California motion picture and television production credit Credit code 223 and 237

Overview

You may qualify for this credit if you produced a motion picture or television show in California. There are 3 types of motion picture and television production credits currently available. You can claim  any of the following:

  • Original California motion picture and television production credit
  • New California motion picture and television production credit
  • Third motion picture and television production credit

If you are a corporation, you may use the credit to reduce tax below your Tentative Minimum Tax (TMT).

If you are an individual, you cannot use the credit to reduce tax below TMT.

You cannot use this credit to reduce the Alternative Minimum Tax.

If the credit was generated by a Single Member Limited Liability Company (SMLLC), treated as a disregarded entity, the limitations regarding the amount of credit that can be used by the owner of the disregarded entity will apply.

Check if you qualify

Tax credits are allocated and certified by the California Film Commission (CFC).

How to apply

Create an account and apply at California Film & Television Tax Credit Program.

How to claim

  • File your income tax return
  • Include a separate California Motion Picture and Television Production Credit  (FTB 3541) to claim each of these credits
    • Provide the certificate numbers when claiming these credits
    • Use the name California Motion Picture and Television Production credit and the code 223 when claiming the old credit (certificate numbers below 5000)
    • Use the name New California Motion Picture and Television Production credit and code 237 when claiming the new credit (certificate numbers 5000 and above)
    • Use the name Third California Motion Picture and Television Production credit (code still to come) when claiming the third credit (certificate numbers 7001 and above)
  • Visit Instructions for FTB 3541 for more information
  • You can carryover any excess credit that is not used in the year it is allocated for an additional 6 years for the old and the new credit. The third motion picture credit can be carried over for an additional 9 years after it is allocated

Assignment rules

You may assign this credit:

  • Only if you are a corporation or a Limited Liability Company (LLC) reporting as a corporation
  • To an affiliated corporation that is an eligible assignee as defined in the laws relating to motion picture credits or in the laws relating to general assignment
  • That flows through to you, to an affiliate that is an eligible assignee, if you are a corporation that is either a member of an LLC, partner in a partnership or a shareholder of an S corporation

General rules

  • You can use all the three credits at the same time to reduce your income, franchise, or sales and use tax liabilities
  • The credit can be assigned either under the motion picture and television credit rules or the general credit assignment rules. You cannot assign the same credit under both rules
  • If you elect to apply a portion or all of your credit against sales and use tax, you must inform us about the election on FTB 3541
  • You are required to report allocation, assignment, purchase, sale, and application of credit against income/franchise tax with FTB (see below) and sales and use tax with California Department of Tax and Fee Administration

Motion picture and television production credit rules:

  • Once made the assignment of this credit is irrevocable
  • You may assign only that portion of the credit that is in “excess of your tax” for the taxable year when you are making the assignment
  • If you are assigning a prior year carryover amount, you must still use the credit against your tax liability of the current year before you can assign the excess amount
  • If you have more than one motion picture credit, you may apply  any or all of the credits as applicable to your existing tax liability before assignment. Once the tax liability has been met for a taxable year, you can make the assignment on your original return or on an amended return
  • If you made an invalid election to assign, you may withdraw the election and file a valid election to assign on an amended return
  • If the credit was generated by an SMLLC, treated as a disregarded entity, the limitations regarding the amount of credit that can be used by the owner of the disregarded entity will not apply to the assignee

How to assign

  1. File your income tax return
  2. To assign credit under:
    • Motion picture and television credit rules, include a separate FTB 3541 for each of the three credits
    • General credit assignment rules, refer to credit assignment
    • Provide  the certificate number when completing all forms
  3. Each assignee must also file a separate form FTB 3541 with complete details to report receiving the assigned credit

Selling the credit

  • You may sell the entire credit attributable to an Independent Film or a part of it to an unrelated party. But you cannot sell it to multiple parties
  • If you have purchased the credit, you can only apply it against your income or franchise tax liabilities. You cannot resell the credit
  • If you have purchased a credit that was generated by an SMLLC that is a disregarded entity, the limitations regarding the amount of credit that can be used by the owner of the disregarded entity will not apply to you
  • Whether you are the seller or the buyer of the credit, you will need to report your gain upon sale or purchase of the credit

How to sell