Cal. Code Regs. tit. 10 § 5553

Current through Register 2025 Notice Reg. No. 2, January 10, 2025

Section 5553 - [Operative 4/1/2025] Application Process for Tax Credit Allocation

(a) The open allocation periods for the California Film and Television Tax Credit Program 4.0 shall be announced by the Director of the CFC prior to each new fiscal year on the CFC website. The California fiscal year runs from July 1 to June 30. The announcement shall identify the application categories that may be submitted in each application period as follows:

(1) Independent films, which includes independent films with a qualified expenditure budget of ten million dollars ($10,000,000) or less and independent films with a qualified expenditure budget over ten million dollars ($10,000,000), as well as independent films of both budget categories filming on certified or once-certified soundstages.

(2) Feature films, which includes non-independent films that film on certified or once-certified soundstages.

(3) Relocating television series, which includes relocating television series filming on certified or once-certified soundstages.

(4) Television projects, which includes pilots, miniseries/limited series, new television series, and recurring television series, including projects that film on certified or once-certified soundstages.

(b) An application for an allocation of tax credits under the California Film and Television Tax Credit Program 4.0 shall contain the information outlined in this section, as applicable, and shall be submitted to the CFC through the online application portal accessible on the website www.film.ca.gov or, if necessary prior to portal completion or due to technical issues, in PDF or equivalent non-proprietary document format.

(c) An applicant that begins principal photography in California prior to receiving a Credit Allocation Letter (CAL), Form D4 (January 1, 2025), hereby incorporated by reference, shall be disqualified from receiving such letter for that particular production.

(d) An applicant shall not submit a duplicate application for a project during any given allocation period. Submittal of duplicate applications will disqualify an applicant from the tax credit program.

(1) Submitting an application for an allocation of credits under the California Film and Television Tax Credit Program 4.0 simultaneously with an application for an allocation of tax credits under the California Soundstage Filming Tax Credit Program shall constitute a "duplicate application."

(2) Submitting an application for an allocation of credits under the California Soundstage Filming Tax Credit Program for a project that has applied for but has confirmation that it is not receiving tax credits under the California Film and Television Tax Credit Program 4.0 for the project shall not constitute a "duplicate application."

(e) 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.

(f) 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.

(g) Any expenditures for services, wages, or goods incurred prior to the date of CAL issuance shall not be considered qualified expenditures with the exception of production facility, office rentals, completion bonds and insurance premiums, which are permitted on a prorated basis, to include the expenditures which are incurred on or after CAL issuance.

(h) An applicant producing a qualified motion picture that is a television series shall submit one application per season of that television series.

(1) A television series with an order for additional episodes for the same season, known as a supplemental season, may submit an application for the additional episodes in a subsequent television allocation period.

(i) The application process for tax credit allocation shall occur in two phases. Phase I requires applicants to complete and submit the application as set forth on the CFC website pursuant to subdivision (a). Phase II occurs after all applicants have been ranked by jobs ratios and the highest ranked productions per category are required to submit their supporting documentation.

(j) Phase I: The applicant shall initiate the application process by indicating a production category in accordance with subdivision 5551(b) of this article. The application shall include and the applicant shall provide, as applicable, the following information:

(1) Project details:

(A) Production title and production category.

(B) Preproduction start date, principal photography start date, and postproduction end date.

(C) Applicant entity, type of taxpayer ID, and taxpayer ID number.

(D) Identify if the applicant is a corporation, limited liability company, individual proprietorship, subchapter S corporation, partnership, or other.

(2) The applicant shall enter the contact type and provide the contact name, title, address, email, and phone number(s) for each of the following, as applicable:

(A) Applicant contact.

(B) Primary contact.

(C) Production company contact.

(D) Parent company contact.

(E) Budget contact.

(F) Schedule contact.

