California Code of Regulations
Title 10 - Investment
Chapter 7.75 - California Film Commission
Article 4 - California Soundstage Filming Tax Credit Program
Section 5540 - Credit Certificate Issuance Process - Phase C

Universal Citation: 10 CA Code of Regs 5540

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a)

(1) Within 48 months of the date of the 30-month completion deadline for the qualified motion picture, as specified in subdivision (c), every applicant allocated tax credits under the California Soundstage Filming Tax Credit Program shall do one of the following:
(A) Submit the documents specified in this section, in an electronic format and/or hardcopy, as directed by the CFC; or,

(B) Submit a written notice to the CFC stating that they will not be requesting certification for the allocated credits; or,

(C) For an applicant with insufficient tax liability to initiate the process at the timeframe set in paragraph (1) above, request an extension in writing.
1. The applicant may request one or more extensions of up to twelve (12) months and the CFC will approve the extension for an applicant that requests such an extension within the timeframe specified in clause 2. below and submits a statement of insufficient tax liability to initiate use of the allocated tax credits.

2. The applicant shall request an extension no less than thirty (30) business days prior to the expiration of the timeline specified in paragraph (1) above or prior to the expiration of a previously approved extension for the request to be considered by the CFC.

(D) Failing to comply with the requirements of this paragraph shall constitute forfeiture of an applicant's allocated tax credits.

(2) Within the timeframe specified in paragraph (1) above, after an applicant's Phase A and B submissions are approved by the CFC, and the qualified motion picture has been produced and the final element has been created, the applicant may proceed to submit the documentation described in this section along with the diversity report described in section 5537 and the CFC's approval or rejection of that report. The CFC shall not certify any tax credit until it has received a final diversity report from the Phase B applicant and has determined that the Phase A applicant that owns the certified soundstage or soundstages on which the qualified motion picture project is filmed has complied with the annual workforce certification requirements in section 5538 for that soundstage or soundstages.

(b) The applicant shall be required to submit the following documents upon completion of the qualified motion picture:

(1) Proof of copyright registration of the screenplay, teleplay, motion picture, television series or pilot.

(2) Documentation indicating the date of completion of post-production. Documentation may include, but not be limited to, the facility invoice evidencing the date the final element was completed or other reasonable documentation as determined by the CFC.

(3) List of all Cast and Crew for the project with Social Security numbers redacted, if applicable.

(4) Copy of Script Supervisor's Lined Script or the continuity/spotting log of the project. TV series must submit episodes 2 and 5 of the series.

(5) Expenditure Summary Report information as set forth below. The applicant shall ensure that all contact information provided is correct and up to date.
(A) Section 1. Applicant Information, including the applicant entity, type of entity, taxpayer ID, address(es), phone number(s), contact person(s) and their title(s), parent company information (if applicable), CPA information. Input copyright registration number and seller's permit number, if applicable.

(B) Section 2. Contact Information for parent company and CPA firm.

(C) Section 3. Project Information. If television series, indicate number of completed episodes. Report start date of pre-production, principal photography, hiatus start date if applicable, hiatus return date if applicable, end of principal photography, end date of post-production (creation of final element), projected or actual release date (if known).

(D) Section 4. Production Shoot Days and Locations. Provide production shooting days inside and outside the Los Angeles zone, counties outside the LA zone, other states or countries; and provide Soundstage Local Community Expenditure Report Form (July 28, 2023), hereby incorporated by reference, for each county outside of Los Angeles County if applicable. Provide PP stage shooting days in total and PP stage shooting days on the soundstage or soundstages certified as part of the certified studio construction project from Phase A.

(E) Section 5A. Production and Financial Statistics. Provide total number of cast, base crew, extras and stand-in man days, residents and non-residents, number of outside zone local hires.

(F) Section 5B&C. Financial Statistics. Provide total worldwide expenditures; total California expenditures; qualified and non-qualified; total worldwide VFX expenditures; total CA expenditures, qualified and non-qualified; total qualified California VFX expenditures eligible for uplifts (excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less).

(G) Section 5D. Subject to self-reported voluntary information, include separate listings regarding the ethnicity and gender statistics of all individuals that received qualified wages and all individuals that received non-qualified wages.

(H) Section 6. Career Readiness and Pilot Skills Training Program.
1. Verification of fulfillment of career readiness requirement utilizing one of the required forms for Soundstage Career Readiness verification, Forms SCR1, SCR2, SCR3, SCR4, and SCR5 (March 11, 2022), hereby incorporated by reference. If applicable, verify submission of career readiness payment.

2. Verification of payment of 0.5 percent of the approved credit amount to the Career Pathways Training Program with date paid and amount, utilizing required Form SCPP (July 28, 2023), hereby incorporated by reference.

(I) Section 7. Uplifts (as per Soundstage AUP findings)
1. Out of zone Uplift. (Non-independent films only)
(i) Enter total out of Los Angeles zone wages excluding Local Hire Labor (applicable period).

(ii) Enter total out of Los Angeles zone non-wages (applicable period) excluding the total consumables.

(iii) Enter total non-wage expenditures totally consumed outside Los Angeles Zone (applicable period).

(iv) Calculate total out of Los Angeles zone uplift amount.

2. Local hire labor uplift: Total of out of zone local hire labor eligible for uplift.

3. Visual Effects (VFX) uplift (excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less). Total dollar amount for California VFX eligible for additional 5% tax credit.

