Finding Money, Pitching Investors, Building Relationships: Being Smart with Taxes & Section 181
Finding money is often one of the toughest tasks many independent film producers face, as well as one of the most critical. You need money to make movies, and you need to make movies to build a successful career. Building relationships with investors is one big, important step you can take to help find money on an ongoing basis for your projects and further your cause.
This is a guest post by Fred Siegel, CPA.
Bring up the following topics to an aspiring, developing, or struggling producer, however, and don't be surprised to hear the following answers: "Finding Money" -- Where?!!!; "Pitching Investors" -- How?!!; "Building Relationships" -- Huh???
Given the critical role of money, it is wise to make building strong, ongoing relationships with investors a key part of your thinking. You want to work with investors who will invest not just in this project, but in the next one and the one after that as well. Investors who invest regularly in your projects are effectively investing in more than just your projects; they are also investing in you.
Also, we are in a new year, 2014, and Section 181 of the tax code has expired, with questions remaining as to whether it will be renewed. What follows are some insights into Section 181.
Being Smart with Taxes & Section 181
A key topic in finding money and pitching investors in today's film financing environment, and by extension, building relationships with investors, is taxes. Taxes are an increasingly important piece of a producer's overall financing plan and pitch. Being smart with taxes can help you bring valuable benefits and protections to your investors, to your project, and to you.
A few quick words: Taxes can be tricky and fraught with tripwires and unanticipated dangers. There also appears to be a good amount of misinformation regularly floating around the industry and the Internet, sometimes leading to seriously misinformed decisions or producers being entirely unaware of larger issues that may blow up.
One key "tax" area that has commonly been part of producers' pitches to investors in recent years is known as "Section 181." Section 181 refers to a federal tax law that pertains specifically to the motion picture industry. Being smart about "Section 181" today should begin with:
- A basic understanding of what "Section 181" is, how producers have been "pitching" it to investors, and the basic benefit of Section 181
- The 12/31/31 expiration of Section 181, what that means, what exceptions apply, and whether your project can utilize Section 181
- The risks and potential disasters for your investors, your film, and *you,* of using Section 181 improperly (e.g., finding that the IRS doesn't agree with how you view the world and your Section 181 election, and the extremely costly consequences that may trigger).
Section 181 & Pitching Investors
Expiration; Principal Photography; "Grandfathering"
Not Being Smart. Invalid Section 181 Election. Disaster Example. -- For Your Investors, Your Film, and *you*
Being smart with taxes is one big way to help build relationships with investors and find money for your projects, to the benefit of your films, your investors, and so importantly to you and the furtherance or continuing success of you film producing career. Make an indie film/tax/business professional one of the collaborators that are a key and regular part of your team.
Fred Siegel is an indie film, tax, and business consultant and founder of Fred Siegel, CPA, specializing in key tax and business issues for producers and content creators. The focus of the firm is working with independent filmmakers and their development and production companies, film financing companies, film funds, and creative folk.
Fred Siegel, CPA
Dealing With the Business of Film
Consulting, Financing, Tax Credits, Taxation, Accounting
Fred@FredSiegelCpa.com New York, NY
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