(3) The applicant shall list the following information for financing sources:

(A) For all motion picture projects:

1. Names of financing sources.

2. Amounts of funding and percentage of overall funding per financing source.

3. Named sources must total a minimum of sixty percent (60%) of the project's total production budget.

(B) For independent films, additionally:

1. Names of all equity investors including, without limitations, all partners (including percentage of ownership).

2. Attest that the applicant entity is not a publicly traded company or owned directly or indirectly more than twenty-five percent (25%) by a publicly traded company.

(4) The applicant shall provide information about the proposed project as follows:

(A) For television series applicants:

1. If it is a new television series or a miniseries/limited series, indicate if the pilot was initially accepted in a California Film and Television Tax Credit Program, provide the number of episodes in the season, and confirm that each episode has over forty (40) minutes of running time exclusive of commercials.

2. If it is a pilot, confirm that it has over forty (40) minutes of running time exclusive of commercials.

3. If it is a recurring television series, provide the number of episodes for the season, the number of episodes for the prior season, and the episode running time exclusive of commercials.

4. If it is a relocating television series, provide the previous location, the number of episodes previously shot, the number of episodes included in this season, and the episode running time. Indicate if any part of the previous season was filmed in California and if so, the number of principal photography days inside California and outside California.

(B) Production schedule: Provide start dates of preproduction and principal photography, end date of principal photography, estimated end date of postproduction and projected or actual release date.

(C) Key Personnel and Department Heads: Provide names, to the extent such information is known at the time of application, of executive producer(s), producer(s), writer(s), director, lead actor(s), director of photography, location manager, and the safety advisor required pursuant to section 9152(a) of the Labor Code.

(D) For applicants opting into the provisions specified in paragraph (8) below, provide the name and contact information of a designated diversity, equity, inclusion, and accessibility main contact.

1. The person listed is the person that will be contacted to coordinate the mandatory diversity, equity, inclusion, and accessibility orientation required pursuant to section 5554(c) of this article, and the person that will be contacted about any of the submitted forms detailed in sections 5553.3 and 5554.2 of this article.

2. If the designated person changes during the course of the production, applicants shall notify the CFC of the change.

(E) Provide a logline.

(F) Provide a synopsis. The synopsis must be a minimum of one thousand six hundred (1600) characters and a maximum of six thousand (6000) characters and include a description of the main characters, plotline, beginning and ending, and major scene descriptions.

(5) Information about principal photography days:

(A) The applicant must provide the following information:

1. Number of principal photography days in the Los Angeles (LA) zone.

2. Number of principal photography days in California outside the LA zone.

3. Number of California principal photography days (1. plus 2.).

4. Percentage of principal photography days outside the LA zone (2. divided by 3. x 100).

(i) This is the percentage that determines the number of bonus points a qualified motion picture project is eligible for in accordance with section 5553.1 of this article.

5. Number of principal photography days outside of California.

6. Total number of principal photography days (3. plus 5.).

7. Percentage of California principal photography days (3. divided by 6. x 100).

(B) If shooting outside of Los Angeles zone, list the California counties where filming will occur.

(C) If shooting outside California, list states and/or countries where filming will occur.

(D) Soundstage applicants must also provide the following information:

1. Number of principal photography stage shooting days. This number must include principal photography stage shooting days on certified or once-certified soundstages as well as principal photography days on non-certified soundstages.

(i) A soundstage must be in use for at least six (6) hours for the day to count as a stage shooting day.

2. Number of principal photography stage shooting days on a certified or once-certified soundstage.

3. Percentage of stage shooting days on a certified or once-certified soundstage (2. divided by 1. x 100).

(i) A qualified motion picture must film fifty percent (50%) or more of stage shooting days on certified or once-certified soundstages to be eligible as a soundstage applicant.

4. The unique soundstage identifier for each certified or once-certified soundstage on which the project will film, as provided by the owner of the certified studio construction project.

(6) Production statistics:

(A) The applicant shall 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, meaning the average number of staff and shooting crew employed per principal photography day.

