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Frequently Asked Questions - California Motion Picture and Television Production Credit

For questions or comments about these FAQs, contact Jaclyn Zumaeta at:

General questions

  1. Who is a "qualified taxpayer" for the purposes of this credit?
  2. How does a taxpayer apply for the credit?
  3. When may a qualified taxpayer or affiliate first claim this credit?
  4. How much credit is allocated by the California Film Commission (CFC) every year?
  5. Is the election to use the credit against sales and use tax irrevocable?
  6. Is there a carryover provision for the credit?
  7. To what extent can you take the credit against tax?
  8. Can you reduce Alternative Minimum Tax (AMT) by the credit?
  9. How do I claim my credit?
  10. How do I claim the credit if my Corporation files a short period return?

Questions regarding sale of the independent film credit

  1. Which credit allocated by the CFC can be sold?
  2. To whom may a credit be sold?
  3. Can part of a credit be sold?
  4. Can a purchaser use the credit against sales and use tax?
  5. Can a purchaser re-sell the credit?
  6. Does a taxpayer need to notify Franchise Tax Board (FTB) prior to selling its credit?
  7. Will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 and subdivision (g) of R&TC Section 17039 apply to the buyer's use of the credit?

Questions regarding assignment of the credit

  1. What are the prerequisite conditions for assigning the credit?
  2. To whom may a credit be assigned under R&TC Section 23685 (c)(1) and 23695(c)(1)?
  3. How do we make or change a credit assignment?
  4. Can the assignment be made on an amended return?
  5. When may an election to assign the credit be made?
  6. Can the credit be assigned to multiple assignees?
  7. Can assignment be changed?
  8. Can a qualified taxpayer that is a Limited Liability Company (LLC) elect to assign the credit?
  9. Can a member of a partnership or an LLC taxed as a partnership, or a shareholder of an S corporation, who received a portion of a credit as a pass-thru item; assign its portion of the credit?
  10. If an assigned credit is claimed by both the assignor and the assignee, to which party will you allow the credit?
  11. What should a taxpayer do if they discover they have made an invalid election to assign the credit?
  12. If a taxpayer has a credit carryover from the taxable year in which the credit was allowed, may the taxpayer assign all or some portion of the carryover credit in year two even if the remaining amount of credit does not exceed the assignor's year two tax liability?
  13. If a taxpayer assigns the credit to an assignee who meets all of the assignee requirements in the taxable year that the assignment was made, but the assigned credit is not fully used by the assignee in that taxable year due to it exceeding the assignee's tax liability for the year of the assignment, may the assignee take the remainder of the credit in a subsequent taxable year?
  14. Taxpayer has credit available from the old and new programs. When determining the amount of credit the taxpayer can assign, how does the requirement that the taxpayer first use the credit against their tax liability apply?
  15. Can the credit be assigned under R&TC Section 23663 and then subsequently assigned under R&TC Section 23685(c) or 23695(c) or vice versa?
  16. Will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee’s use of the credit?

Other Issues

  1. If the credit is earned by an entity that is treated as disregarded for tax purposes, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the use of the credit by the owner of the disregarded entity?
  2. If an independent film credit earned by an entity that is treated as disregarded for tax purposes is sold pursuant to subdivision (c)(3)(A) of R&TC Section 23685 or (c)(3)(A) of R&TC Section 23695, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the buyer's use of the credit?
  3. If an independent film credit earned by an entity that is treated as disregarded for tax purposes is sold pursuant to subdivision (c)(1) of R&TC Section 17053.85 or subdivision (c)(1) of R&TC Section 17053.95, will the disregarded entity limitation found in subdivision (g) of R&TC Section 17039 apply to the buyer’s use of the credit?
  4. If the credit earned by an entity that is treated as disregarded for tax purposes is assigned under subdivision (c)(1) of R&TC Section 23685 or subdivision (c)(1) of R&TC Section 23695, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee?
  5. If the credit earned by an entity that is treated as disregarded for tax purposes is assigned under the unitary affiliate assignment rules of R&TC Section 23663, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee?

