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§ 5521. Application Process for Tax Credit Allocation.

10 CA ADC § 5521Barclays Official California Code of RegulationsEffective: December 22, 2023

Barclays California Code of Regulations
Title 10. Investment
Chapter 7.75. California Film Commission
Article 3. California Film and Television Tax Credit Program 3.0
Effective: December 22, 2023
10 CCR § 5521
§ 5521. Application Process for Tax Credit Allocation.
(a) The open allocation periods for the California Film & Television Tax Credit Program 3.0 shall be announced by the Director of the CFC prior to each new fiscal year on the CFC website. The California fiscal year is from July 1 to June 30. The announcement shall identify the application categories: Independent films, feature films, relocating television series, and television projects that may be submitted in each application period.
(b) An applicant that begins principal photography in California prior to receiving a CAL shall be disqualified from receiving such letter for that particular production.
(c) An applicant shall not submit a duplicate application for a project during any given allocation period. Submittal of duplicate applications shall be good cause to disqualify an applicant from the tax credit program.
(d) An applicant may submit a new application for the same project during any fiscal year if the qualified production did not receive or retain a tax credit allocation from a previous allocation period in the same fiscal year.
(e) An applicant, including any affiliated entities, that has been issued a tax credit allocation for a particular production that begins but does not complete principal photography of that production, shall not be eligible to reapply for a tax credit reservation for that particular production.
(f) Any expenditures for services, wages, or goods incurred prior to application approval shall not be considered qualified expenditures with the exception of production facility, office rentals, completion bonds and insurance premiums, which may be prorated to include the expenditures which are incurred on or after CAL issuance.
(g) An applicant of a television series shall submit one application for a television season of that television series. A television series with an order for additional episodes for the same season may apply in a subsequent television allocation period.
(h) The application process for tax credit allocation shall occur in two phases. Phase I requires applicants to complete and submit the online application as set forth on the CFC website. Phase II occurs after all applicants have been ranked by jobs ratios and the highest ranked productions per category are required to submit their documentation. The applicant shall initiate the online application process by selecting a production category from the following: Feature film, independent film with a qualified expenditure budget of ten million dollars ($10,000,000) or less, independent film with a qualified expenditure budget over ten million dollars ($10,000,000), new television series, recurring television series, pilot, mini-series, relocating television series. The application shall include the information-set forth below:
(1) Section 1: Applicant information.
(A) Production title, date submitted, production category, principal photography start date, post production end date, estimated tax credit, Application Jobs Ratio, applicant entity and taxpayer ID number; Identify if the applicant is a corporation, limited liability company, individual proprietorship, subchapter S corporation, partnership, or other. If Relocating TV Series is selected under production category dropdown menu, for fiscal years 2021-22 and 2022-23, by checking the box, Applicant attests that the television series (without regard to episode length or initial media exhibition) that wishes to relocate to California has a minimum budget of at least $1 million per episode, filmed at least 75% of principal photography days for at least one episode outside of California, and has not filmed more than 25% of principal photography days for any episode inside of California. (A definition of the applicant that will receive the tax credit is included as per section 5520(b)).
(2) Section 2: Contact information
(A) Enter the contact type and provide the contact name, title, address, email and phone for each of the following, as applicable: applicant contact, primary contact, production company contact, parent company contact, budget and schedule contact.
(3) Section 3: Financing sources and ownership.
(A) List the following information for financing sources:
1. Names of financing sources, amounts, percentage of funding. Named sources must total a minimum of 60% of total production budget.
(B) For Independents: List names of all equity investors including, without limitations, all partners (including percentage of ownership). Attest that applicant entity is not owned directly or indirectly more than 25% by a publicly traded company.
(4) Section 4: Proposed project.
(A) If it is a new television series indicate if TV Pilot was initially accepted in the program, number of episodes, and confirm over forty (40) minutes of running time exclusive of commercials. If it is a relocating television series indicate previous location, number of episodes previously shot and number of episodes included in this season. Indicate if the previous season was filmed in California and if so, the number of principal photography days inside California and outside California. (The previous question is disabled if the applicant attests in Section (1)(A) that their relocating television series falls under the definition in Section 5520(ff) for fiscal years 2021-22 and 2022-23.) If it is a mini-series, indicate the number of episodes and confirm over forty (40) minutes of running time exclusive of commercials.
(B) Production schedule. Provide start date of principal photography, end date of principal photography, estimated end date of post-production and projected or actual release date.
(C) Key Creatives: Provide names of executive producer(s), producer(s), writer(s), director, lead actor(s), director of photography, and location manager.
