Utilizing Tax Credits
When all requirements are met, approved projects receive a Tax Credit Certificate. Qualified taxpayers participating in the California Film & TV Tax Credit program, or their affiliates, are allowed a credit against the net tax in the amount specified on the Tax Credit Certificate.
How to Use Tax Credits
Non-Independent tax credit recipients are limited to a cap of $5 million with offsetting state income tax liability and a $5 million cap with offsetting Sales and Use tax liability. This applies to projects in both Program 2.0 and Program 3.0. The cap on credits against income tax liability are at the combined reporting group level; the cap on credits against Sales and Use tax liability can be claimed by affiliates.
Independent Films are also limited to the $5 million tax credit limitation for the next 3 years. Companies which purchase tax credits from Independent Films have the same limitations when they elect to utilize their credits against their state income tax liability.
Franchise Tax Board
- The California Franchise Tax Board (FTB) facilitates the transfer and utilization of tax credits for Programs 3.0, 2.0, and 1.0.
- Once the credit certificates are issued by the California Film Commission, taxpayers can use the old and new credit at the same time to reduce their income, franchise, or sales and use tax liabilities.
- Taxpayers are required to report allocation assignment, purchase, sale and application of credit against income/franchise tax with the FTB on Form 3541 California Motion Picture and Television Production
FTB Form 100
Corporation will continue to use Form 100 or Form 100W for water’s-edge filers while reporting their credit to offset tax liability. Program 1.0 applicants will use code 223 when utilizing credits against tax. Program 2.0 applicants will use code 237, while Program 3.0 will use code 239.
FTB Form 3551
Independent productions will continue to use form 3551 to report sale or transfer of film credit.
FTB Form 3541
Applicants will continue to report the credit on form 3541; separate forms are to be completed for old and new credit.
California Department of Tax and Fee Administration
- The California Department of Tax and Fee Administration (CDTFA) may allow a refund for qualified sales and use tax paid through the due date of the claimant’s most recent sales and use tax return.
- Tax credits may be used to offset against specified portion of sales and use tax due for the five years following the close of the production period, without regard to the fiscal year from which the tax credits were allocated.
- Production is considered complete when the process of postproduction has been finished and a final composite answer print, delivery air master, or digital cinema files of the qualified motion picture is produced.
- Qualified taxpayers may make an irrevocable election to apply tax credits against their sales and use tax liability in the same year the tax credit certificate is issued by the CFC.
- However, tax credits may not be assigned until the qualified taxpayer’s franchise or income tax return is filed. An affiliate cannot apply the tax credits against sales and use tax until the tax credits are assigned.
- Form CDTFA-318, California Film and Television Tax Credit, must be completed and submitted to CDTFA to make an irrevocable election to apply tax credits to sales and use tax liability and file a claim for refund of sales and use tax.
- California Department of Tax and Fee Administration
- CDTFA-318, California Film and Television Tax Credit
Teleproduction or Other Postproduction Partial Exemption+
Revenue & Taxation Code Section 6378 allows a partial sales and use tax exemption for the purchase of teleproduction and postproduction service equipment by qualified persons primarily engaged in teleproduction or other postproduction activities when that property is used 50 percent or more of the time in those activities described in Code 512191 of the North American Industry Classification System Manual. The seller is relieved from the liability for the sales tax subject to exemption when accepting in good faith a completed section 6378 exemption certificate timely.