Tax Guide for Film & Television

Understanding tax credit issues related to your business can be time-consuming and complicated. We understand this and want to help provide the information you need. We have created this guide to help you understand a sales and use tax credit opportunity that can potentially be applied to your filmmaking business. This guide will assist you with applying for the tax credit and obtaining a refund of qualified sales and use taxes.

Overview

If you own a business in California, and you expect to be making sales, leasing equipment, or purchasing items from out of state, you must apply for a seller's permit or otherwise register with the California Department of Tax and Fee Administration (CDTFA). When you hold a seller's permit, you must file sales and use tax returns and pay any sales or use tax due on your sales and purchases. Whether you are a new filmmaker in California or growing your existing filmmaking business, you may be eligible for a tax credit that can be used against your sales and use tax liabilities.

Register with CDTFA

Online Registration – Register with us online for your seller's permit, or add a business location to an existing account.

Filing and Payment

Tax Return Filing Deadlines – Find your filing due dates.

File a Tax Return Online – Use CDTFA's online filing service which is easy, fast, and free!

Online Payment Options – Make payments online for tax and fee programs.

Notice of Business Change – Keep your information current by using this form to notify us of any business changes.

Film & Television Tax Credit Program

The California Film Commission (CFC) administers the Film & Television Tax Credit Program. This program provides tax credits based on qualified expenditures for qualified productions produced in California. The first credit program provided for $100,000,000 in tax credits to be allocated for each fiscal year from July 2009 through June 2015. The second California Film & Television Tax Credit Program was a five year, $1.55 billion program that provides $230,000,000 in tax credits to be allocated for fiscal year July 2015 through June 2016 and $330,000,000 in credits to be allocated for each fiscal year from July 2016 through June 2020. The third California Film & Television Tax Credit Program allocates $330,000,000 in tax credits for each fiscal year from July 2020 through June 2025.

The CFC allocates credits to applicants planning to produce qualified productions. Interested applicants must submit applications for proposed productions through the CFC's online application portal. Once an application is processed, the CFC will notify the applicant as to whether its production is eligible to receive credits. Allocated credits may only be used after a qualified production is completed and the CFC has verified the qualified expenditures for the production and issued a credit certificate.

The current program offers tax credits to TV projects and feature films with several application periods each fiscal year. Each fiscal year – July 1 to June 30 – the $330-million funding is categorized into the following project types: TV Projects, Relocating TV, Indie Features, and Non-Indie Features.

How to contact CFC:

• Phone: 1-323-860-2960, extension 110
• Website: http://film.ca.gov/tax-credit/
• Mail:
  California Film Commission
  Attn: California Film & Television Tax Credit Program
  7080 Hollywood Blvd., Suite 900
  Hollywood, CA 90028

General Information and Procedures

Who is a qualified taxpayer for the purpose of this credit?

You are a qualified taxpayer if you have been issued a certified Tax Credit Certificate by the CFC and have paid or incurred qualified expenditures. A qualified taxpayer may also assign tax credits to one or more affiliated corporations.

What is an affiliated corporation?

"Affiliated Corporation” as used in Revenue & Taxation Code (R&TC) sections 23685(c)(1) (first credit program) and 23695(c)(1) (current credit program) includes:

• A corporation that owns, directly or indirectly, 100 percent of the assignor's voting common stock;
• A corporation in which the assignor owns, directly or indirectly, 100 percent of the voting common stock;
• A corporation that is wholly owned by a corporation or individual owning 100 percent of the voting common stock of the assignor; or
• A corporation that is a stapled entity as defined in R&TC section 25105.

How can a tax credit be used?

If you are a qualified taxpayer who has been issued a credit certificate by the CFC or if you are an affiliated corporation (“affiliate”) of a qualified taxpayer, the following information will help you use your credits.

• A qualified taxpayer may apply the tax credits against their California franchise tax or their California income tax, or make an election to apply the tax credits to their California sales and use tax (for periods beginning on or after January 1, 2020, and before January 1, 2023, credits applied to offset sales and use tax may not exceed $5,000,000 in a taxable year). An election to use all or a portion of the tax credits for sales and use taxes is irrevocable. Once this election is made, those credits are no longer available to apply against any California franchise tax or income tax liability.
• A qualified taxpayer may assign any portion of its unused credits to an affiliate, which may apply the tax credits against its franchise or income tax or make an irrevocable election to apply the tax credits to its sales and use tax. Credits must be assigned on the qualified taxpayer's California franchise tax or income tax return before the affiliate may elect to use the credits against a sales and use tax liability.
• An irrevocable election to apply tax credits against sales and use tax must be filed on or before the date on which the qualified taxpayer or affiliate would first be allowed to claim a credit on its California franchise tax or income tax return.
• The rules for assigning credits and claiming credits for franchise and income tax purposes are administered by the California Franchise Tax Board (FTB), and related information can be found on the FTB's webpage at FTB – California motion picture and television production credit.

