Agreement Reached to Expand California Tax Incentives for Film Production
The State of California has finalized language to approve a tripling of funds designated for film tax credits in an effort to reinvigorate filming and media production within the state.
Although not yet signed into law, on August 27, 2014, the California governor gave his approval to legislation that increases the amount available under the state’s Film and Television Tax Credit Program from its current $100 million cap up to $330 million. Two days later, the California State Senate approved the legislation on a 32-2 vote. The enhanced tax credits will be available for five fiscal years starting January 1, 2015. The Assembly Bill – AB 1839, the California Film and Television Job Retention and Promotion Act of 2014 – adjusts the process for obtaining a film production credit by scrapping the prior lottery system and instituting a new ranking system based on the number of jobs created and other economic benefits accruing to the state.
The California Film Commission is instructed to allocate available credits under the program based upon application of amounts to projects starting with the highest jobs ratio. The program credit pool is allocated to filming projects as follows:
independent films (five percent);
feature films (35 percent);
relocating television series into California from out-of-state (20 percent); and
new television series, pilots or miniseries (40 percent).
AB 1839 would allow credits of 20 percent of the first $100 million of qualified expenditures for feature films and 25 percent of the first $10 million in qualified expenditures for independent films. Television series would be eligible for an uncapped 25 percent credit for the first year claiming credits in California, and a 20 percent credit for the first $100 million of qualified expenditures each year thereafter. A key element of the program is an additional credit of up to five percent offered to production companies that film outside of the Los Angeles area in other regions of the state. This bonus percentage applies to qualified expenditures related to original photography, music scoring and music track recording, and visual effects.
In order to be a qualified motion picture under the program, a taxpayer must ensure that more than 75 percent of shooting days occur in California or more than 75 percent of its production budget is for payment of services or property in California.
Any credit amount allowed under the program is applied against a taxpayer’s tax liability and under certain circumstances, may be carried forward or sold.