State Tax
Incentive Regimes For Film Production
Florida
There
are several special tax exemptions that have helped
Florida become the third largest motion picture
and television production center in the United
States.
Tax
incentives have traditionally included:
Effective
January 1, 2001, no tax on the sale or lease of
motion picture, television, and sound-recording
equipment. This exemption takes place at the “Point
of Sale”. For complete information on Florida's
Certificate of Exemption go to www.filminflorida.com.
No
tax on artistic or copyright material on master
tapes, master films, master records and master
videotapes. Transactions involving masters are
taxed only on the value of the blank film, tape
or other tangible personal property. The value
of all the major cost components of making a master,
such as artistic services, processing, copyrights
and royalties, is excluded from taxation when
the master is sold or leased;
No
tax on the rent or lease of real property used
as an integral part of a motion picture production.
Renting studios, sound stages, lots, buildings
or any other real estate is exempt. This exemption
applies to small, independent operations and to
major studio facilities.
No
tax on labor to produce a film, commercial or
sound recording made for a company’s own
use;
No
tax on the lease of real property to a person
providing food and drink concessionaire services
within the premises of a movie theater.
Qualified
Target Industry individual tax refunds of $3,000
per new, new high-wage motion picture, sound recording
and reproducing studio created in Florida ($6,000
in a rural county or enterprise zone) are available
with additional bonuses for extremely high-wage
jobs. Only businesses serving multi-state and/or
international markets are targeted.
A
new incentive program was introduced in 2007,
under the auspices of the Don Davis Entertainment
Industry Economic Development Act of 2007. The
incentives are offered in the form of a cash reimbursement,
not a tax credit, which means the producer gets
a check for the full value of the incentive earned.
No brokers are necessary. The program began July
1, 2007, and will be effective through June 30,
2009.
Incentives
are (at the time of writing) available in the
following areas:
General
Production - Queue 'A'
Films,
TV, Commercials and Music Videos with Qualified
Expenditures $625,000 or more: Eligible for 15
- 22% Cash Rebate
General
Production - Queue 'B'
Multiple
Commercials and Music Videos with $500,000 or
more in combined qualified expenditures, and with
a minimum of $100,000 in qualified expenditures
per production: Eligible for 15 - 20% Cash Rebate
Independent
Florida Filmmaker - Queue ‘C’
Indie
Florida Feature Films or Documentaries 70 minutes
or longer with Qualified Expenditures of $100,000
up to $625,000: Eligible for 15 - 17% Cash Rebate
Digital
Media Projects - Queue ‘D’
Interactive
Entertainment: Eligible for 10% Cash Rebate
California
The
$45m Film California First Program, initiated
by then Governor Gray Davis, was approved by the
Legislature in June 2000 and commenced on January
1, 2001. FCF Program increased California's competitive
edge in attracting and retaining film projects.
Qualified Production Companies realized cost savings
through the Program's various reimbursement categories
when filming on public property in California.
However,
Film California First is currently not funded.
Incentives now offered by the Californian authorities
include:
Financial Incentive
The
State Theatrical Arts Resources (STAR) Partnership
is a unique program that offers filmmakers access
to unused, distinctive State-owned properties
(e.g., health facilities, vacant office structures,
prisons, etc.) for a nominal fee or at no charge,
thus helping production companies to substantially
cut below-the-line expenses. Permits for STAR
properties are also obtained through the CFC.
Tax
Incentives
No
State hotel tax on occupancy. Most cities or counties
that impose a local hotel tax have a tax exemption
for occupancies in excess of 30 days. Five percent
sales tax exemption on the purchase or lease of
post-production equipment for qualified persons.
Services Provided
- Free
permits for California State properties.
- No
location fees for California State properties.
- One-stop
film office for California State properties.
- On
site location library and web-based location
finder for sites throughout California.
- On
site California Highway Patrol (CHP) Film Liaison
available to assist with filming on State freeways
and highways. This liaison also arranges CHP
officers to monitor film shoots.
- On
site California State Fire Marshal available
to provide advice and approval for pyrotechnics
and other special effect permits for State properties.
- Coordination
with more than 55 in-state film commissions.
- Production
and troubleshooting assistance.
In
early 2009, Governor of California, Arnold Schwarzenegger,
succeeded in his quest to provide a more attractive
fiscal environment for Hollywood's movie industry
with the inclusion of new tax credits in the state's
budget.
Hollywood
had long been complaining that it is losing business
with film makers increasingly choosing to locate
production in other US states which offer attractive
tax incentives.
The
new tax measures, which are set to take effect
in 2011, will provide new TV shows and films with
a 20% tax credit on qualifying expenses such as
crew wages, technical equipment and catering costs
(known as 'below the line' expenses). The scheme
will also provide a 25% tax credit for TV shows
and low-budget independent films with budgets
of between USD1m and USD10m, which relocate to
California. However, the scheme's budget is capped
at USD100m per year, and the 20% tax credit for
new films will only apply to productions worth
less than USD75m - restrictions that some industry
insiders believe will reduce the attractiveness
of the tax breaks compared with other states,
where some tax schemes are not capped.