Back to California Motion Picture and Television Production Credit


General questions

  1. Who is a "qualified taxpayer" for the purposes of this credit?

    A qualified taxpayer is a taxpayer who has paid or incurred qualified expenditures and has been issued a credit certificate by CFC.

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  2. How does a taxpayer apply for the credit?

    There are two motion picture and television production credits. The old credit came into effect on January 1, 2011, and the new credit came into effect on January 1, 2016. For both these credit programs the qualified taxpayer would apply directly to CFC for an allocation and credit certificate. CFC developed program guidelines and application procedures to allocate the tax credits to qualified taxpayers. Applications under the old program first became available on June 1, 2009, and CFC began accepting applications on July 1, 2009, on a first come, first served basis. The new credit program 2.0 replaced the lottery selection with a ranking system based on jobs and other criteria.

    How to contact CFC:

    • Phone: 323.860.2960 extension 110
    • Website: www.film.ca.gov/Incentives.htm
    • Mail:

      California Film Commission
      7080 Hollywood Blvd., Suite 900
      Hollywood, CA 90028
      Attn: California Film & Television Tax Credit Program

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  3. When may a qualified taxpayer or affiliate first claim this credit?

    This nonrefundable credit may not be claimed until it is certain that there is a tax liability against which to claim the credit. Therefore, the first time the credit can be claimed is when the liability is assessed against the taxpayer who earned the credit. For example, the credit can be claimed when the tax return is filed or the tax liability is assessed in some other manner.

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  4. How much credit is allocated by the California Film Commission (CFC) every year?

    The CFC allocated $100 million every fiscal year starting 2009/2010. Under the new credit scheme, the CFC will allocate an additional $230 million for the fiscal year 2015/2016. For the fiscal year 2016/2017 onwards, an amount of $330 million will be allocated every year until fiscal year 2019/2020.

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  5. Is the election to use the credit against sales and use tax irrevocable?

    Yes. A qualified taxpayer may make an irrevocable election to apply all or a portion of its certified credit against qualified sales and use tax imposed on the qualified taxpayer.

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  6. Is there a carryover provision for the credit?

    Excess credit that is unutilized in the year of allocation can be carried over for an additional six years.

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  7. To what extent can you take the credit against tax?

    Corporations can use the credit to reduce tax below the Tentative Minimum Tax (TMT) but cannot reduce the minimum tax. Personal income tax payers cannot use the credit to reduce tax below the TMT.

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  8. Can you reduce Alternative Minimum Tax (AMT) by the credit?

    No, taxpayers may not use the credit to reduce any AMT liabilities.

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  9. How do I claim my credit?

    You can claim the old credit for taxable years beginning on or after January 1, 2011, using code number 223 and credit name California Motion Picture and Television Production Credit on the California tax return that is applicable to you. If you are claiming the new motion picture credit that came into effect on January 1, 2016, and have a credit certificate number that is greater than 5000 use code number 237. The credit name to be used will be New California Motion Picture and Television Production Credit.  If you have more than two credits, follow the instructions on the Schedule P, Alternative Minimum Tax and Credit Limitations, applicable to you.

    You should also file form FTB 3541, California Motion Picture and Television Production Credit, providing details of the credit generated, received from a pass-thru entity, purchased, sold, received as an assignment etc., and the amount being claimed. The credit certificate number associated with each credit being claimed should be provided. You should check the box on the Form 3541 to indicate if you are reporting the old credit or the new motion picture and television production credit. Separate FTB 3541 are required for reporting the old and the new credits.

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  10. How do I claim this credit if my Corporation files a short period return?

    You can claim the credit for taxable years beginning on or after January 1, 2011. Use code number 223 and credit name California Motion Picture and Television Production Credit on either line 26a or 26b of Form 100, California Corporation Franchise or Income Tax Return, or Form 100W, California Corporation Franchise or Income Tax Return – Water's Edge Filers. If you are claiming the new motion picture credit that came into effect on January 1, 2016, and have a credit certificate number that is greater than 5000 use code number 237. The credit name to be used will be New California Motion Picture and Television Production Credit. If you have more than two credits follow the instructions for Schedule P (100), Alternative Minimum Tax and Credit Limitations – Corporations, or Schedule P (100W) Alternative Minimum Tax and Credit Limitations – Water's-Edge Filers.