(D) Synopsis. The synopsis must be a minimum of 1600 and a maximum of 6000 characters and include a description of the main characters, plotline, beginning and ending, and major scene descriptions.
(5) Section 5: Production shoot days and Bonus Points.
(A) Principal photography (PP) Days.
1. Enter the requested data for PP Days. The online application will automatically calculate the totals.
a. Enter total PP days in Los Angeles (LA) zone.
b. Enter total PP days outside LA zone, but in California.
c. Total California PP days equals a. plus b.
d. Total percentage of PP days outside LA zone equals b. divided by c. x 100.
e. Enter total non-California PP days.
f. Total PP days equals c. plus e.
g. Total percentage of California PP days equals c. divided by f. x 100
(B) If shooting outside of Los Angeles zone, indicate the California counties where filming will occur.
(C) If shooting outside California, indicate state and/or country where filming will occur.
(6) Section 6: Production statistics.
(A) Provide the following information regarding labor statistics for in-state work:
1. Estimated total number of cast members.
2. Estimated total number of base crew members (Base crew is the average number of staff and shooting crew employed per principal photography day).
3. Estimated total background performers/stand-in man-days. (The sum of the number of days, full or partial, a person is estimated to work).
4. By checking the box, Applicant acknowledges the following required documentation will be submitted if and when the Applicant applies for a tax credit certificate: Subject to self-reported voluntary information, include separate listings regarding the ethnicity and gender statistics of all individuals who received qualified wages and all individuals who received non-qualified wages.
(B) Provide the following budget information.
1. Provide total production budget.
2. Provide total California expenditures (qualified and non-qualified).
3. Indicate if seventy-five percent (75%) or more of total production budget will be spent in California.
(C) Visual Effects: (excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less). Provide total worldwide VFX budget amount, total California VFX budget amount, and total California VFX budget eligible for bonus points. Indicate if the total California qualified VFX is equal or greater than 75% of total worldwide VFX budget or if the California qualified VFX is at least ten million dollars ($10,000,000).
(7) Section 7: Additional tax credit calculation: Uplifts and bonus points.
A list of eligible expenditures and wages are provided as stated in section 5523(a)(1) and 5524(e) and (f), as applicable.
(A) Out of zone Uplift. (Non-Independent productions excluding relocating TV series)
1. Enter total budgeted out of zone wages excluding local hire labor (applicable period).
2. Enter total budgeted out of zone non-wages (applicable period) excluding the total consumables.
3. Enter total non-wage expenditures totally consumed outside Los Angeles Zone (applicable period).
4. Applicable period is defined as in Section 5520 (a).
(B) Local Hire Labor Uplift: Total of out of zone local hire labor eligible for additional tax credits (includes independent films and relocating TV series).
1. The applicant is responsible for collecting proof of identity and proof of the location where the qualified individual resides for local hire labor at the time of hire and for providing copies to the CPA performing the AUP (September 27, 2023), hereby incorporated by reference. Without proof of identity and proof of the location where the qualified individual resides for a crewmember the Local Hire Labor Uplift shall not be applied for that individual.
(i) Acceptable proof of identity is a California Driver's License, a State ID Card, or a Passport.
(ii) For purposes of sections 17053.98(a)(4)(E) and 23698(a)(4)(E) of the Revenue and Taxation Code, acceptable proof of the location where the qualified individual resides is a current home or apartment rental agreement, or a utility bill, mortgage statement, internet or phone provider bill, renter's or homeowner's insurance bill, or equivalent document, issued within the previous three months.
(C) Total California Qualified Visual Effects (VFX) Uplift and/or bonus points. (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 and/or additional bonus points.
(D) Music Wages: (excludes independent films with qualified expenditure budgets of ten million dollars ($10,000,000) or less).
Enter total California music scoring wages eligible for bonus points.
(E) Total Additional Tax Credit: The online application will automatically calculate the following: The total out of zone amount (non-independent productions only) and total California VFX amount and total local hire labor amount (includes independents and relocating TV series) which is eligible for an additional tax credit.
1. Multiply total out of zone amounts by .05
2. Multiply total VFX amount by .05
3. Multiply total local hire labor amount by .10 for non-independent productions and by .05 for independent films and relocating television series.
4. (Total additional amount of 1 + 2+ 3 above)
(8) Section 8: Estimated Credit Allocation and Jobs Ratio.
