Income taxes: film tax credits

The law gives qualifying film productions faster access to more of their credits and extends the life of older credits. It also removes sold film credits from California’s business-credit cap starting in 2027.

What the law does ​

• Extends the carryforward period for motion picture credit 2.0 and 3.0 from 9 to 15 years.
• Requires a taxpayer or related company to remain an active participant in the film-credit program to use those older credits in years 10 through 15.
• Raises the refundable share of motion picture credit 4.0 from 90% to 95% of the unused credit.
• Pays refundable credit 4.0 amounts over 2 years rather than 5 years.
• Exempts sold motion-picture credits from the general business-credit limit for tax years beginning in 2027.

Who it affects ​

• Qualified motion-picture and television producers receiving California film tax credits.
• Independent-film producers and unrelated taxpayers that buy eligible film credits.
• Corporations, partnerships, and other taxpayers claiming, carrying forward, selling, assigning, or refunding eligible credits.

Context ​

The increased refunds are paid from the continuously appropriated Tax Relief and Refund Account.

Breakdown ​

Film Tax Credit Refunds and Carryovers ​

This part extends the time to use certain California film tax credits and speeds up refunds for motion picture credit 4.0. Credits under motion picture credit 2.0 and 3.0 may generally be carried forward for up to 15 years instead of 9, subject to an active-participant requirement in the added years. It also raises the refundable share of credit 4.0 and pays it over a shorter period.

Key takeaways

• Motion picture credits 2.0 and 3.0 may be carried forward for up to 15 years rather than 9 years.
• To use a credit in years 10 through 15, the taxpayer or a specified related company must be an active participant.
• The refundable amount for motion picture credit 4.0 increases from 90% to 95% of the total refundable amount.
• Refunds for motion picture credit 4.0 will be paid over 2 years instead of 5 years.
• Because the bill increases refunds paid from a continuously appropriated fund, it makes an appropriation.

Sold Film Credits Exempted ​

Beginning with tax years starting on or after January 1, 2027, the bill excludes sold tax credits from California’s business-credit limit. This means credits that have been sold will not count toward the cap on how much a taxpayer’s taxes can be reduced through business credits.

Key takeaways

• The exemption applies to tax years beginning on or after January 1, 2027.
• Sold tax credits will not be subject to the business-credit limit.
• The change applies to both the current $5 million limit and the later limit based on 70% of total taxes or $5 million, whichever is greater.

Public Funds Finding ​

The bill makes formal legislative findings and declarations about whether its provisions involve a gift of public funds. These statements explain the Legislature’s position on that issue.

Key takeaways

• The bill includes legislative findings and declarations concerning a gift of public funds.
• The findings state the Legislature’s position on the public-funds issue related to the bill.