Nonetheless,
the tax package was welcomed by US film and television
industry groups, including the American Federation
of Television and Radio Artists (AFTRA), the Directors
Guild of America (DGA), the Motion Picture Association
of America (MPAA) and the Screen Actors Guild
(SAG).
“For
the past 10 years, a united entertainment community
has been telling state officials that our industry
is threatened by runaway film and television production,"
the groups wrote in a joint statement.
"Film
and television productions have been leaving California
for tax incentives in other states and countries
for years now, and like everybody else, entertainment
industry workers are suffering in this economic
climate. We applaud the passage of this incentive
which will help make California competitive and
not only save the jobs that are being lost but
generate much needed revenue for the state,"
the statement added.
Illinois
In
August, 2003, Illinois Governor Rod Blagojevich
signed into law a package of tax breaks designed
to lure movie and television companies back to
the state following years of decline in the number
of productions taking place there.
As
previously mentioned, many states across the US
have suffered at the hands of 'runaway productions',
whereby producers of big-budget movies have chosen
to locate in countries with favourable tax regimes
for such projects, such as Australia and Canada.
"In the old days, movies were filmed in Illinois
all of the time," Blagojevich lamented at
the time. "Nowadays, movies named 'Chicago'
are filmed in Toronto."
Illustrating
the extent to which runaway production has affected
states like Illinois, Brenda Sexton of the Illinois
Film Office estimated recently that the state
has forgone about $100 million per year in film
and television production revenue in recent years.
Blagojevich also points out that since 2001, 18
movies which were 'set' in Chicago were actually
shot on location in Canada.
Meanwhile,
Bob Teitel and George Tillman, producers of Barbershop
and Barbershop 2 welcomed the move, although they
warned that Canada in likely to remain very attractive
to US film-makers.
"It's
so competitive out there. It's so competitive
in Canada, with the dollar. Anything that helps
brings more productions here is a step in the
right direction," said Teitel.
In
May, 2006, the Illinois Film Office announced
an expansion of its film production tax credit
program. The new incentive took effect immediately
and applies to productions shot after May 1, 2006.
While the previous incentive offered a tax credit
equal to 25 percent of qualifying Illinois labor
costs, the new tax credit offers an across-the-board
credit equal to 20 percent of all production costs,
including post-production.
However,
the following year, the Film Office posted the
following notice on its website:
"The
current Illinois Film Tax Credit expires on December
31, 2007. If you have a project that you are considering
bringing to Illinois, you must submit your application
by December 31, 2007. Per State of Illinois rules
and regulations, applicants have 2 years from
the date of the application to complete the statutory
requirements and receive the tax credit."
"As
details of a project are often in flux, an application
filed on December 31, 2007 can be amended after
that date provided amendments relate to the original
project content."
"Although
the Illinois Film Tax Credit has not yet been
renewed, Governor Blagojevich remains committed
to the credit and we have every confidence that
the credit will be extended as soon as the state's
budget issues are resolved."
Louisiana
Since
2002, Louisiana has offered three sets of incentives
for film production.
SALES
AND USE TAX EXCLUSION
This
exclusion, from state sales and use tax (4%),
ran until January 1, 2007. The production company
would be granted the "exclusion" if
it reported anticipated expenditures of $250,000
or more from a checking account in a financial
institution in Louisiana in connection with filming
or production of one or more nationally distributed
motion pictures, videos, television series, or
commercials in the state of Louisiana within any
consecutive 12-month period.
EMPLOYMENT / LABOR TAX CREDIT
The
law provided that for state certified productions
that had received an 12 effective certification
date prior to December 31, 2005, a motion picture
production company was entitled to a tax credit
for the employment of La. residents in connection
with production of a nationally distributed motion
picture, video, television series, or commercial
made in Louisiana.
The
credit was equal to 10% of the total aggregate
payroll for residents employed in connection with
such production when total production costs in
Louisiana equal or exceed $300,000 but less than
$1 million during the taxable year. The credit
shall be equal to 20% of the total aggregate payroll
for residents employed in connection with such
production when total production costs in Louisiana
equal or exceed $1 million during the taxable
year.
The
term "total aggregate payroll" does
not include the salary of any employee whose salary
is equal to or greater than $1 million.
The
credit may be applied to any income tax or corporation
franchise tax liability applicable to the motion
picture production company. If the motion picture
production company is an entity not subject to
income or franchise tax, the credit shall flow
through its partners or members as follows:
- Corporate
partners or members shall claim their share
of the credit on their corporation income or
corporation franchise tax returns.