    You should also file form FTB 3541, California Motion Picture and Television Production Credit, providing details of the credit generated, received from a pass-thru entity, purchased, sold, received as an assignment etc., and the amount being claimed. The credit certificate number associated with each credit being claimed should be provided. You should check the box on the Form 3541 to indicate if you are reporting the old credit or the new motion picture and television production credit. You will need to use separate Form 3541 for reporting each of the credits.

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Questions regarding sale of the independent film credit

  1. Which credit allocated by the CFC can be sold?

    R&TC Sections 17053.85(c)(1), 17053.95(c)(1), 23685(c)(3)(A) and 23695(c)(3)(A) allow qualified taxpayers to sell a credit attributable to an independent film to an unrelated party.

    To qualify as an independent film, the film and producing company must meet the following criteria:

    • The film must have a minimum budget of one million dollars ($1,000,000). The old credit also had a maximum budget limitation of ten million dollars ($10,000,000).
    • The film must be produced by a company that is not publicly traded.
    • Publicly traded companies cannot directly or indirectly own more than 25 percent of the company producing the film.

      The qualified taxpayer selling the credit shall report the following information to the Franchise Tax Board prior to the sale of the credit:

    • The social security number or taxpayer identification number of the unrelated party purchasing the credit.
    • The amount of the credit.
    • The amount of consideration the qualified taxpayer will receive for sale of the credit.

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  2. To whom may a credit be sold?

    An independent film credit may be sold to any unrelated party. For this purpose, a related party is a party that would be treated as a related party under Internal Revenue Code Sections 267, 318, or 707.

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  3. Can part of a credit be sold?

    Yes. A part of the credit may be sold. However, the credit cannot be sold to multiple taxpayers.

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  4. Can a purchaser use the credit against sales and use tax?

    No. A purchaser of credit can only apply the credit against their income and franchise tax liabilities.

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  5. Can a purchaser re-sell the credit?

    No. The purchaser of the credit cannot re-sell the credit.

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  6. Does a taxpayer need to notify Franchise Tax Board (FTB) prior to selling its credit?

    Yes. The seller must notify FTB before selling its credit. The taxpayer must provide all the details regarding the sale on FTB Form 3551, Sale of Credit Attributable to an Independent Film, before they are permitted to sell the credit.

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  7. Will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 and subdivision (g) of R&TC Section 17039 apply to the buyer's use of the credit?

    Refer to Other Issues FAQ #2 and FAQ #3.

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Questions regarding assignment of the credit

  1. What are the prerequisite conditions for assigning this credit?

    All of the following prerequisites must be met before a credit may be assigned:

    • The assignor must be taxed as a corporation.
    • The credit must first exceed the "tax" of the assignor for the taxable year in which the credit is to be assigned.
    • The assignee must be an affiliated corporation as defined by R&TC Section 23685(c)(1) and 23695(c)(1).

    This credit may also be assigned under the credit assignment rules applicable to unitary affiliates. Refer to FAQs - Credit Assignment, Revenue and Taxation Code Section 23663.

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  2. To whom may a credit be assigned under R&TC Sections 23685(c)(1) and 23695(c)(1)?

    A qualified taxpayer may elect to assign a credit to an affiliated corporation, which includes a corporation:

    • That owns, directly or indirectly, 100 percent of the assignor's voting common stock, or
    • In which the assignor owns, directly or indirectly, 100 percent of the voting common stock, or
    • That is wholly owned by a corporation or individual owning 100 percent of the voting common stock of the assignor, or
    • That is a stapled entity as defined in R&TC Section 25105.

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  3. How do we make or change a credit assignment?

    Taxpayers making an assignment under the provisions of R&TC Sections 23685 and 23695 must assign the credit using form FTB 3541, California Motion Picture and Television Production Credit. The assignor has to file a form FTB 3541 providing details of the entity to which it is assigning the credit, the amount of assignment, the year the credit was allocated and the credit certificate number. The assignee will also file separate form FTB 3541 providing details of the amounts of credit received, the name of the assignor and the credit certificate number with the year the credit was allocated.

