California Codifies Loan-Out Companies, Adds Payroll Companies Reporting Requirements

On September 30, 2024, California Governor Gavin Newsom signed SB 422 into law that (1) protects entertainment workers’ use of loan-out companies and (2) changes Motion Picture Payroll Services Companies’ California Employment Development Department (EDD) reporting requirements on loan-outs. This bill amends Section 679 of the Unemployment Insurance Code and adds Section 1088.9. 

While loan-out companies have been in use for decades in the industry, they were not formally recognized by the state of California. Under this new law, the formal definition of a loan-out company aligns with the pre-established industry standard. 

The law codifies the standard, a “loan-out employer" is “a corporation, or limited liability company that is classified as a corporation for federal income tax purposes, the principal activity of which is the performance of personal services for a motion picture production company or allied motion picture services company, provided that those services are substantially performed by an employee of the corporation who owns, on any day during the taxable year, more than 10 percent of the outstanding stock of the corporation.”

• The definition of a loan-out employer aligns with GreenSlate’s policy for acceptance of processing loan-out payments. We ask that you continue to ensure in your internal approval process that the loan-outs submitted to GreenSlate for payment comply with this requirement. 

The new law also clarifies that the loan-out company is the UI employer of the employee-owners or members who provide services to production companies. Further, neither a loan-out company nor an individual whose services are provided by a loan-out company are employees of the motion picture payroll services company.

• Loan-out employees will not qualify for unemployment insurance through GreenSlate, any such claims will be denied.      

The new law puts additional reporting requirements onto Motion Picture Payroll Services Companies. Starting in 2026, Motion Picture Payroll Services Companies will need to file a report containing the following information for each loan-out company processed:

1. The total amount of payments made to the loan-out company.
2. The business name, address, and telephone number of the loan-out company.
3. The federal employer identification number, California employer account number, or other identifying number of the loan-out corporation, as required by the EDD, in consultation with the Franchise Tax Board.
4. The full name, address, and social security number of any individual whose services were provided through the loan-out company.
5. The name, address, and federal employer identification number, California employer account number, or other identifying number of the Motion Picture Payroll Services Company, as required by the EDD, in consultation with the Franchise Tax Board.
6. Any other information required by the EDD.