Film & TV Tax Credit Program 3.0
Tax Credit Program 2.0
2.0 Tax Credit Program Regulations
The Film and TV Tax Credit Program 2.0 operates under a number of Regulations. Which Regulations apply for your project? Each project shall utilize the Regulations according to the date of when the Credit Allocation letter (CAL) was issued. Regulations are not retroactive. If you need further clarification, contact the CFC.
Key changes between the Emergency Regulations, the 2nd Re-Adopted regulations, and the Permanent Regulations:
Pick up orders were originally required for new or renewed television series. Beginning with the 2nd re-adoption regulations and continuing, pilots must also have a pick up order in order to apply for a tax incentive.
Independent Film Definition
In the Permanent Regulations, an “Independent Film” is clearly defined as a motion picture produced by a company not owned more than 25% by a publicly traded company and with a running time of at least 75 minutes.
Out of Los Angeles Zone
The program allows additional tax credits (“uplifts”) for expenditures Out of the L.A. Zone (OZ) for non-independent productions (excluding relocating series in their first year). Under the Emergency Regulations, the calculation of out of zone non-wage expenditures involved subtracting post production, insurance and legal expenditures (tagged “PST”) from the total qualified non-wage spend. This figure is pro-rated by OZ Principal Photography (PP) days in relationship to total PP days to reach the amount which will qualify for the additional 5% tax credit.
With input from our stakeholders, the CFC changed this methodology in the Permanent Regulations. Applicants will now “tag” out of zone non-wage expenditures (ZE – zone expenditures or, optionally, ZC – zone consumables) when budgeting and during the Applicable Period (prep/shoot/strike out of the zone). This amount will be prorated as described previously. OZ wages continue to be tagged and tracked as before (ZW). The Qualified Expenditure Charts and Tracking Tips are differentiated between Program 2.0 Year 1 and subsequent program years to avoid confusion due to these changes in the regulations.
The Career Readiness Initiative originally had a flat fee financial contribution option based on whether a project was non-independent or independent. In the Permanent Regulations, the financial contribution is now based on .25 percent of the estimated tax credit reservation, with a floor of $5K and a ceiling of $12K (more can be contributed if desired).
Production Facility and OZ Principal Day
Production facility day and an Out of zone principal photography day is further clarified in the 2nd re-adoption and Permanent Regulations. A production facility day must be a minimum of 6 hours and an out of zone day must shoot the first scene of the day OZ.
The Jobs Ratio bonus points have been modified under the Permanent Regulations. The revised percentage point ranges affect two areas: Visual Effects (VFX) and Principal Photography (PP) days outside the LA zone. During Program year 1, increased VFX spending in California reduced the jobs ratio and therefore discouraged VFX spend in the state. An increase in the VFX bonus point range from 1-10 to 1-15 offsets the problem. The amount of percentage points for filming outside the LA zone was also increased from 1-8 points to 1-10 points, in an effort to further encourage film production throughout the state. The points for filming in a production facility did not change. These updated bonus points are incorporated into the on-line application portal for projects applying beginning in May 2016. The new bonus point chart and Jobs Ratio Calculator tool are available on the website under Jobs Ratio Ranking.
Approved Production Facility
The Approved Production Facility definition has changed for applicants that receive a CAL under the 2nd re-adoption regulations and the Permanent Regulations. The new definition now includes movie ranches and facilities whose primary use is film production even if they may not meet the city and county fire authority approval as a “certified facility”. If the facility or ranch does not have fire authority certification, the applicant must request approval from the CFC prior to principal photography in order to utilize bonus points (both inside and outside of the 30 mile zone). For a list of facilities approved by the fire authority having jurisdiction, click here.