3. Estimated total background performers/stand-in days worked, meaning the sum of the number of days, full or partial, a person is estimated to work.

4. All applicants will be required to check a box to acknowledge that if and when they apply for a tax credit certificate, the applicant will submit separate listings of voluntary, self-reported race/ethnicity and gender statistics for all individuals who received qualified wages and all individuals who received non-qualified wages on the motion picture project, as required pursuant to sections 17053.98.1(d)(1)(E), 17053.98.1(d)(1)(J), 17053.98.1(g)(2)(A)(iv), 23698.1(d)(1)(E), 23698.1(d)(1)(J), and 23698.1(g)(2)(A)(iv) of the Revenue and Taxation Code and as detailed in section 5554.2 of this article.

(B) The applicant shall provide the following budget information:

1. Total worldwide production budget.

2. Total California expenditures (qualified and non-qualified).

3. Indicate if seventy-five percent (75%) or more of the total production budget will be spent in California.

(C) All applicants shall provide the following visual effects (VFX) information:

1. The total worldwide VFX budget amount.

2. The total California VFX budget amount.

(i) This is the sum that determines the number of bonus points a non-independent project (including any television series) or an independent film with a qualified expenditure budget over ten million dollars ($10,000,000) is eligible for in accordance with section 5553.1 of this article.

(D) All applicants shall provide the total budgeted amount of California music scoring and track recording qualified wages.

1. This is the sum that determines the number of bonus points a non-independent project (including any television series) or an independent film with a qualified expenditure budget over ten million dollars ($10,000,000) is eligible for in accordance with section 5553.1 of this article.

(E) Soundstage applicants shall provide:

1. The total budgeted amount of worldwide picture editing and postproduction sound labor and services.

2. The total budgeted amount of California picture editing and postproduction sound wages.

3. The total budgeted amount of California picture editing and postproduction sound non-wage expenditures.

4. A soundstage applicant must incur no less than seventy-five percent (75%) of picture editing and postproduction sound labor and services costs in California to qualify.

(F) Soundstage applicants shall provide the total budgeted amount of qualified soundstage wages, as defined in section 5550(s)(5) of this article.

1. A soundstage applicant must incur a minimum of five million dollars ($5,000,000) in soundstage wages to qualify.

(7) Productions have access to additional tax credit calculations in the form of uplifts detailed below related to specific expenditures and wages, as applicable and as referenced in section 5552(h) and (i) of this article. Details for non-independent productions, except relocating television series, are outlined in subparagraphs (A)-(C) below. Details for independent productions and relocating television series are outlined in subparagraph (D) below.

(A) To be eligible for the five percent (5%) Out of Zone Uplift, non-independent productions, except relocating television series, must:

1. Provide the total budgeted out of zone wages, excluding local hire labor, incurred during the applicable period.

2. Provide the total budgeted out of zone non-wages, excluding the total consumables, incurred during the applicable period.

3. Provide the total non-wage expenditures entirely consumed outside the Los Angeles Zone during the applicable period.

4. The combined sum of the qualified out of zone expenditures provided pursuant to clauses 1., 2., and 3. above is the sum to which the uplift percentage applies.

5. The aggregate uplift amount of the combined sums pursuant to subparagraphs (A) and (B) of this paragraph cannot exceed five percent (5%) of the non-independent production's overall qualified expenditures.

(B) To be eligible for the five percent (5%) California Visual Effects (VFX) Uplift, non-independent productions, except relocating television series, must:

1. Have an eligible California VFX budget by meeting one of the two below qualifying criteria. Either:

i. The total California qualified VFX is equal to or greater than seventy-five percent (75%) of the total worldwide VFX budget; or,

ii. The California qualified VFX budget is equal to or greater than ten million dollars ($10,000,000).

2. Provide the total budgeted dollar amount of California VFX expenditures.

3. The total dollar amount of California VFX expenditures provided pursuant to clause 2., above, is the sum to which the uplift percentage applies.