4. Total additional tax credit: Calculate the following: The total out of Los Angeles zone amount (non-independent films only) and total California VFX amount and total local hire labor amount which is eligible for an additional tax credit.
(i) Multiply total out of zone amounts by .05

(ii) Multiply total VFX amount by .05

(iii) Multiply total Local Hire Labor amount by .10 for Non-Independent Films and by .05 for Independent Films and Relocating Television Series

(iv) (Calculate total additional amount of (i) + (ii) + (iii) above)

5. Total Diversity Goals Potential Increase: Calculate based on the CFC-approved percentage point increase, up to four percent for meeting or making a good faith effort to meet the diversity goals in the applicant's diversity workplan, as evidenced by the applicant's CFC-approved diversity report.

(J) Section 8. Credit Amount. As per the findings of the CPA performing the Soundstage AUP report, provide the Total Qualified Wages; Total Qualified Non-Wages; and completion bond fee, if applicable. Total Qualified Expenditures, Tax Credit Amount, Uplifts tax credit amount, and Total Adjusted Credit Amount, subject to verification and to the cap sum specified in sections 17053.98(k)(8)(B) and 23698(k)(8)(B) of the Revenue and Taxation Code.

(K) Section 10. Signature certification. By signing the Report, the applicant acknowledges, agrees and certifies that the applicant has read and reviewed the summary, and that the content provided is true and accurate to the best of their knowledge or at least the knowledge of what would be expected of a reasonable person in the same capacity.

(6) An AUP report in compliance with the Soundstage AUP. The Soundstage AUP report shall be prepared and certified by a certified public accountant (CPA) who meets the following criteria:
(A) Maintains an active license or has proof of a valid out-of-state accounting firm registration for the firm practicing attest services in California.

(B) The accounting firm performing the assurance services shall provide documentation from the California Society of Certified Public Accountants or other organization administering said review, indicating that a Peer Review Report was completed within the last three years and the rating was a "Pass." If the firm performing attest services is newly formed, the firm must provide evidence it is registered for review by an organization administering the review in the state in which the firm resides.

(C) The same public accounting firm is not permitted to perform the Soundstage AUP report required pursuant to this section if it is providing or has provided services related to Phase A for the soundstage or soundstages where the Phase B qualified motion picture is being produced, such as the Certified Studio Construction Project Verification Report required pursuant to section 5532 or the annual soundstage workforce report required pursuant to section 5538.

(7) The actual layout of the main and end titles produced by a title house or other postproduction facility.

(8) Documentation from each visual effects, title, digital effects and/or post sound company contracted by the production company, indicating the total dollar amount of work performed within the State of California shall be certified by managerial level personnel with knowledge of the project.

(9) Documentation from the designated representative of the California Community Colleges Chancellor's office and/or the California Department of Education or the CFC, verifying participation in the career-based learning and training program as required in section 5536.

(10) A miniseries shall submit documentation verifying that its initial distribution consists of two or more episodes longer than forty (40) minutes each exclusive of commercials.

(11) A listing of other jurisdictions in which any member of the applicants combined reporting group has produced a qualified motion picture in the preceding year pursuant to section 17053.98(g)(3)(C)(i)(I) and 23698(g)(3)(C)(i)(I) of the Revenue and Taxation Code. Updated information as per section 5533(d)(8)(K) is also required.

(12) Documentation verifying that the required fee was paid by the qualified taxpayer to fund the Career Pathways Training Program.

(c) The production shall be completed within 30 months from the issuance date of the CAL, Form SD (August 12, 2022), hereby incorporated by reference as required in sections 17053.98(b)(18)(B)(ii) and 23698(b)(18)(B)(ii) of the Revenue and Taxation Code.

(d) The qualified motion picture shall be considered complete when the process of postproduction has been finished and a final composite answer print, delivery air master, or digital cinema files of the qualified motion picture is completed.

(e) The CFC shall review all the required materials submitted by the applicant to determine the sufficiency of the required documentation and that the applicant meets all the criteria for the program. During the review, the CFC may reject insufficient documentation not in compliance with the requirements found in this section or may request additional documentation to determine if the production is a qualified motion picture and to verify the qualified expenditures.

(f) The CFC shall approve or disapprove the request for the tax credit certificate, Form SM (August 12, 2022), hereby incorporated by reference.

(1) Upon rejection of insufficient documentation or disapproval of the request for a tax credit certificate, the CFC shall provide the applicant with a notice of disapproval stating the reasons for the disapproval. Disapproval is final and shall not be subject to administrative appeal or review.

(2) Upon approval, the tax credit certificate shall be issued to the applicant.
(A) If the entity that incurs the qualified expenditures is a partnership, limited liability company or subchapter S corporation (pass-through entity), that entity is the applicant for purposes of filing the tax credit application and receiving the final tax credit certificate.

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)-(5), 17053.98(k)(8), 17053.98(k)(10), 17053.98(k)(13), 17053.98(b), 17053.98(c), 17053.98(d), 17053.98(e), 17053.98(g), 17053.98(i), 23698(k)(1)-(5), 23698(k)(8), 23698(k)(10), 23698(k)(13), 23698(b), 23698(c), 23698(d), 23698(e), 23698(g) and 23698(i), 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)-(5), 17053.98(k)(8), 17053.98(k)(10), 17053.98(k)(13), 17053.98(b), 17053.98(c), 17053.98(d), 17053.98(e), 17053.98(g), 17053.98(i), 23698(k)(1)-(5), 23698(k)(8), 23698(k)(10), 23698(k)(13), 23698(b), 23698(c), 23698(d), 23698(e), 23698(g) and 23698(i), Revenue and Taxation Code; and Section 14998.1, Government Code.

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