California Revenue and Taxation Code § 23685

(a) (1) For taxable years beginning on or after January 1, 2011, there shall be allowed to a qualified taxpayer a credit against the “tax,” as defined in Section 23036, in an amount equal to the applicable percentage, as specified in paragraph (4), of the qualified expenditures for the production of a qualified motion picture in California. (2) The credit shall be allowed for the taxable year in which the California Film Commission issues the credit certificate pursuant to subdivision (g) for the qualified motion picture, and shall be for the applicable percentage of all qualified expenditures paid or incurred by the qualified taxpayer in all taxable years for that qualified motion picture. (3) The amount of the credit allowed to a qualified taxpayer shall be limited to the amount specified in the credit certificate issued to the qualified taxpayer by the California Film Commission pursuant to subdivision (g). (4) For purposes of paragraphs (1) and (2), the applicable percentage shall be: (A) Twenty percent of the qualified expenditures attributable to the production of a qualified motion picture in California. (B) Twenty-five percent of the qualified expenditures attributable to the production of a qualified motion picture in California where the qualified motion picture is a television series that relocated to California or an independent film. (b) For purposes of this section: (1) “Ancillary product” means any article for sale to the public that contains a portion of, or any element of, the qualified motion picture. (2) “Budget” means an estimate of all expenses paid or incurred during the production period of a qualified motion picture. It shall be the same budget used by the qualified taxpayer and production company for all qualified motion picture purposes. (3) “Clip use” means a use of any portion of a motion picture, other than the qualified motion picture, used in the qualified motion picture. (4) “Credit certificate” means the certificate issued by the California Film Commission pursuant to subparagraph (C) of paragraph (2) of subdivision (g). (5) (A) “Employee fringe benefits” means the amount allowable as a deduction under this part to the qualified taxpayer involved in the production of the qualified motion picture, exclusive of any amounts contributed by employees, for any year during the production period with respect to any of the following: (i) Employer contributions under any pension, profit-sharing, annuity, or similar plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The employer’s cost of life or disability insurance provided to employees. (B) Any amount treated as wages under clause (i) of subparagraph (A) of paragraph (18) shall not be taken into account under this paragraph. (6) “Independent film” means a motion picture with a minimum budget of one million dollars ($1,000,000) and a maximum budget of ten million dollars ($10,000,000) that is produced by a company that is not publicly traded and publicly traded companies do not own, directly or indirectly, more than 25 percent of the producing company. (7) “Licensing” means any grant of rights to distribute the qualified motion picture, in whole or in part. (8) “New use” means any use of a motion picture in a medium other than the medium for which it was initially created. (9) (A) “Postproduction” means the final activities in a qualified motion picture’s production, including editing, foley recording, automatic dialogue replacement, sound editing, scoring and music editing, beginning and end credits, negative cutting, negative processing and duplication, the addition of sound and visual effects, soundmixing, film-to-tape transfers, encoding, and color correction. (B) “Postproduction” does not include the manufacture or shipping of release prints. (10) “Preproduction” means the process of preparation for actual physical production which begins after a qualified

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