Does Your Client Qualify for the New Film Credit?
May 2009 - Recent legislation (enacted on February 20, 2009) allows an income tax credit to a qualified taxpayer for 20 percent of qualified expenditures attributable to the production of a qualified motion picture and 25 percent of qualified expenditures attributable to the production of a qualified motion picture. A qualified motion picture is an independent film allocated and certified by the California Film Commission. A qualified television series is a series where the production is relocated to California1.
Although the credit may not be claimed until taxable years beginning in 2011, taxpayers may become eligible for the tax credit if they apply to the California Film Commission beginning July 1, 2009.
The amount of the credit allowed is limited to the amount specified in the credit certificate issued by the California Film Commission. The total amount of credits the California Film Commission is authorized to issue is limited to $100 Million in credits for fiscal year 2009/2010 through fiscal year 2013/2014.
The credit does have a six-year carryover provision. Any credit that is allowed and is attributable to an independent film, as defined, can be sold to an unrelated party, but not be sold to more than one taxpayer or resold. In lieu of claiming the credit, a taxpayer may also make an irrevocable election to apply the credit amount against “qualified sales and use taxes.”
The tax credit disallows certain types of productions, such as commercial advertising, music videos, news programs, game shows, and sporting events. Other types of productions also do not qualify for the tax credit.
The California Film Commission is currently developing program guidelines and application procedures. Applications are expected to be available on June 1, 2009. Applications will be accepted on a first come, first served basis beginning on July 1, 2009.
For more information, visit the California Film Commission website at film.ca.gov.
1California Revenue & Taxation Code section 17053.85 (PIT) & 23685 (Corp.)