_53973A30-2DDA-4691-A6B4-627C32C77E6F">
<ns0:Num>SEC. 4.</ns0:Num>
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<html:p>This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.</html:p>
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