(A) Qualified Wages
(B) Qualified Non-wages
(C) If applicable, enter total contingency, which can be no more than 10% of qualified expenditures. The contingency cannot be included as a line-item within the body of the budget.
(D) If applicable, enter total completion bond fee, which can be no more than 2% of qualified expenditures. The completion bond fee cannot be included as a line-item in the body of the budget. Completion bond costs for any filming outside of California must be excluded proportionately.
(E) Total qualified expenditures.
(F) Total tax credit uplifts
Total qualified expenditures shall be multiplied by 25% if production category is an independent film or relocating television series; totals in this section shall be multiplied by 20% for all other production categories. (Credit allocation applies only to the first ten million ($10,000,000) of qualified expenditures for independent films and the first ten million ($10,000,000) of qualified expenditures eligible for uplifts. Credit allocation applies only to the first one hundred million ($100,000,000) of qualified expenditures for non-independent productions and the first one hundred million ($100,000,000) of qualified expenditures eligible for uplifts.)
(G) Total tax credit uplift amount.
(H) Total tax credit amount including uplifts.
A jobs ratio shall be assigned to the application, based on the criteria in Section 5527 and the information provided by the applicant in this application. The jobs ratio number for the production will be indicated once the application is complete.
(9) Section 9. Certification.
(A) Clicking submit on the Application Summary is the applicant's acknowledgement, agreement and certification that the applicant has read and reviewed the application, including all its attachments, and that the content provided in the application by the applicant is true and accurate to the best of his or her knowledge or at least the knowledge of what would be expected of a reasonable person in the same capacity.
(B) Provide name, title, and date.
(i) Applicants shall be selected for Phase 2 of the application process based on the jobs ratio ranking of their application, pursuant to Section 5527.
(j) The CFC shall notify, by electronic mail, the top ranked projects in each category of qualified motion pictures, as provided for in sections 17053.98(i) and 23698(i) of the Revenue and Taxation Code. These applicants shall provide the additional materials and supporting documentation as requested by CFC as described in subsection (k) below within the timeframe provided on the electronic notification, which shall be within three (3) business days and can be extended to no more than seven (7) business days from the electronic notification date for legitimate business reasons.
(k) The applicant shall submit the following:
(1) An electronic copy of the qualified expenditure budget in an industry standard budgeting program. The electronic copy shall be uploaded to the online application portal for the qualified motion picture. The industry standard budgeting program shall provide the following:
(A) Qualified wage expenditures and qualified non-wage expenditures. If applicable, also indicate costs which will be incurred outside the Los Angeles zone during the applicable period.
(B) For non-independent productions (excluding relocating TV series in their first season in California) indicate those accounts for which an additional five percent (5%) tax credit is allowed for qualified expenditures purchased or rented and used outside the Los Angeles zone during preproduction through strike on location; qualified visual effects if at least ten million dollars ($10,000,000) or seventy-five percent (75%) of worldwide visual effects paid or incurred in the state; and qualified wages for services performed outside the Los Angeles zone during preproduction through strike by individuals who reside within the Los Angeles Zone. Productions shall also indicate those accounts for which an additional ten percent (10%) tax credit is allowed for local hire labor.
(C) A television series shall submit a qualified expenditure budget including all pattern and amortization costs, or separate amortization and pattern budgets. The budget shall be in an industry standard budgeting program uploaded to the online application. The Production Budget shall indicate, as applicable, the information required in subsection (k) (1)(A) and (B) above.
1. Television series applicants submitting more than one budget shall submit only the pattern and amortization budgets; no additional budgets or budget versions will be accepted.
(D) For independent films and relocating television series in their first season in California, indicate those accounts for which an additional five percent (5%) tax credit is allowed for local hire labor.
(2) Fringe Benefit Matrix: Applicant shall submit information on fringe benefit payments included in the qualified expenditure budget. After entering project title, category, and date, applicant provides a detailed breakdown of qualified fringe benefit payments for union and/or non-union background performers, union and/or non-union crew, Director's Guild of America (DGA) crew, as applicable. Fringe payments include: state unemployment tax, payroll/handling fees, pension, health, vacation and holiday, workers compensation, DGA fringes benefit payments, and non-union health insurance payments. Casting fees are not included as fringe benefit payments but should be included as a line item in the budget.
(3) One-Line Schedule (“production board”). Applicant shall submit in PDF or equivalent format a One-Line Schedule which shall include scene descriptions, scene numbers, holidays and cast numbers and shall indicate which days are scheduled for filming outside of the Los Angeles zone.