4. The aggregate uplift amount of the combined sums pursuant to subparagraphs (A) and (B) of this paragraph cannot exceed five percent (5%) of the non-independent production's overall qualified expenditures.

(C) To be eligible for the ten percent (10%) Local Hire Labor Uplift, non-independent productions, except relocating television series, must:

1. Provide the total budgeted wages for out of zone local hire labor.

2. The sum of the local hire labor wages provided pursuant to clause 1., above, is the sum to which the applicable uplift percentage applies.

(i) Local hire wages must be substantiated in accordance with section 5552(i)(3) of this article.

(D) To be eligible for the five percent (5%) Local Hire Labor Uplift, independent productions and relocating television series must:

1. Provide the total budgeted wages for out of zone local hire labor.

2. The sum of the local hire labor wages provided pursuant to clause 1., above, is the sum to which the applicable uplift percentage applies.

(i) Local hire wages must be substantiated in accordance with section 5552(i)(3) of this article.

(8) Applicants may opt in to, or opt out of, participating in diversity provisions required pursuant to sections 17053.98.1(g)(3)(D) and 23698.1(g)(3)(D) of the Revenue and Taxation Code and as detailed in sections 5553.3 and 5554.2 of this article. An applicant with a project that is an independent film with a qualified expenditure budget of ten million dollars ($10,000,000) or less is exempt from the diversity provisions required pursuant to sections 17053.98.1(g)(3)(D) and 23698.1(g)(3)(D) of the Revenue and Taxation Code.

(A) An applicant that opts in to the diversity provisions detailed in paragraph (8) must state its intention to do so in the application and must submit a diversity, equity, inclusion, and accessibility workplan, Form DEIA2 (January 1, 2025), hereby incorporated by reference, within thirty (30) calendar days of CAL issuance as detailed in subdivision (b) of section 5553.3 of this article.

(B) An applicant that opts out of the diversity provisions detailed in paragraph (8) above must state its intention to do so in the application.

1. An applicant that states its intention to opt out in the application may still choose to opt in by submitting the diversity workplan required pursuant to section 5553.3(b) of this article within thirty (30) calendar days of CAL issuance.

(C) In addition to the diversity provisions detailed in paragraph (8) above, other related requirements are mandatory and apply to all applicants regardless of project category pursuant to sections 17053.98.1(b)(19)(B)(vi), 17053.98.1(d)(1)(E), 17053.98.1(d)(1)(J), 17053.98.1(g)(2)(A)(iv), 17053.98.1(g)(2)(A)(ix), 23698.1(b)(19)(B)(vi), 23698.1(d)(1)(E), 23698.1(d)(1)(J), 23698.1(g)(2)(A)(iv), and 23698.1(g)(2)(A)(ix) of the Revenue and Taxation Code.

(9) For purposes of estimated Credit Allocation and Jobs Ratio, all applicants must provide:

(A) The total budgeted amount of Qualified Wages.

(B) The total budgeted amount of qualified non-wages.

(C) If applicable, the total contingency, which can be no more than ten percent (10%) of qualified expenditures. The contingency cannot be included as a line-item within the body of the budget.

(D) If applicable, the total completion bond fee, which can be no more than two percent (2%) of qualified expenditures. Completion bond costs for any filming outside of California must be excluded proportionately.

(E) The total budgeted amount of Qualified Expenditures, (A) plus (B) plus (C) plus (D).

(F) Total eligible tax credit allocation amount, excluding uplifts.

1. For a non-independent project, the total qualified expenditures calculated pursuant to subparagraph (E) above shall be multiplied by twenty percent (20%).

2. For an independent film or a relocating television series, the total qualified expenditures calculated pursuant to subparagraph (E) above shall be multiplied by twenty-five percent (25%).

