Form 3541 - California Motion Picture And Television Production Credit

B Definitions

Note: This credit may also be assigned under the credit assignment

rules of R&TC Section 23663. Any portion of the credit assigned under

Credit certificate. Credit certificate means the tax credit certificate

either Section 23663 or 23685 may not be subsequently assigned under

issued by the CFC for the allocation of the credit to a qualified taxpayer.

either statute. For more information on credit assignment under R&TC

Section 23663, get form FTB 3544, Election to Assign Credit Within

Qualified taxpayer. Qualified taxpayer means a taxpayer who has paid

Combined Reporting Group, and form FTB 3544A, List of Assigned

or incurred qualified expenditures and has been issued a tax credit

Credit Received and/or Claimed by Assignee.

certificate by the CFC. In the case of any pass-through entity, the

determination of whether a taxpayer is a qualified taxpayer is made at

Assignor. An assignor is the qualified taxpayer that receives the CFC Tax

the entity level. The credit is not allowed at the pass-through entity level.

Credit Certificate. The following rules must be met before a credit can

The credit is passed through to the shareholders, beneficiaries, partners,

be assigned:

or members.

• The assignor must be taxed as a corporation.

Qualified motion picture. Qualified motion picture means a motion

• The credit must first exceed the “tax” of the assignor for the taxable

picture that is produced for distribution to the general public, regardless

year in which the credit is to be assigned.

of medium. For more information, refer to the R&TC Section 17053.85,

• The eligible assignee must be an affiliated corporation as defined by

Section 23685, or go to film.ca.gov.

R&TC Section 23685(c)(1).

Independent film. Independent film means a motion picture with a

Eligible assignee. An eligible assignee is any affiliated corporation,

minimum budget of one million dollars ($1,000,000) and a maximum

which includes a corporation where one of the following applies:

budget of ten million dollars ($10,000,000) that is produced by a

• Owns, directly or indirectly, 100 percent of the assignor’s voting

company that is not publicly traded and publicly traded companies do

common stock.

not own, directly or indirectly, more than 25 percent of the producing

• The assignor owns, directly or indirectly, 100 percent of the voting

company.

common stock.

Television series. Television series means a television series that

• Is wholly owned by a corporation or individual owning 100 percent of

relocated to California, without regard to episode length or initial

the voting common stock of the assignor, or

media exhibition, that filmed all of its prior season or seasons outside

• Is a stapled entity as defined in R&TC Section 25105.

of California and for which the taxpayer certifies that this credit is the

D Limitations

primary reason for relocating to California.

Affiliated corporation. Affiliated corporation has the meaning provided

The credit cannot reduce the S corporation 1.5% entity-level tax (3.5%

in R&TC Section 25110(b), except that “100 percent” is substituted

for financial S corporations), the minimum franchise tax (corporations

for “more than 50 percent” wherever it appears in the section and

and S corporations), the annual tax (limited partnerships, limited liability

“voting common stock” is substituted for “voting stock” wherever it

partnerships, and LLCs taxed as partnerships), the alternative minimum

appears in the section. For more information, see General Information C,

tax (corporations, exempt organizations, individuals, and fiduciaries),

Credit Assignment.

the built-in gains tax (S corporations), or the excess net passive income

tax (S corporations).

C Credit Assignment

For corporate taxpayers, the credit can reduce the regular tax below

For taxable years beginning on or after January 1, 2011, R&TC

the TMT. For individual taxpayers, the credit cannot reduce regular tax

Section 23685(c)(1) allows a qualified taxpayer to assign a California

below the TMT. For more information, get Schedule P (100, 100W, 540,

motion picture and television production credit to an eligible assignee.

540NR, or 541), Alternative Minimum Tax and Credit Limitations.

The credit must first exceed the tax of the qualified taxpayer (the

S corporation. If a C corporation has unused credit carryovers when

assignor) for the taxable year in which the credit is to be assigned.

it elects S corporation status, the credit carryovers may not be passed

The election to assign any credit is irrevocable. The assignor shall

through to the S corporation or the shareholders. For more information,

make the election and report the credit assignment by completing

get Schedule C (100S), S Corporation Tax Credits.

Part IV, Credit Assigned to Affiliated Corporations Pursuant to R&TC

Disregarded business entity. If a taxpayer owns an interest in a

Section 23685. Once a credit is assigned to an eligible assignee, it

disregarded business entity [for example, a single member limited

cannot be reassigned. The assignor will reduce the credit amount

liability company (SMLLC), which for tax purposes is treated as a sole

available for assignment by the amount of the credit assigned.

proprietorship if owned by an individual or a division if owned by a

After assignment of an eligible credit, the eligible assignee may use the

corporation], the credit amount received from the disregarded entity

credit against income tax liability, or apply it against BOE qualified sales

is limited to the difference between the taxpayer’s regular tax figured

and use taxes. Also, the restrictions and limitations that applied to the

with the income of the disregarded entity, and the taxpayer’s regular tax

assignor (entity that originally generated the credit) may apply to the

figured without the income of the disregarded entity. If the credit is sold

eligible assignee.

under Section 17053.85(c) or assigned or sold under Section 23685(c)

this restriction does not apply.

There is no requirement of payment or other consideration for

assignment of the credit by an eligible assignee to an assignor.

E Carryover

The assignor and the eligible assignee shall maintain the information

necessary to substantiate any credit assigned and to verify the

If the available credit exceeds the current year tax liability or is limited

assignment and subsequent use of the credit assigned. Lack of

by TMT (individual taxpayers only), the unused credit may be carried

substantiation may result in the disallowance of the assignment. The

over for six years or until the credit is exhausted, whichever occurs first.

assignor and the eligible assignee shall each be liable for the full amount

Apply the credit carryover to the earliest taxable year. In no event can the

of any tax, addition to tax, or penalty that results from any disallowance

credit be carried back and applied against a prior year’s tax.

of the credit assigned under R&TC Section 23685. The Franchise Tax

Retain all records that document this credit and carryover used in prior

Board may collect such amount in full from either the assignor or the

years. The FTB may require access to these records.

eligible assignee.

Page 2 FTB 3541 Instructions 2015

Form 3541 - California Motion Picture And Television Production Credit - 2015 Page 4

Related Articles

Related forms

Related Categories