    Taxpayers desiring to assign the credit under the provisions of R&TC Section 23663 must use the general credit assignment form FTB 3544, Election to Assign Credit Within Combined Reporting Group. Assignees will use the form FTB 3544A, List of Assigned Credit Received and/or Claimed by Assignee, to report receipt and use of the assignment.

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  4. Can the assignment be made on an amended return?

    Yes, only if the assignment is made under the provisions of R&TC Sections 23685 and 23695. If it is made under the R&TC Section 23663 general credit assignment provision, then assignment can be made only on the original return.

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  5. When may an election to assign this credit be made?

    The election to assign a credit and the actual assignment of the credit are two distinct events. An election to assign the credit may be made any time after the credit certificate is issued by CFC. However, a credit may not be actually assigned until it is certain there is some portion of the credit in excess of the assignor's tax liability. As such, the first time the credit can be actually assigned is when the liability is assessed against the assignor, i.e., when the tax return is filed or the tax liability is assessed in some other manner. If a credit or portion thereof is assigned to an affiliate prior to the assessment of the assignor's tax liability, and the assignor's tax liability requires the assignor to use a portion or all of the credit assigned against its own tax liability, FTB may disallow the assignee or the assignor from taking the credit under R&TC Section 23685(c)(8) or 23695(c)(8).

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  6. Can the credit be assigned to multiple assignees?

    Yes. A qualified taxpayer may elect to assign any portion of its excess credit to one or more affiliated corporations for each taxable year in which the credit is allowed.

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  7. Can assignment be changed?

    Once made, the assignment for a particular taxable year is irrevocable. However, it may be changed for any subsequent taxable year if the election to make the assignment is expressly shown on each of the returns of the qualified taxpayer and the qualified taxpayer’s affiliated corporations that assign and receive the credits.

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  8. Can a qualified taxpayer that is an LLC elect to assign the credit?

    Yes, if the LLC is being taxed as a corporation rather than a partnership under California tax law.

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  9. Can a member of a partnership or an LLC taxed as a partnership, or a shareholder of an S corporation, who received a portion of a credit as a pass-thru item; assign its portion of the credit?

    Yes, if the member of the partnership or the LLC or the shareholder of an S corporation is a corporation or taxed as a corporation, the credit may be assigned by the corporate member or shareholder. However, if the member or shareholder is taxed as an individual, the assignment of the credit by that member or shareholder is not permitted under the statute.

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  10. If an assigned credit is claimed by both the assignor and the assignee, to which party will you allow the credit?

    FTB may collect any portion of a doubly-claimed credit from either the assignee or the assignor.

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  11. What should a taxpayer do if they discover they have made an invalid election to assign the credit?

    If a taxpayer has made an invalid election under R&TC Section 23685(c)(8) or 23695(c)(8), they should file an amended return to notify FTB they are withdrawing or removing the election from the invalid year and file a valid election to assign the credit on the amended return.

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  12. If a taxpayer has a credit carryover from the taxable year in which the credit was allowed, may the taxpayer assign all or some portion of the carryover credit in year two even if the remaining amount of credit does not exceed the assignor's year two tax liability?

    To be consistent with the policy of R&TC Section 23685 and 23695 governing assignments, a carryover credit must first be used against the subsequent years' tax liability of the assignor, and then only the excess may be assigned. (Refer to Questions regarding assignment of the credit FAQ #5)

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  13. If a taxpayer assigns the credit to an assignee who meets all of the assignee requirements in the taxable year that the assignment was made, but the assigned credit is not fully used by the assignee in that taxable year due to it exceeding the assignee's tax liability for the year of the assignment, may the assignee take the remainder of the credit in a subsequent taxable year?

    Yes, once the credit is assigned properly in the first taxable year, the assignee may apply the carryover against its tax liability for any subsequent taxable years in the same manner as it would have been allowed to the assignor, unless the assignment is properly revoked.

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  14. Taxpayer has credit available from the old and new programs. When determining the amount of credit the taxpayer can assign, how does the requirement that the taxpayer first use the credit against their tax liability apply?