(A) A television series may submit in PDF or equivalent format, a production calendar, including: the start and end dates of the season, the number of in-state and out-of-state principal photography days, holidays, and the total number of episodes in lieu of a one-line shooting schedule. The production calendar must indicate which days are scheduled for filming outside the Los Angeles zone.
(4) Applicant shall submit in PDF or equivalent format the screenplay, including scene numbers that match the submitted schedule for the production. If the application is for a pilot that does not have a script, this requirement shall be waived. This requirement is waived for recurring television series.
(5) Applicant shall submit supporting documentation that confirms at least 60% of production financing. Applicant shall include documentation for each financing source including, but not limited to, commitment letters, financing agreements, term sheets, and/or bank statements in PDF or equivalent format. Applications submitted without the sufficient documentation described above, which shall be determined in the sole discretion of CFC, shall be considered incomplete and good cause to disqualify the application.
(6) Pick-up order. A pilot, new television series or relocating television series shall submit evidence, in PDF or equivalent format, that the pilot or series is scheduled for photography, e.g. a pick-up order, when applying for a credit allocation. Recurring television series may submit applications without a pick-up order but shall not receive a credit allocation until proof of a pick-up order has been submitted. Any recurring television series that has not supplied a pick-up order within 140 calendar days of the CAL date for the allocation period for which it submitted an application will be removed from the queue and may reapply during the next television allocation period. The number of episodes indicated on the pick-up order must match the number of episodes in the application.
(7) Narrative statement pursuant to sections 17053.98(g)(2)(A)(viii) and 23698(g)(2)(A)(viii) of the Revenue and Taxation Code.
(8) Relocating statement. Applicant certifies that the credit provided is the primary reason for relocation to California (if applicable). The Applicant must state either that (1) at least 75 percent of principal photography days of its most recent season was filmed outside of California; or (2) For fiscal years 2021-22 and 2022-23, the television series (without regard to episode length or initial media exhibition) that wishes to relocate to California has a minimum budget of at least $1 million per episode, filmed at least 75% of principal photography days for at least one episode outside of California, and has not filmed more than 25% of principal photography days for any episode inside of California. If submitting a relocating statement, the detailed narrative statement as per Revenue and Taxation code sections 17053.98 (g)(2)(A)(viii) and 23698(g)(2)(A)(viii) is not required. The certification shall be submitted in PDF or equivalent format.
(9) Unlawful harassment policy. Applicant shall submit company's written policy against unlawful harassment as set forth in section 17053.98(g)(2)(A)(ix) and 23698(g)(2)(A)(ix) of the Revenue and Taxation Code.
(10) Applicants that administer voluntary programs to increase the representation of women and minorities, or have access to such programs, shall submit a summary of those programs including a description of what the program is designed to accomplish and information about how the programs are publicized to interested parties as set forth in sections 17053.98(g)(2)(A)(xi) and 23698(g)(2)(A)(xi) of the Revenue and Taxation Code.
(11) Company and financial information, if available and as applicable, as required by sections 17053.98(g)(2)(A)(v), 17053.98(g)(2)(A)(xii), 23698(g)(2)(A)(v), and 23698(g)(2)(A)(xii) of the Revenue and Taxation Code.
(l) Within thirty (30) business days of receipt of the completed application and all requested supporting documents, the Director of the CFC, or his or her designee, will notify the applicant whether the application is accepted or disqualified. An approved application shall meet the Eligibility Requirements in Section 5522. Upon approval, a Credit Allocation Letter, (CAL) CFC Form D3 (Rev. July 28, 2023), hereby incorporated by reference, shall be issued to the applicant indicating the amount of tax credits allocated, as provided in Section 5526. Failure to timely submit all requested documents above, as applicable, shall be good cause to disqualify the applicant.
(1) Each CAL is issued to the specific project described and outlined in the synopsis, script, schedule, and budget that were submitted with the application. Exchanging the approved project for a different project is prohibited and will result in revocation of the CAL.
(2) A qualified motion picture project that is taken over by an entity other than the applicant entity and wishes to retain the project's allocation of tax credits must comply with the following:
(A) The original applicant entity must submit a statement on company letterhead declaring that they no longer retain the project and specify the business entity that will take over the project, including that business entity's taxpayer ID.
(B) The applicant entity taking over the project must submit:
1. Applicant contact, production company contact, and budget contact.
2. Documentation required pursuant to paragraph (3) of subdivision (h) and paragraphs (5) and (11) of subdivision (k) of this section.
3. An updated production schedule, required pursuant to subparagraph (B) of paragraph (4) of subdivision (h) of this section.
