California ~ Multiple Taxes: Motion Picture Production Credit Extended; Application and Reporting Requirements Modified

Legislation has extended the nonrefundable motion picture production credit against California personal income and corporation franchise and income taxes an additional two years by authorizing the California Film Commission (CFC) to allocate additional motion picture production credits totalling up to $100 million annually from July 1, 2015, to July 1, 2017. As before, the total annual allocation may be increased by the amount of any unused credits from previous years and taxpayers may also elect to claim a refundable sales and use tax credit in lieu of claiming the income or franchise tax credits.

Additional amendments revise the information that taxpayers are required to include on their credit application submitted to the CFC. Taxpayers included in a combined reporting group must include the names of all members included in the group if known at the time of the application. Previously, such taxpayers were required to report all members of the combined reporting group and any members to which the credit is assigned, including, if readily available, the states, provinces, or other jurisdictions in which any of those members finance motion picture productions. Taxpayers who are involved in a partnership or limited liability company must only report those partners or members who have a financial interest in the applicant’s qualified motion picture. Previously, all partners and members were required to be listed.

The CFC must collect the following information from qualified taxpayers prior to issuing a credit certificate:

  • A list of the states, provinces, or other jurisdictions in which any member of the applicant’s combined reporting group in the same business unit as the qualified taxpayer has produced in the preceding calendar year a qualified motion picture, excluding any episodes of a television series that were complete or in production prior to July 1, 2009. This information is only required for motion pictures intended to be released in the U.S. market and only if the information is readily available.
  • Any financial incentive by the state, province, or other jurisdiction that was predicated on the performance of primary principal photography or postproduction in that location that was awarded to such qualified motion picture.
  • The CFC must also try to obtain the following information from applicants that were not awarded credit allocations:
  • whether the qualified motion picture that was the subject of the application was completed;
  • if completed, in which state or foreign jurisdiction was the primary principal photography completed; and
  • whether the applicant received any financial incentives from the state or foreign jurisdiction to make the qualified motion picture in that location.

The CFC is required to share specified information with the Legislative Analyst’s Office (LAO) and is also required to post the following information on its website:

  • a list of qualified taxpayers and the tax credit amounts allocated to each qualified taxpayer;
  • the number of production days in California the qualified taxpayer represented in its application would occur;
  • the number of California jobs that the qualified taxpayer represented in its application would be directly created by the production;
  • the total amount of qualified expenditures expected to be spent by the production; and
  • a summary describing the production of the qualified taxpayer as well as background information regarding the qualified taxpayer contained in the qualified taxpayer’s application for the credit.

The LAO is required to prepare a report by January 1, 2016, evaluating the effectiveness of the credit. All taxpayer information obtained from the CFC, the Franchise Tax Board, the Employment Development Department, and the State Board of Equalization remains confidential taxpayer information. Although the LAO may publish a statistical analysis, this information may not be presented in such a way that reveals the identification of particular taxpayers, reports, and tax returns and the publication of the percentage of dividends paid by a corporation that is deductible by the recipient.

Ch. 841 (A.B. 2026 ), Laws 2012, effective September 30, 2012, and applicable to taxable years beginning on or after January 1, 2012

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting