Section 5527 - Jobs Ratio Ranking Process(a) For the purposes of the jobs ratio calculation, qualified wages shall include: (1) Qualified wages which are directly paid by the applicant or its payroll service; plus(2) thirty-five percent (35%) of all qualified non-wage expenditures, including contracted services in which the qualified wages are not directly paid by the applicant, but by the vendor. Qualified VFX expenditures may be apportioned as 70% qualified wage and 30% qualified non-wage for VFX work performed by third party California vendors.(b) The jobs ratio as defined in Section 5520 (l) may be increased by up to twenty-five percent (25%) if the qualified motion picture demonstrates an increase in economic activity in the state. This activity is based on the following:(1) One to seven bonus points based on the visual effects expenditures per project category, e.g., independent film, non-independent feature, television project. Excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less.(2) One to ten bonus points based on the percentage of principal photography days outside the Los Angeles Zone in relation to the qualified motion picture's total principal photography days in the state. To qualify for bonus points, a principal photography day outside the Los Angeles Zone must include at minimum filming the first scene of the day outside the Los Angeles Zone.(3) One to five bonus points based on the wages paid to scoring musicians, including the following positions: Instrumental musicians, vocalists, music arrangers, orchestrators, Musical Instrument Digital Interface(MIDI) transcribers, music copyists, music librarians, conductors (unless also the composer), and musician and choral contractors employed solely for the purpose of recording music for the qualified motion picture. Excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less.(c) The CFC shall establish the bonus point ranges as follows:(1) Percentage points for principal photography days out of the Los Angeles zone as provided in subsection (b)(2) shall be determined by applying percentage points on a linear proportionate scale. Starting with 10% of principal photography days, the applicants will receive one point for every 10 percent increase of out of zone principal photography days (10% or more but less than 20% of the above days = 1 point, 20% or more but less than 30% of the above days = 2 points, etc.) until the maximum cap of points is received. The percentages are determined by dividing the out of zone principal photography days by the total principal photography days.(A) If the maximum number of points is not achieved by any project in a given year's applicant pool, the CFC may decrease the step size (for example from 10% to 5% incremental steps) needed to gain an additional point in subsequent allocations but maintain the linear proportionate structure.(2) Bonus points for VFX as provided in subsection (b)(1) shall be determined utilizing the following method: The CFC shall use the National Institute of Standards and Technology formula to create cut-off values that sort an equal number of projects into each point range as further described below. Following the National Institute of Standards and Technology (NIST) "Engineering Statistics Handbook: Percentile" formula, the applicant pool is first ranked from lowest to highest value in each of the three categories, where 1 corresponds to the lowest rank. The formula then finds the rank n associated with each percentile cut-off as follows:
n = P/100 x (N + 1)
P is the percentile of interest. If there are ten possible point ranges for example, then P = 10 would correspond to the 10th percentile, P = 20th to the 20th percentile, and so forth, until the 100th percentile has been calculated. N is the total number of applicants in the current applicant pool.
The formula then uses a standard rounding and conversion procedure to turn the rank n into a monetary cut-off value. The Excel function PERCENTILE automatically does this calculation according to the same NIST formula (see citation: http://www.itl.nist.gov/div898/handbook/prc/section2/prc262.htm) The CFC shall use this Excel function to determine initial cut-offs, and then choose final cut-offs within +/- 10 percent of what the formula produces, such that the ranges can be rounded. Ranges may be adjusted for future application periods based on the data collected from previous application periods.
(3) Bonus points for music wages as provided in section (b)(3) shall be determined by utilizing music wage data from submitted budgets in prior tax credit programs and from music contractors. After determining the highest to lowest qualified wage figures per type of production, ranges with percentage points by production type were calculated.(d) Ranges to establish the points for the above criteria shall be posted on the CFC website prior to any application period.(e) The jobs ratio calculation shall not include any increase to the tax credit from work outside the Los Angeles zone or qualified visual effects incurred in California as set forth in Section 5524 (e). It also shall not include any increase to the tax credit from expenditures relating to a contingency or completion bond.(f) The jobs ratio multiplied by (total points [acquired in (b)(1)-(3), as applicable)] x 1/100) + 1 shall be the adjusted jobs ratio which shall be utilized to rank qualified motion pictures within each category during the application process, pursuant to Section 5521 (i).(g) This process shall be automatically calculated on the online application, based on the information provided by the applicant.(h) If information submitted by an applicant is overstated on the application, the applicant will be penalized as provided in Revenue and Taxation Code Sections 17053.98(d)(2) and 23698(d)(2).Cal. Code Regs. Tit. 10, § 5527
Note: Authority cited: Sections 17053.98(e) and 23698(e), Revenue and Taxation Code; and Section 11152, Government Code. Reference: Sections 17053.98 and 23698, Revenue and Taxation Code; and Section 14998.1, Government Code.
Note: Authority cited: Sections 17053.98(e) and 23698(e), Revenue and Taxation Code; and Section 11152, Government Code. Reference: Sections 17053.98 and 23698, Revenue and Taxation Code; and Section 14998.1, Government Code.
1. New section filed 7-1-2020; operative 7-1-2020 pursuant to Government Code section 11343.4(b)(3)(Register 2020, No. 27).
2. Amendment of subsection (b) filed 12-22-2023; operative 12/22/2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 51).