CALIFORNIA PRODUCTION INCENTIVE
On February 20, 2009, Governor Arnold Schwarzenegger signed legislation creating tax credits for film and television productions as part of an economic stimulus provision in the new state budget. Over the next several weeks, the California Film Commission will be developing program guidelines and application procedures. Applications will not be accepted prior to July 1, 2009. The following summarizes the key points of the California Production Incentive:
Tax Credit and Definition of “Qualified Motion Picture”
Qualified taxpayers are allowed a credit against income or sales and use taxes, based on qualified expenditures, for taxable years beginning on or after January 1, 2011. Only tax credits issued to an “independent film” may be transferred or sold to an unrelated party. Other qualified taxpayers may carryover tax credits for 5 years and transfer tax credits to an affiliate.
20% Tax Credit for a "qualified motion picture" which includes:
• Feature Films ($1 million minimum - $75 million maximum production budget)
• Movies of the week or miniseries ($500,000 minimum production budget)
• New television series licensed for original distribution on basic cable ($1 million minimum budget; one-half hour shows and other exclusions apply)
25% Tax Credit for a "qualified motion picture," that is:
• A television series, without regard to episode length, that filmed all of its prior season or seasons outside of California.
• An "independent film" ($1 million − $10 million budget that is produced by a company that is not publicly traded and that publicly traded companies do not own more than 25% of the producing company.)
A "qualified motion picture" must be one of the above and meet the following conditions:
• 75% test (production days or total production budget) in California
• Principal photography must commence no later than 180 days after application approval
• Postproduction completed within 30 months of receiving tax credit application approval
• Registration of copyright for the motion picture with US Copyright Office
Qualified In-state Spend
"Qualified expenditures" are amounts paid or incurred for the purchase or lease of tangible personal property and qualified wages for services performed in California.
The following wages are not qualified expenditures: writers, directors, music directors, music composers, music supervisors, producers and performers, other than background actors with no scripted lines.
Productions Not Eligible For Tax Credits
Commercials; music videos; news programs; current events or public affairs programs; talk shows; game shows; sporting events; ½ hour (airtime) episodic TV shows; awards shows; productions that solicit funds; reality programs; student films; industrial films; clip based programming where more than 50% of content is comprised of licensed footage; documentaries; variety programs; daytime dramas; strip shows; pornography.
Funding Allocation |
$100 million annually beginning fiscal year 2009/2010 through fiscal year 2013/2014
$10 million of the annual funding shall be set aside for independent films
Any unused funds carryover to the next fiscal year
The California Film Commission is developing application procedures. Once established, applications will be accepted on a first come first served basis -- no earlier than July 1, 2009 -- as long as funds are available within each fiscal year.
Joint Statement Regarding Inclusion of Film and Television Production Tax Incentive in California State Budget
American Federation of Television and Radio Artists (AFTRA), Directors Guild of America (DGA), Motion Picture Association of America (MPAA) and Screen Actors Guild (SAG) today released the following statement:
“For the past 10 years, a united entertainment community has been telling state officials that our industry is threatened by runaway film and television production. Film and television productions have been leaving California for tax incentives in other states and countries for years now, and like everybody else, entertainment industry workers are suffering in this economic climate. We applaud the passage of this incentive which will help make California competitive and not only save the jobs that are being lost but generate much needed revenue for the state.”