(C) A qualified motion picture project described in paragraph (2) above can only be transferred to a different business entity prior to the start of principal photography.
(m) As soon as feasible, but not less than four (4) weeks prior to the start of principal photography, the production accountant is required to attend an orientation meeting with the Director of the CFC or his or her designee, along with any or all of the following staff members: a primary producer, production manager or other appropriate personnel as determined by the applicant. Applicants and staff members shall not be required to attend more than one (1) orientation meeting for a motion picture in the program.
(n) Any television series, relocated television series and any television series based on a pilot that has been approved and issued a Credit Allocation Letter, shall be given first priority for a credit allocation during an open allocation period in each subsequent year in the life of that series whenever credits are allocated and available within a fiscal year.
(1) Each recurring television series shall submit a new application and pick-up order, if available, for each season during any open television project application period as specified by the CFC in its written notification. The application shall reflect the estimated qualified expenditures but the allocation will not exceed the amount approved in the previous season's credit allocation letter(s). The narrative statement requirement as set forth in sections 17053.98(g)(2)(A)(viii) and 23698(g)(2)(A)(viii) of the Revenue and Taxation Code for all projects shall be deemed as met for recurring television series with the statement submitted by that series when it was accepted into the program as a pilot, new or relocating television series.
(2) The allocation amount requested by a relocating TV series applying for tax credits in subsequent fiscal years as a recurring TV series shall not exceed the amount approved in the previous season's credit allocation letter(s).
(o) Principal photography in California shall commence no later than one hundred eighty (180) calendar days after the credit allocation letter is issued. Qualified motion pictures with qualified expenditures of at least one hundred million dollars ($100,000,000) must begin principal photography (as defined in Section 5520(u)) no later than two hundred and forty (240) calendar days after CAL issuance. If the production does not begin principal photography prior to the 180 or 240 day deadline, the tax credit allocation shall be revoked, unless a Force Majeure event has occurred which directly prevented the production from commencing within the deadline. With submission of documentation verifying such event, the CFC shall grant an extension. If a production implements a hiatus during the principal photography period, any and all hiatus period(s) may be no longer than one hundred twenty (120) calendar days in aggregate for the entire duration of the production.

Credits

Note: Authority cited: Sections 17053.98(e), 17053.98(g), 17053.98(i), 17053.98(j), 23698(e), 23698(g), 23698(i) and 23698(j), Revenue and Taxation Code; and Section 11152, Government Code. Reference: Sections 6902.5, 17053.98(g) and 23698(g), Revenue and Taxation Code; and Section 14998.1, Government Code.
History
1. New section filed 7-1-2020; operative 7-1-2020 pursuant to Government Code section 11343.4(b)(3) (Register 2020, No. 27).
2. Amendment of subsection (n)(1) filed 8-17-2020 as an emergency; operative 8-17-2020. Emergency expiration extended 60 days (Executive Order N-40-20) plus an additional 60 days (Executive Order N-66-20) (Register 2020, No. 34). A Certificate of Compliance must be transmitted to OAL by 6-18-2021 or emergency language will be repealed by operation of law on the following day.
3. Amendment of subsection (n)(1) refiled 6-14-2021 as an emergency, including further amendments; operative 6-18-2021. Emergency expiration extended 60 days (Executive Order N-40-20) plus an additional 60 days (Executive Order N-66-20) (Register 2021, No. 25). A Certificate of Compliance must be transmitted to OAL by 1-14-2022 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 6-18-2021 order, including amendment of subsections (h)(1)(A), (h)(4)(A), (k)(8) and (k)(10), further amendment of subsection (n)(1), repealer and new subsection (n)(2) and amendment of Note, transmitted to OAL 12-29-2021 and filed 2-10-2022; amendments effective 2-10-2022 pursuant to Government Code section 11343.4(b)(3) (Register 2022, No. 6).
5. Amendment of subsection subsections (h)(4)(A) and (h)(6)(A)4., new subsections (h)(7)(B)1.-(h)(7)(B)1.(ii), amendment of subsections (h)(8)(C)-(D), new subsection (k)(1)(C)1., amendment of subsections (k)(6)-(l), new subsections (l)(1)-(l)(2)(C) and amendment of subsections (n)(1) and (o) filed 12-22-2023; operative 12-22-2023 pursuant to Government Code section 11343.4(b)(3) (Register 2023, No. 51).
This database is current through 4/26/24 Register 2024, No. 17.
Cal. Admin. Code tit. 10, § 5521, 10 CA ADC § 5521
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