(G) Total tax credit uplift amounts, as calculated pursuant to paragraph (7) above, and as applicable to each project.

(H) Total requested tax credit amount including uplifts, combining the sum calculated pursuant to subparagraph (F) and the sum calculated pursuant to subparagraph (G) above.

1. Credit allocation applies only to the first ten million dollars ($10,000,000) of qualified expenditures for independent films and the first ten million dollars ($10,000,000) of qualified expenditures eligible for uplifts.

2. Credit allocation applies only to the first one hundred million dollars ($100,000,000) of qualified expenditures for non-independent productions and the first one hundred million dollars ($100,000,000) of qualified expenditures eligible for uplifts.

(10) Acknowledgements and Attestation:

(A) Every applicant must acknowledge that they are aware of the requirement for motion picture projects allocated tax credits under the California Film and Television Program 4.0 to participate in the Safety on Productions Pilot Program required pursuant to section 9152(a) of the Labor Code and outlined in sections 9150 et seq. of the Labor Code.

(B) Every applicant must acknowledge that they are aware of the requirement for projects allocated tax credits under the California Film and Television Tax Credit Program 4.0 to contribute a sum equal to a percentage of their CAL amount to the Career Pathways Program within thirty (30) calendar days of CAL issuance. The applicable percentage is detailed in section 5554.1 of this article.

(C) A soundstage applicant must attest that they are the qualified taxpayer that is either:

1. More than fifty percent (50%) owned, directly or indirectly, by the same owner or owners of the soundstage or soundstages that is part of a certified studio construction project on which the production is filmed; or,

2. Entered into a contract or lease of ten (10) years or more with the owner or owners of a certified studio construction project on which the production is filmed.

(11) The applicant is required to provide the submission date as well as the name and title of the person submitting the application. Signing the application or submitting the application in the online portal 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 their knowledge or at least the knowledge of what would be expected of a reasonable person in the same capacity.

(12) A jobs ratio shall be assigned to the application, based on the criteria in section 5553.1 and the information provided by the applicant in its application. The jobs ratio number for the production will be indicated once the application is complete.

(k) Applicants shall be selected for Phase II of the application process based on the jobs ratio ranking of their application within the application category, pursuant to section 5553.1 of this article.

(l) The CFC shall notify, by electronic mail, the top ranked projects in each category of qualified motion pictures, as provided for in sections 17053.98.1(g)(2)(D), 17053.98.1(i), 23698.1(g)(2)(D), and 23698.1(i) of the Revenue and Taxation Code. These applicants shall provide the additional materials and supporting documentation requested by the CFC pursuant to subdivision (m) below.

(1) The submission timeframe for an applicant to provide the information and documentation required pursuant to subdivision (m) below shall be within five (5) calendar days of the electronic notification.

(A) An applicant facing business-related barriers to providing the information and documentation required pursuant to subdivision (m) below may request an extension of up to four (4) calendar days of the timeframe specified in paragraph (1) above and the CFC will approve that request if the applicant requests the extension prior to the expiration of the original timeframe and provides supporting documentation clarifying those barriers.

(m) An applicant that moves forward to Phase II shall submit the following:

(1) An electronic copy of the qualified expenditure budget in a motion picture industry standard budgeting program, such as, but not limited to, Movie Magic Budgeting or Showbiz. The industry standard budgeting program shall provide qualified wage expenditures and qualified non-wage expenditures.

(A) Qualified wage expenditures and qualified non-wage expenditures in the budget shall be tagged in accordance with section 5553.2 of this article, and must for eligible productions specifically indicate the following:

1. The budget lines to which the out of zone uplift is applicable.

2. The budget lines to which the VFX uplift is applicable.

3. The budget lines to which the local hire labor uplift is applicable.

4. The budget lines to which the music labor bonus points are applicable.

(B) A television series shall submit a qualified expenditure budget including all pattern and amortization costs, or separate amortization and pattern budgets, in accordance with the information required pursuant to paragraph (1) and subparagraph (1)(A) 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.

