California Film and Television Tax Credit
The state of California places great importance on its film and television tradition and the direct in-state spending and employment opportunities the industry generates. It backs that up by offering significant incentives when film and television producers choose to shoot their show in California or bring an existing series here. While other U.S. states and Canadian provinces vie for film and TV projects, California still employs half of the nation’s industry professionals. To keep that number growing, California created the Film and Television Tax Credit Program. To help clients, prospects and others understand the benefits; JLK Rosenberger has provided a brief summary below.
Types of Qualified Projects and Budgets
To apply for the California Film and Television Tax Credit Program, a project must be one of the following:
- A “Feature Film” with a minimum production budget of $1,000,000 (no maximum cap and tax credits apply to the first $100,000,000)
- A “Movie of the Week” or “Miniseries” with a minimum production budget of $500,000
- A new television series licensed for any distribution outlet with a minimum episode budget of $1,000,000 and with a running time longer than 40 minutes, exclusive of commercials
- Television pilots produced for distribution in any media outlet with a minimum budget of $1,000,000
- A television series of any episode length for distribution in any media outlet with a minimum production budget requirement of $1,000,000 per episode that relocated to California and filmed its most recent season (minimum of 6 episodes) outside of California
- An independent film that is produced by a non-publicly traded company or one that is not more than 25% owned by a publicly traded company with a minimum production budget of $1,000,000 (no maximum cap and credits apply only to the first $10,000,000 of qualified expenditures)
In addition, the qualified motion picture must meet one of the following conditions:
- A minimum of 75% of total principal photography days must occur wholly in California, not including the filming of primarily backgrounds, visual effects, action, and/or crowd scenes by the second, stunt, or visual effects units
- A minimum of 75% of the production budget must be incurred and used for goods, services and/or wages within California
Only a portion of certain production expenditures qualify for the tax credit, such as some crew and staff salaries (camera and sound operators, electricians, post-production editors, etc.), wages (i.e. background actors, off-camera stunt personnel, and wages paid to qualified entities such as loan-out corporations), fringe benefits, cost of facility rentals and equipment, and production operation costs (i.e. construction, wardrobe, food, lodging, and lab processing).
All costs must be incurred and services performed in the state of California. Similarly, in order for purchases and rentals to qualify, they must be purchased and/or rented and used in the state.
Amount of Tax Credit
The amount of allowable tax credit varies based on the type of motion picture, and credits are allocated using a “Jobs Ratio” ranking system that selects projects based on wages paid to the production crew, among other criteria. There is a 20% non-transferable tax credit plus 5% “uplift” available for qualified feature films, miniseries, “movies of the week,” new television series, and television pilots with a running time of longer than 40 minutes. The “credit uplift” of 5% is available for non-independent production expenses for:
- Filming outside the Los Angeles zone
- Music scoring and music track recording
- Visual effects (minimum spend required)
The maximum credit a production can earn is 25%. Qualified independent productions can apply for a 25% transferable tax credit (the only type of project with the ability to sell their credits), and non-independent relocating television series can apply for a 25% non-transferable tax credit (with additional seasons being eligible for 20%).
There are multiple criteria used to select motion picture projects for tax credit consideration, and the application process is rigorous so the state can ensure each chosen production has solid financial backing and the required in-state spending, employment, filming locations, and other key factors. If you need assistance determining your project’s eligibility or applying for the California Film and Television Tax Credit Program, call our team at 949-860-9893 or click here to e-mail us.