How can a tax credit be used to offset a sales and use tax liability?

• Credits may only be applied against specified portions of the sales and use tax (R&TC sections 6051, 6051.3, 6051.15, 6201, 6201.3, 6201.15) which add up to a rate of:
  • April 1, 2009 through June 30, 2011: 6%
  • July 1, 2011 to present: 5%
• No interest will be paid on any amount refunded or credited.

When can the tax credit be used for sales and use tax purposes?

Initial Refund Period

After the CFC issues the tax credit certificate for the qualified production, refunds will be allowed for sales and use taxes a claimant paid during the period:

• Beginning on the first day of the calendar quarter prior to the quarterly period in which the production period began for which the CFC issued the tax credit certificate, and
• Ending on the due date of the claimant's most recent sales and use tax return filed with the CDTFA prior to making the irrevocable election and filing a claim for refund of sales and use tax.

Note

1. The production period for a qualified motion picture begins when pre-production of the qualified motion picture starts. Pre-production means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment.

This period is known as the initial refund period. An example of the application of the initial refund period is below.

1. Example:
   If pre-production began during the third quarter of 2015 (July 1 through September 30, 2015), the start date of the initial refund period is April 1, 2015, which is the first day of the second quarter of 2015, the calendar quarter prior to the quarterly period in which the production period began.

Secondary Refund Period

Unused credits may be used to offset and obtain a refund of qualified sales and use taxes reported and paid for a secondary refund period if a claimant files an irrevocable election to apply unused tax credits to qualified sales and use taxes and:

1. Does not claim a refund for the initial refund period, or
2. Claims a refund for the initial refund period and still has unused credits to which the election applies.

The secondary refund period includes the claimant's reporting periods for the five years following the close of the initial refund period.

1. Example:
   If the end of the initial refund period is determined by reference to the second quarter of 2015 sales and use tax return due date, then the secondary refund period includes the third quarter of 2015 through the second quarter of 2020.

Is there a statute of limitation for filing a claim for refund in relations to the tax credit?

Per R&TC section 6902, the CDTFA can only refund qualified sales and use taxes remitted during the initial and secondary refund periods if a claim for refund for such taxes is filed within the statute of limitations. This means the deadline for filing a timely claim for refund is generally whichever of the following occurs last:

• Three years from the due date of the return;
• Six months from the date of overpayment; or,
• For payments made on a determination, six months from the date the determination became final.

1. Example:
   The CFC issues a credit certificate to a qualified taxpayer for a production whose production period began in the third quarter of 2014. Therefore, the initial refund period includes the second quarter of 2014. Under the three-year statute of limitations, in order to obtain a refund for the second quarter of 2014, a claim for refund must be filed by July 31, 2017. Likewise, to obtain a refund for the third quarter of 2014, a claim for refund must be filed by October 31, 2017.

How do I make an irrevocable election and file a claim for refund of sales and use tax?

To make an irrevocable election to apply tax credits to sales and use tax and file a claim for refund of sales and use tax, you must complete CDTFA-318, California Film and Television Tax Credit. If using credits in the secondary refund period, you must file a separate CDTFA-318. You may also need to file additional claim(s) for refund (CDTFA-318) to secure periods within the three-year statute during the secondary refund period.

Claims should be sent to:
California Department of Tax and Fee Administration
Audit Determination & Refund Section, MIC: 39
P.O. Box 942879
Sacramento CA 94279-0039

After receiving the claim for refund, CDTFA staff will:

• Send a letter to the claimant acknowledging that the CDTFA received their claim.
• Verify that the claimant is either the qualified taxpayer that was issued a credit certificate by the CFC, or the qualified taxpayer's affiliate that has been assigned unused credits.
• Verify that the claimant filed a claim for refund and irrevocable election (CDTFA-318, California Film and Television Tax Credit) to apply credits against qualified sales and use taxes paid during a qualifying refund period.
• Verify that the claimed amount does not exceed the amount of the claimant's unused tax credits.
• Verify that the claimed amount is for paid qualifying sales and use tax.
• Verify that the claim for refund is within the statute of limitations.
• Work with FTB staff to ensure the total amount claimed at both agencies does not exceed the amount of the claimants' total tax credit.

It takes approximately 45 to 90 days to process a claim for refund under $50,000, and 120 to 180 to process a claim for refund of $50,000 and above.

Resources

Laws and Regulations

• R&TC Section 6902, Claim For Refund
• R&TC Section 6902.5, Movie Picture Tax Credit

Forms

• CDTFA-318, California Film and Television Tax Credit

Related Websites

• The California Film Commission's (CFC) Website
• FTB – California Motion Picture and Television Production Credit
• Legislative Analyst Office – California's First Film Tax Credit Program

If You Need Help

If at any time you need assistance with topics included in this guide – or with topics not included – feel free to contact us by telephone or email. For contact information and hours of operation please see our How to Contact Us webpage.

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