Last fall I
wrote a column about the brave new world of production
incentives (See IMAGINE October 2004). Since then the
competition for production dollars has become even
more intense. A number of noteworthy production
incentives have recently been adopted to attract
producers.
UNITED
STATES
The United
States has established its first federal tax incentive
law to stop runaway productions. The 2004 tax act
created IRC Section 181, which permits a 100%
write-off for the cost of certain audio-visual works
with budgets up to $15 million, regardless of whether
they are produced for theatrical, television or home
video release. However, the work cannot include a
“depiction of actual sexually explicit conduct.”
Under the new
law, independent producers may write off a movie in a
single year if 75% of that budget is spent in the
United States. The limit goes up to $20 million if the
movie is made in a low-income area of the U.S. It
would appear that for television series, the $15
million threshold would apply to each episode.
Under this
legislation, the cost of producing qualifying films
can be fully deducted from income for tax purposes in
the year the expenditures occur. Principal photography
must commence after Oct. 22, 2004, but before Jan. 1,
2009. This federal incentive can be combined with
state incentives. Additional information is available
at: http://www.legalelite.com/Email/e-smoore-tax.htm
NEW YORK
CITY
In New York
City, Mayor Michael Bloomberg recently signed
legislation that provides an additional 5% refundable
tax credit to filmmakers shooting in the city. The
credit is part of a package of “Made in NY”
incentives intended to encourage more productions in
the city itself, and is in addition to the 10%
refundable tax credit given by the state of New York.
The NYC tax credit is applicable to all costs of
below-the-line tangible property or services used or
performed within any of the five boroughs of New York
City. The costs must be incurred directly and
predominately in the pre-production, production, and
post-production of a qualified film.
The refundable tax credit is applied against the
production company or film owner’s New York State
taxes. Fifty percent of any unused, earned credits may
be carried forward to the following year. If those
credits are still unused, they become fully refundable
to the production company or film owner in the third
year.
Productions eligible to apply for the “Made in NY”
credit include feature length films, made-for-TV
movies, television pilots, and television series, and
the productions must be completed sometime between
this year and 2007. To qualify, 75% of the total stage
work must be conducted in a qualified New York City
facility. If the production spends at least $3 million
during production of the film at the qualified
facility, the production company is eligible for the
entire 5% tax credit refund. If the production spends
less than $3 million at the qualified facility, but
spends at least 75% of its location days in NYC, the
production company is also eligible for the entire 5%
tax credit refund. If the production spends less than
$3 million and shoots less than 75% of its location
days in NYC, the production company will only receive
a tax credit refund for the qualified costs at the
qualified facility. Credits are offered on a first
come, first served basis.
For more information, contact the City of New York
Mayor’s Office of Film, Theatre and Broadcasting: www.nyc.gov/html/film/html/index/index.shtml.
QUEBEC
Filmmakers
looking to shoot in Canada now have extra incentive to
shoot in Quebec. The provincial government has
increased its tax credit for non-Canadian film and
television productions. It now provides a 20% tax
credit on labor costs.
The provincial
government felt the increase was necessary to bolster
production in a country that saw the number of film
productions drop dramatically in 2004 due to a
stronger Canadian dollar and better tax credits in
other countries. Quebec chose a 20% credit to slightly
outdo its western neighbor, Ontario province, which
announced an 18% credit to foreign producers and a 30%
credit to domestic producers. For more information
about Quebec’s new tax credit, visit www.sodec.gouv.qc.ca/.
An
extensive listing of production incentives can be
reviewed at Mark Litwak’s website: Entertainment Law
Resources (www.marklitwak.com)
with links to websites with detailed information. It
is important to contact the appropriate agency to
obtain up to date information on eligibility as the
rules and regulations governing incentives and
subsidies frequently change. PUB
Mark
Litwak is a veteran entertainment attorney and
producer’s rep based in Beverly Hills, California.
He is a friend of IMAGINE and a regular contributor.
He is
the
author of six books, including
the recently published Risky Business, Financing and Distributing
Independent Film
(Silman-James, 2004). He is the author of the CD-ROM
program Movie Magic Contracts.
He can be reached at law@marklitwak.com
