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 issue a refund for qualified sales & use taxes paid through the due date of the claimant’s most recent sales and use tax return.
- Credits may be claimed against sales and use taxes due for the five years following the close of the production period, without regard to the fiscal year from which the credits were allocated.
- Production is considered complete when the process of post-production 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 use certified credits against sales and use tax as soon as they are issued by the CFC.
- However, certified credits may not actually be assigned until the qualified taxpayer’s franchise or income tax return is filed. An affiliate cannot apply the credits against sales and use tax until the credits are actually assigned.