    Depending on the amount of credit available to the taxpayer (which includes amounts allocated by CFC, received from a pass-thru entity and prior year assignable carryover) and the current year tax liability, the taxpayer may only need to apply it against one credit or in partial amounts to both the credits. Refer to examples below:

    Situation 1

    Facts: Taxpayer has $300,000 of old credit. They have $200,000 of new credit. Current year tax liability is $100,000.

    Solution 1: Taxpayer can meet their tax liability by using the old credit. They can assign the remaining $200,000 of the old credit. They can also assign the entire $200,000 of their new credit.
    Solution 2: Taxpayer can meet their tax liability by using the new credit. They can assign the remaining $100,000 of the new credit. They can also assign the entire $300,000 of their old credit.

    Situation 2

    Facts: Taxpayer has $100,000 of old credit. They have $200,000 of new credit. Current year tax liability is $150,000.

    Solution 1: Taxpayer meets part of their tax liability by using old credit. $50,000 of tax liability has not been met. They cannot assign old credit. They apply the remaining $50,000 tax liability to the new credit. They can assign the remaining $150,000 of new credit.
    Solution 2: Taxpayer can meet their tax liability by using new credit. They can assign the remaining $50,000 of their new credit. They can also assign the entire $100,000 of their old credit.

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  15. Can the credit be assigned under R&TC Section 23663 and then subsequently assigned under R&TC Section 23685 (c) or 23695(c) or vice versa?

    No. Only the entity generating the credit is eligible to assign the credit under either R&TC Section 23663 or either 23685(c) or 23695(c). Therefore, once the credit has been assigned, the assignee has no right to assign it again.

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  16. Will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee’s use of the credit?

    Refer to Other Issues FAQ #4 and FAQ #5

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Other Issues

  1. If the credit is earned by an entity that is treated as disregarded for tax purposes, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the use of the credit by the owner of the disregarded entity?

    Yes. While certain sales and assignments of the California Film and Television Credit are specifically exempted from the limitation in subdivision (i) of R&TC Section 23036, the use of the credit by the owner of a disregarded entity that earned the credit is not specifically exempted, and thus the limitation applies to the owner's use of the credit.

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  2. If an independent film credit earned by an entity that is treated as disregarded for tax purposes is sold pursuant to subdivision (c)(3)(A) of R&TC Section 23685 or subdivision (c)(3)(A) of R&TC Section 23695, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the buyer's use of the credit?

    No. Unlike the rules governing credit assignments under R&TC Section 23663 between unitary affiliates, the rules in the California Motion Picture and Television Production Credit permitting the sale of independent film credits under R&TC Sections 23685(c)(3) and 23695(c)(3) override the limitation found in R&TC Section 23036(i). As a result, the buyer who purchases an independent film credit that was earned by a disregarded entity will not be subject to that restriction.

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  3. If an independent film credit earned by an entity that is treated as disregarded for tax purposes is sold pursuant to subdivision (c)(1) of R&TC Section 17053.85 or subdivision (c)(1) of R&TC Section 17053.95, will the disregarded entity limitation found in subdivision (g) of R&TC Section 17039 apply to the buyer’s use of the credit?

    No. The rules in California Motion Picture and Television Production Credit permitting the sale of independent film credits under R&TC Sections 17053.85(c)(1) and 17053.95(c)(1) override the limitation found in R&TC Section 17039(g). As a result, the buyer who purchases an independent film credit that was earned by a disregarded entity will not be subject to that restriction.

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  4. If the credit earned by an entity that is treated as disregarded for tax purposes is assigned under subdivision (c)(1) of R&TC Section 23685 or subdivision (c)(1) of R&TC Section 23695, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee?

    No. The assignment provisions under R&TC Sections 23685(c)(1) and 23695(c)(1) specifically override the limitations found in R&TC Section 23036(i).

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  5. If the credit earned by an entity that is treated as disregarded for tax purposes is assigned under the unitary affiliate assignment rules of R&TC Section 23663, will the disregarded entity limitation found in subdivision (i) of R&TC Section 23036 apply to the assignee?

    Yes. See FAQ D-10 on the FAQs - Credit Assignment, Revenue and Taxation Code Section 23663 page.

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