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This article is used by permission of Mark Litwak, Esq. and is taken from
www.marklitwak.com.
NEW PRODUCTION INCENTIVES ENACTED
By Mark Litwak, Attorney At Law
Last fall I wrote a column about the brave new world of production incentives.
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 http://www.sodec.gouv.qc.ca/.
An extensive listing of production incentives can be reviewed at my 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.
—Mark Litwak (www.marklitwak.com)
Mark Litwak is a veteran entertainment attorney and Producer’s Rep
based in Beverly Hills, California. He is the author of six books including:
Reel Power: The Struggle for Influence and Success in the New Hollywood,
Dealmaking in the Film and Television Industry, Contracts for the Film and
Television Industry, and the recently published Risky Business: Financing
and Distributing Independent Film. He is the author of the CD-ROM program
Movie Magic Contracts, and the creator of the Entertainment Law Resources
website at www.marklitwak.com. He can be reached at law@marklitwak.com.
Disclaimer-Any
material sent to or provided by Mark Litwak is for illustrative and educational
purposes only and should not be relied upon as legal advice, or be considered
confidential or the basis of an attorney client relationship. This
material may not be suitable for your particular situation and different
legal advice may be appropriate depending on your jurisdiction or circumstances.
Therefore, you should not rely on this material, or any part of it, without
the advice of competent legal counsel.
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