Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) The
qualified expenditures shall be allowed as provided in sections
17053.98(b)(16)
and
23698(b)(16)
of the Revenue and Taxation Code.
(1) Qualified
Wages shall also include payments to a qualified entity to the extent its services
are performed in California, including, but not limited to, Qualified Expenditures
as defined in sections
17053.98(b)(16)
and
23698(b)(16)
of the Revenue and Taxation Code.
(b) The non-qualifying expenditures are as
provided in sections
17053.98(b)(21)(B)
and
23698(b)(21)(B)
of the Revenue and Taxation Code. The following expenses shall not be allowed as
qualified expenditures:
(1) State and federal
income taxes.
(2) Certified public
accountant and public accounting firm expenses for the CPA reports required pursuant
to sections 5532,
5538, and
5540, or for the CPA report which may
be required pursuant to section
5537.
(3) Expenditures for rentals or purchases outside
the state regardless if used in the state, and services performed outside the state
are not considered qualified expenditures including, but not limited to, digital
visual effects work which is physically performed out-of-state.
(4) Expenditures for the exhibition of the
qualified motion picture including, but not limited to, digital cinema distribution
copies and release prints.
(5)
Expenditures incurred thirty (30) days after the creation of the final elements,
such as, but not limited to, composite answer print, air master, and digital cinema
files. Creation of additional versions for foreign distribution and/or archival
purposes are not considered final elements.
(6) Financial contribution expenditures related to
the pilot career pathways training program.
(c) For the purposes of this section, a five
percent (5%) uplift to the tax credit allocation for non-independent films
(excluding a relocating television series in its first season in California) shall
be made by the CFC when any of the following conditions have been met:
(1) The production company pays or incurs
qualified expenditures relating to qualified visual effects work totaling a minimum
of ten million dollars ($10,000,000) incurred in California or at least seventy-five
percent (75%) of total worldwide visual effects expenditures are incurred in
California.
(2) The production company
pays or incurs qualified wages for services performed outside the Los Angeles zone
during the applicable period relating to original photography outside the Los
Angeles zone by individuals who reside within the Los Angeles zone. The foregoing
amounts shall be substantiated by documentation including, but not limited to,
timesheets and payroll records as requested by the CFC and/or the CPA performing the
Soundstage AUP (August 28, 2023), hereby incorporated by reference, required
pursuant to section
5540.
(3) The production company purchases or leases
tangible personal property outside the Los Angeles zone during the applicable period
and the personal property is used or consumed outside the Los Angeles zone. Tangible
personal property must be purchased, rented, or leased from an outside of Los
Angeles vendor through an office or other place of business outside the Los Angeles
zone. Rentals or purchases from a pass-through business do not qualify for the five
percent (5%) augmentation.
(A) If the tangible
personal property purchased or leased outside the Los Angeles zone was not
completely used or consumed solely outside the Los Angeles zone, the production
company shall apportion amounts paid or incurred for tangible personal property
outside the Los Angeles zone during the applicable period by multiplying these
non-wage outside the Los Angeles zone expenditures by the ratio of days of principal
photography outside the Los Angeles zone to the total number of days of principal
photography.
(B) If the tangible
personal property purchased or leased outside the Los Angeles zone was completely
used or consumed solely outside the Los Angeles zone, the production company may
elect to substantiate that with its records. Tangible person property purchased or
leased outside the Los Angeles zone shall be deemed to be completely used or
consumed provided the property was of a type or nature such that it would have no
residual material value remaining after its use or consumption outside the Los
Angeles zone. Examples of such property include, but are not limited to, food and
catering items, rented hotel or corporate housing usage, construction supplies and
materials for sets, automotive or other fuels, security services, location and stage
services, government permit fees, personnel services, printing, equipment rentals
for the applicable period outside the Los Angeles Zone, transportation services, dry
cleaning, and shipping and travel costs from within the state to and from the out of
zone location.
(d)
A ten percent (10%) uplift for non-independent films excluding relocating TV series,
is available if the production company pays or incurs qualified wages for services
performed by local hire labor outside the Los Angeles zone during the applicable
period relating to original photography outside the Los Angeles zone. The foregoing
amounts shall be substantiated by documentation including but not limited to
timesheets and payroll records as requested by the CFC and/or the CPA performing the
Soundstage AUP required pursuant to section
5540.
(e) The maximum amount of tax credits allowed for
independent films and/or relocating television series for their initial season in
California is twenty-five percent (25%) and therefore the five percent (5%) uplift
is not applicable to such productions except for an additional five percent (5%)
uplift for local hire labor. Production may also qualify for an increase in its tax
credit percentage up to four percent (4%) for meeting diversity goals stated in the
diversity workplan required pursuant to section
5534 and documented in the diversity
report required pursuant to section
5537.
Note: Authority cited: Sections 17053.98(k)(10) and
23698(k)(10), Revenue and Taxation Code; and Section 11152, Government Code.
Reference: Sections 17053.98(k)(1)-(4), 17053.98(k)(8), 17053.98(a), 17053.98(b),
23698(k)(1)-(4), 23698(k)(8), 23698(a) and 23698(b), Revenue and Taxation Code; and
Section 14998.1, Government Code.
Note: Authority cited: Sections
17053.98(k)(10)
and
23698(k)(10),
Revenue and Taxation Code; and Section
11152,
Government Code. Reference: Sections
17053.98(k)(1)-(4),
17053.98(k)(8),
17053.98(a),
17053.98(b),
23698(k)(1)-(4),
23698(k)(8),
23698(a)
and
23698(b),
Revenue and Taxation Code; and Section
14998.1,
Government Code.
