Form 3541 - California Motion Picture And Television Production Credit

D Limitations

Affiliated corporation. Affiliated corporation has the meaning provided

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

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

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

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

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

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

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

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

Assignment.

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

C Credit Assignment

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

tax (S corporations).

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

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

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

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

motion picture and television production credit to an eligible assignee.

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

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

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

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

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

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

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

make the election and report the credit assignment by completing

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

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

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

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

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

cannot be reassigned. The assignor will reduce the credit amount

disregarded business entity [for example, a single member limited

available for assignment by the amount of the credit assigned.

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

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

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

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

corporation], the credit amount received from the disregarded entity

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

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

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

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

eligible assignee.

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

There is no requirement of payment or other consideration for

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

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

this restriction does not apply.

The assignor and the eligible assignee shall maintain the information

E Carryover

necessary to substantiate any credit assigned and to verify the

assignment and subsequent use of the credit assigned. Lack of

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

substantiation may result in the disallowance of the assignment. The

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

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

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

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

Apply the credit carryover to the earliest taxable year possible. In no

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

event can the credit be carried back and applied against a prior year’s

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

tax.

eligible assignee.

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

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

years. The FTB may require access to these records.

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

either Section 23663 or 23685 may not be subsequently assigned under

Specific Line Instructions

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

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

Owner of credit – Enter the name of the owner of the credit and the CA

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

Corporation no. or FEIN or the CA Secretary of State (SOS) file number.

Credit Received and/or Claimed by Assignee.

If the name shown on the California return is the same as the owner of

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

the credit, enter “Same”.

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

be assigned:

Part I – Available Credit

• The assignor must be taxed as a corporation.

Credit certificate numbers (Lines 1b, 2b, 3b, 7b, and 10b) – Provide

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

the tax credit certificate number for the current year generated credit

year in which the credit is to be assigned.

allocated to you from the CFC, passed through to you from a pass-

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

through entity, purchased from a qualified taxpayer, assigned to you

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

from an affiliated corporation, or applied against BOE sales and use

Eligible assignee. An eligible assignee is any affiliated corporation,

taxes. If you reported multiple credits, list all tax credit certificate

which includes a corporation where one of the following applies:

numbers on the respective lines or attach a schedule, if necessary.

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

Failure to provide all tax credit certificate numbers may result in the

common stock.

disallowance of the credit.

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

Line 1a – Current year generated credit. If you received a tax credit

common stock.

certificate from the CFC, enter the full amount of credit allocated to you

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

as shown on the CFC Tax Credit Certificate. If you received more than

the voting common stock of the assignor, or

one tax credit certificate during the taxable year, add the credit amounts

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

from all credit certificates and enter the total on this line. If you received

the credit from a pass–through entity, purchased the credit from a

qualified taxpayer, or received the credit through an assignment from

another corporation pursuant to R&TC Section 23685, do not enter the

amounts on this line. Instead, enter these amounts on line 2a, line 3a, or

line 4, respectively.

Page 2 FTB 3541 Instructions 2014

Form 3541 - California Motion Picture And Television Production Credit - 2014 Page 4

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