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Film and TV Tax Incentives Renewed in Fiscal Cliff Deal, Section 181 Extended Through 2013

01.2.13 @ 5:25PM Tags : , , , , , ,

If you’re involved in the film or TV industry in any way, there’s a good chance you or someone you know has benefitted from Section 181 of the U.S. IRS Tax Code since it was established in 2004. Basically, it gives any investor the ability to deduct 100% of the money they invest in that same year for production costs up to $15 million dollars — and possibly as much as $20 million dollars. The good news is that as part of the last minute “Fiscal Cliff” deal, Section 181 has been renewed for 2013, which means that investors have a federal incentive to put money into a project, in addition to the various state tax incentives.

Here is a little bit from The Hollywood Reporter on the news:

Chicago-based entertainment lawyer Hal “Corky” Kessler, who urged Congress to pass the tax incentives nine years ago, said Wednesday that he has been working closely with Baucus’ office in recent months to make sure the measure was extended. He said he’s planning to moderate a panel at the Sundance Film Festival this month to educate filmmakers and investors on what they need to do to qualify for the tax breaks.

“What it does is it helps stop runaway production,” Kessler said. “It helps get investors who would like to have a significant impact in their taxes reduced.”

The Directors Guild of America and the Independent Film & Televison Alliance put together a brochure in 2010 outlining the benefits of the tax code, known as “Section 181.”

“This is a significant Federal tax incentive that allows producers of qualifying productions to take an immediate tax deduction for the full or partial costs of a production in the year the cost is incurred (as opposed to having to spread or amortize those costs over a period of years beginning after the film goes to market),” according to the DGA & IFTA.


According to the DGA document, the total budget is not factored into qualification, so any budget size can qualify up to $15 million, or up to $20 million if the production is shooting in a “distressed area.” To qualify, at least 75% of the total production costs must be for services performed in the United States. This means that a movie or TV show cannot shoot 95% in another country, and come back to the U.S. expecting to get the tax break. The other interesting thing is that this applies to each individual episode of a TV show up to 44 episodes — and those budgets can easily reach into the millions per episode.

This might be good for Hollywood, but it’s equally as good for independent filmmakers as it gives a way to make film investing much more attractive for more people. If a particular investor makes quite a bit of money per year, whether a film eventually turns a profit may not even be a consideration thanks to Section 181 — which means more people might be willing to put money in riskier or more challenging projects.

What do you think? Have you or your films benefitted from Section 181 in the past?

Links:

[via THR]

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  • DIYFilmSchool.net on 01.3.13 @ 9:30AM

    This is significant, even for low-budget filmmakers. I’m contemplating the ramifications and implications of implementing this kind of incentive, though. What’s the underlying reason?

    • The idea is to give incentives to filmmakers to keep productions here in the U.S. vs. shipping them overseas (or to Canada) where production costs might be cheaper. This gives American film workers more opportunities for employment (i.e. creates jobs).

  • What I’d like to know is what exactly counts as a qualified film or television production. Seeing how the internet has brought about a new age and interpretation of video and TV, Section 181 could be very useful for starting a web series.

    I just want to make sure that- to get the benefits of this tax break- I’m following all of the rules e.g. an established production company or verified business plan; whatever it takes- even a signed piece of paper- since all I need is a good pitch and a tax incentive to convince my friends in high places to invest in my project.

  • Interesting. Canada has a similar thing yet it’s often said by Canada’s right wing press that it’s bad to have tax incentives for film and TV production and that the reason the U.S. has more films is that they don’t get any tax breaks. Here’s the U.S. having the same thing.