(2) Fringe Benefit Matrix: The applicant shall submit information on fringe benefit payments included in the qualified expenditure budget and provide a detailed breakdown of qualified fringe benefit payments for union and/or non-union background performers, crew, and directing staff, as applicable.

(A) The fringe rates must reflect the rates used in the qualified expenditure budget.

(B) All federal and out-of-state fringes must be excluded, including but not limited to those related to the Federal Income Contributions Act (FICA), Federal Unemployment Insurance (FUI), Federal Unemployment Tax Act (FUTA), and Medicare.

(C) Allowable fringes include State Unemployment Insurance (SUI), payroll/handling fees, pension, health and welfare, vacation and holiday, workers compensation, and non-union health insurance payments.

(D) Casting fees must not be included as fringe benefit payments.

(3) One-Line Schedule ("production board"). The applicant shall submit in PDF or equivalent non-proprietary document format a one-line schedule which shall include scene descriptions, scene numbers that match the submitted screenplay for the production, holidays, and cast numbers, and shall indicate which days are scheduled for filming outside of the Los Angeles zone.

(A) In lieu of a one-line shooting schedule, a television series applicant may submit in PDF or equivalent non-proprietary document format a production calendar that includes 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. The production calendar must indicate which days are scheduled for filming outside the Los Angeles zone.

(4) The applicant shall submit in PDF or equivalent non-proprietary document format the screenplay, including scene numbers that match the submitted schedule for the production.

(A) Notwithstanding the timeframe set out in subdivision (l) of this section, a pilot, new television series, or relocating television series shall submit a screenplay no later than thirty (30) calendar days prior to the start of principal photography.

(B) If the application is for a pilot that does not have a script the applicant shall fulfill this requirement by submitting a detailed synopsis.

(C) The requirement to submit a screenplay does not apply to a recurring television series.

(5) The applicant shall submit supporting documentation that confirms at least sixty percent (60%) of production financing.

(A) The 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 nonproprietary document format.

(B) If the CFC is unable to verify at least sixty percent (60%) of production financing based on the supporting documentation provided, the application shall be considered incomplete.

(6) A pick-up order. A pilot, new television series, or relocating television series shall submit evidence, in PDF or equivalent non-proprietary document format, that the pilot or series is scheduled for photography when applying for a credit allocation.

(A) Notwithstanding the timeframe set out in subdivision (l) of this section, the deadline to submit a pick-up order for a pilot, new television series, or relocating television series shall be seven (7) calendar days prior to the CAL issuance date for that application window.

(B) 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 one hundred forty (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 a subsequent television allocation period.

(7) The applicant shall submit one of the following in PDF or equivalent non-proprietary document format:

(A) A narrative statement required pursuant to sections 17053.98.1(g)(2)(A)(vii) and 23698.1(g)(2)(A)(vii) of the Revenue and Taxation Code, if the application is for an independent project or a non-independent project except a relocating television series.

1. The narrative statement required pursuant to sections 17053.98.1(g)(2)(A)(vii) and 23698.1(g)(2)(A)(vii) of the Revenue and Taxation Code shall be deemed as met for a recurring television series that submitted such a statement when it was accepted into the program as a pilot, new, or relocating television series.

(B) A relocating statement, if the application is for a relocating television series, in which the applicant certifies that the credit provided is the primary reason for relocation to California (if applicable). The statement must include confirmation that at least seventy-five percent (75%) of principal photography days of its most recent season was filmed outside of California.

(8) Unlawful harassment policy. The applicant shall submit the company's written policy against unlawful harassment as set forth in section 17053.98.1(g)(2)(A)(viii) and 23698.1(g)(2)(A)(viii) of the Revenue and Taxation Code.

