Procedures for Claiming California Film & Television Tax Credits
The California Film Commission (CFC) administers a program that provides tax credits to qualified taxpayers based on their qualified expenditures for the production of qualified motion pictures, including feature films and television series, in California. If you are a qualified taxpayer who has been issued a certified Tax Credit Certificate from the CFC, or if you are an affiliate of a qualified taxpayer that has been assigned unused credits, the following information will help you use your credits to obtain a refund of qualified sales and use taxes.
The information below does not apply to tax credits purchased attributable to an independent film. Purchased tax credits may not be used to offset or obtain a refund of sales and use taxes.
- Tax credits cannot be claimed until a Tax Credit Certificate is issued by the CFC.
- A qualified taxpayer may apply the tax credits set forth in its certified Tax Credit Certificate against California franchise or income tax or may irrevocably elect to apply all or a portion of the tax credits to obtain a refund of qualified sales and use taxes imposed on the qualified taxpayer. Once this election is made, those credits are no longer available to apply against any California franchise or income tax liability.
- A qualified taxpayer may assign any portion of its unused credits to an affiliate. Credits must be assigned on the qualified taxpayer's California franchise or income tax return pursuant to Revenue and Taxation Code (RTC) section 23685(c)(1) before they may be used against sales and use tax liabilities. The rules for assigning credits are administered by the California Franchise Tax Board (FTB). Information about assigning credits can be found on the FTB webpage, FAQs – California Motion Picture and Television Production Credit.
- Tax credits can only be claimed against the general fund portion of the sales and use tax rate. The applicable state portions of the tax rates are:
April 1, 2009 through June 30, 2011: 6%
July 1, 2011 to present: 3.9375%
- No interest will be paid on any amount refunded or credited.
- The statute of limitations on claims for refund provided by RTC section 6902 applies to the tax credits.
- Claims should be sent to the State Board of Equalization (BOE) Audit Determination and Refund Section (ADRS) at:
Board of Equalization
Audit Determination & Refund Section, MIC: 39
P.O. Box 942879
Sacramento CA 94279-0039
Claiming Credits – Initial Refund Period
To file a claim for refund of sales and use tax, you must complete form BOE-318, Claim for Refund and Irrevocable Election to Apply Credits Against Qualified Sales and Use Tax.
Initial Refund Period
After the CFC issues the tax credit certificate for the qualified production, refunds will be allowed for sales and use taxes paid during the period:
- Beginning on the first day of the calendar quarter before the quarterly period in which the production period* began for the qualified production for which the CFC issued the tax credit certificate, and
- Ending on the due date of your most recent sales and use tax return filed with the BOE prior to making the irrevocable election.
*The production period for a qualified motion picture begins when preproduction of the qualified motion picture starts. Preproduction means the process of preparation for actual physical production which begins after a qualified motion picture has received a firm agreement of financial commitment.
The qualified film's pre-production starts on September 15, 2009 (3rd quarter of 2009). The CFC issues the Tax Credit Certificate to the qualified taxpayer in February 2011.
The qualified taxpayer has an affiliate that is registered with the BOE and files quarterly sales and use tax returns. The qualified taxpayer assigns the credit to the affiliate pursuant to RTC section 23685(c)(1), on its California income tax return for taxable year 2011. Then, the affiliate files a BOE-318, Claim for Refund and Irrevocable Election to Apply Credits Against Qualified Sales and Use Tax form prior to October 31, 2012.
Determining the initial refund period:
The production period began during the 3rd quarter of 2009. Accordingly, the start date of the initial refund period is April 1, 2009, the first day of the 2nd quarter of 2009.
The claim for refund and irrevocable election was filed prior to October 31, 2012. Thus, the initial refund period ends on July 31, 2012, the due date of the 2nd quarter of 2012 sales and use tax return.
Three-year statute of limitations on refunds:
Per RTC section 6902, the BOE can only refund qualified sales and use taxes remitted during the initial refund period if a claim for refund for such taxes is filed within the statute of limitations. This means the deadline for filing a claim for refund is whichever of the following occurs last:
- Three years from the due date of the return,
- Six months from the date of overpayment, or,
- For payments made on a determination, six months from the date the determination became final.
Under the three-year statute of limitations, in order to obtain a refund for the 2nd quarter of 2009, a claim for refund must be filed by July 31, 2012. Likewise, to obtain a refund for the 3rd quarter of 2009, a claim for refund must be filed by October 31, 2012.
In the example above, the affiliate filed a claim for refund in October 2012. Thus, the statute of limitations prevents the affiliate from claiming a refund for the 2nd quarter of 2009, even though it is included in the initial refund period.
The claim for refund covers the 3rd quarter of 2009 through 2nd quarter of 2012. The affiliate is also able to file a timely claim for refund for any other qualified sales and use taxes paid within the six-month period prior to the October 2012 filing of the claim for refund, although qualified sales and use taxes paid after July 31, 2012, would be included in the affiliate's secondary refund period (discussed below).
Claiming Credits – Secondary Refund Period
Unused credits may be used to offset and obtain a refund of qualified sales and use taxes reported and paid for a secondary refund period if a claimant files an irrevocable election to apply unused tax credits to qualified sales and use taxes and:
- Does not claim a refund for the initial refund period, or
- Claims a refund for the initial period and still has unused certified credits to which the election applies.
The secondary refund period includes the claimant's reporting periods for the five years following the close of the initial refund period.
Example: If the end of the initial refund period is determined by reference to the 2nd quarter of 2012 sales and use tax return due date, then the secondary refund period includes the 3rd quarter of 2012 through the 2nd quarter of 2017.
To apply unused tax credits against qualified sales and use taxes paid for the secondary refund period, the claimant must file a new form BOE-318, Claim for Refund and Irrevocable Election to Apply Credits Against Qualified Sales and Use Tax Liability.
Processing Claims for Refund
After receiving the claim for refund, BOE staff will verify:
- The claimant is either the qualified taxpayer that was issued the certified Tax Credit Certificate from the CFC, or the qualified taxpayer's affiliate that has been assigned unused certified credits pursuant to RTC section 23685(c)(1);
- The claimant filed a claim for refund and irrevocable election (form BOE-318) to apply credits against qualified sales and use taxes paid during the initial or secondary refund period;
- The claimed refund amount does not exceed the amount of the claimant's unused tax credits;
- The claimed amount is for paid general fund sales and use tax; and
- The claim for refund was filed for either the initial or secondary refund period and within the statute of limitations under RTC section 6902.
BOE and FTB staff will be working together to ensure that the total amount claimed at both agencies does not exceed the amount of the tax credit.
Processing Claims for Refund Over $100,000
BOE staff has been delegated authority to grant claims for refund of $100,000 or less of sales and use taxes after completing the verification processes described above. However, BOE Regulation 5237, Board Approval Required for Refunds over $100,000, requires BOE staff to submit recommendations to grant claims for refund in excess of $100,000 of sales and use taxes to the Board Members for approval at a monthly Board meeting. Claims for refund in excess of $100,000 of sales and use taxes will not be granted until they are approved by the Board Members.
If you have questions about claiming the film credit against sales and use tax liabilities, please email the Board of Equalization's Tax Policy Division.