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375.0000 Motion Pictures—Regulation 1529

Annotation 375.0940

(b) On and After September 22, 1988

(1) Generally

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375.0940 Ownership Interest. Generally, the transfer of all or part of, or any interest in, a qualified motion picture is exempt from tax pursuant to section 6010.6(a)(2)(B) of the Revenue and Taxation Code and Sales and Use Tax Regulation 1529(b)(1)(C)2. A person owning less than a majority share of an entity which holds exploitation rights, as a result of a transfer, should be recognized as holding the rights indirectly or by affiliation. However, to avoid the problem of a person claiming indirect ownership of an entity by owning a single share of stock the following rules will apply:

(1) Any person with an ownership interest of 10% or more in an entity which holds exploitation rights, or any related entity (e.g., a subsidiary) 10% or more owned by such person, would be recognized as holding such rights indirectly or by affiliation.

(2) Any person with less than 10%, but 2% or more, of the ownership interest in an entity which holds exploitation rights, or any related entity less than 10%, but 2% or more, owned by such person, will be required to establish the facts and circumstances which demonstrate the person's ability to direct the policies or actions of such entity in order to be recognized as holding such rights indirectly or by affiliation.

(3) In the absence of a finding by the Board to the contrary, any person with less than a 2% ownership interest in an entity which holds the exploitation rights or any related entity less than 2% owned by such person will not qualify.

(4) In the case of partnerships, general partners would be recognized as holding any rights held by the partnership without regard to the actual level of their general partnership interest. Limited partners would be subject to the criteria spelled out in (1), (2) and (3) above. 5/2/91.