(9) The applicant shall submit its diversity checklist, Form DEIA1 (January 1, 2025), hereby incorporated by reference), required pursuant to sections 17053.1(b)(19)(B)(vi) and 23698.1(b)(19)(B)(vi) of the Revenue and Taxation Code and detailed in section 5553.3(a) of this article.

(10) If applicable, the applicant shall submit a summary of its voluntary programs as set forth in sections 17053.98.1(g)(2)(A)(ix) and 23698.1(g)(2)(A)(ix) of the Revenue and Taxation Code.

(n) Within forty-five (45) calendar days of receipt of the completed application and all requested supporting documents required pursuant to this section, the Director of the CFC, or their designee, will notify the applicant whether the application is approved or rejected. An approved application shall meet the eligibility requirements in Section 5551.

(1) Failure by an applicant to submit all Phase I required information within the allocation window specified by the CFC will result in disqualification.

(2) Failure by an applicant that progresses to Phase II to submit all supporting documentation required pursuant to this section, as applicable, in accordance with the timeframe set in subdivision (l) will result in disqualification.

(o) Upon approval of an applicant's submitted application, a Credit Allocation Letter (CAL), Form D4 (January 1, 2025), hereby incorporated by reference, shall be issued to the applicant indicating the amount of tax credits allocated.

(1)

(A) If the applicant's submissions following completion of the qualified motion picture project, including the AUP (January 1, 2025), hereby incorporated by reference, shows that an overstatement was made during the application process which caused the allocation of tax credits to be greater than what the applicant is eligible for upon CFC verification of such submissions as compared to the criteria for the program, the amount of tax credits allocated shall be proportionately reduced prior to issuance of the final tax credit certificate.

(B) If an understatement was made in the application process that caused the allocation of tax credits to be less than what the applicant is eligible for upon verification, no increase will be made to the tax credit amount; the applicant may never receive more tax credits than as provided on the CAL.

(2) Each CAL is issued to the specific project described and outlined in the synopsis, script, schedule, and budget that were submitted with the application. Substituting the approved project for a different project is prohibited and shall result in revocation of the CAL.

(3) If an entity other than the original applicant entity takes over a qualified motion picture project and wishes to retain the project's tax credit allocation, it 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 new business entity that will take over the project, including that business entity's taxpayer ID.

(B) The new applicant entity taking over the project must submit:

1. Applicant contact, production company contact, and budget contact.

2. Updated contact information for key personnel and department heads, including the set safety advisor and the diversity, equity, inclusion, and accessibility main contact, if applicable.

3. An updated production schedule required pursuant to paragraph (3) of subdivision (m) of this section.

4. Documentation required pursuant to paragraph (3) of subdivision (j) and paragraphs (5), (6), (7), (8), (9), and (10) of subdivision (m) of this section.

(C) A qualified motion picture project described in paragraph (3) above can only be transferred to a different business entity prior to the start of principal photography.

(D)

1. For purposes of program requirements and tax credit allocation, a qualified motion picture project described in paragraph (3) above will remain in the project category under which the project originally applied.

2. For purposes of program eligibility, tax credit certification, and usage, only a business entity that meets the requirements of an independent film production company, as defined in section 17053.98.1(b)(7) and 23698.1(b)(7) of the Revenue and Taxation Code, is permitted to take over a project that applied as an independent film.

Cal. Code Regs. Tit. 10, § 5553

Note: Authority cited: Sections 17053.98.1(e) and 23698.1(e), Revenue and Taxation Code; and Section 11152, Government Code. Reference: Sections 17053.98(k), 17053.98.1(a), 17053.98.1(b), 17053.98.1(d), 17053.98.1(g), 17053.98.1(i), 17053.98.1(j), 23698(k), 23698.1(a), 23698.1(b), 23698.1(d), 23698.1(g), 23698.1(i) and 23698.1(j), Revenue and Taxation Code; and Section 14998.1, Government Code.

1. New section filed 12-17-2024; operative 4/1/2025 (Register 2024, No. 51).