-
Individual partners or members shall claim their
share on their individual income tax returns.
-
Partners or members that are estates or trusts
shall claim their share of the credit on their
fiduciary income tax returns.
- Any
unused credit may be carried forward no more
than 10 years from the date the credit was earned.
INVESTOR
TAX CREDIT
The
law grants a tax credit against state income tax
for taxpayers domiciled and headquartered in Louisiana.The
objective of this tax credit is to attract private
investment for the production of nationally distributed
feature length films, videos, television programs,
or commercials made in Louisiana, in whole or
in part for theatrical or television viewing or
as a television pilot.
The
investor earns the tax credit at the time of such
investment. If the total base investment is greater
than $300,000 each taxpayer is allowed a tax credit
of 25% of the actual investment made by that taxpayer.
In
the event that the entire credit cannot be used
in the year earned, any remaining credit may be
carried forward and applied against income tax
liabilities for the subsequent 10 years.
The
Louisiana Investor Tax Credit was amended in January
2006. The amendments to the previously existing
legislation, can be accessed via the Louisiana
Film Commission website.
In August, 2009, it was announced that State Representative
Cameron Henry and Senator Robert Adley had worked
together to raise the State of Lousiana's film
tax credit from 25% to 30%, effective in Autumn
2009, to bring it in line with incentives in the
State of Georgia. The legislation would grant
movie producers a transferable 30% state tax credit
on their expenses, such as catering, hotels, costumes,
equipment, trucks and lighting. They get an additional
tax break by hiring Louisiana workers.
An
important aspect of the new legislation is that
there is no sunset provision. The 30% tax credit
is permanent, which should instill confidence
in the movie industry. "Other states may
increase their credits above 30% and that is why
it is important that the State convince the ancillary
businesses needed to make movies to set up shop
in Louisiana," said Henry, "Georgia
may have a 40% tax credit in the future, but we’ll
have great sound stages and a solid work base
on top of a 30% credit", Henry said. "There
is so much needed to make a movie - like set designers,
laundry services, people to fix the cameras, things
you would never even think of. If we can create
that permanent infrastructure, it will give us
an advantage because everything they need will
be right here."
Michigan
Michigan's
film tax credit was introduced in April, 2008,
and has the following key features:
- The
producer must spend at least USD50,000 in Michigan
to be eligible;
-
There is a 40% refundable tax credit, across
the board on Michigan expenditures;
-
The producer may claim an extra 2% if filming
in one of the 103 Core Communities in Michigan;
-
Credits apply to Labor and Crew: 40%-42%, Resident
Below the Line, 40%-42% Above the Line regardless
of domicile, 30% Non-resident Below the Line.
-
There is a USD2 million salary cap per employee
per production. There is no other cap and no
sunset.
In April, 2009, it was announced that a USD146m
film television production complex had been won
for the Detroit area as a result of Michigan's
generous tax incentives for the entertainment
industry and the local pool of skilled and unskilled
labour.
The
construction of the complex in a suburb of Detroit
is planned to commence later in the year after
the approval this week of a state tax credit worth
USD2.8m over 12 years. The initiator of the project,
Unity Studios Inc. of California, does post-production
work on several popular television shows.
The
studio project will create 83 direct jobs, and
will include a residential program to retrain
workers for jobs in the entertainment production
industry. Unity Studios is the latest to capitalize
on studio demand being created by the state’s
deep incentives for the entertainment industry.
A number of studio projects are in the works —
including the USD40m 23rd Street Studios and USD86m
Wonderstruck Studios projects in Detroit and a
USD70m plan for the old General Motors Corp. Centerpoint
complex in Pontiac.
For
the future local politicians have expressed their
aim to cap the tax credit for film productions
but expand incentives for those who build permanent
film infrastructure. The film tax credits are
projected to reduce Michigan Business Tax receipts
by USD127m this fiscal year, a year in which tax
revenues generally are falling at a precipitous
pace. However 2,800 jobs have been created and
USD65.4m has been spent on film productions in
the state, according to an economic analysis by
the Michigan Film Office.
New Mexico
The State of New Mexico offers film production
companies the following incentives to locate their
productions in the state:
- 25%
Film Production Tax Rebate
New Mexico offers a 25% tax rebate on all production
expenditures (including New Mexico labor) that
are subject to taxation by the State of New
Mexico. This is a refund, not a credit.
- Film
Investment Loan Program
New Mexico offers a loan, with participation
in lieu of interest, up to $15 million per project,
(which can represent 100% of the budget) for
qualifying feature films or television projects.
Terms are negotiated and budget must be at least
$2 million.
- No
State Sales Tax (Not to be used in
conjunction with the 25% tax rebate).
Nontaxable Transaction Certificates (NTTCs)
work much like grocery-store coupons. A certificate
is presented at the point of sale and no gross
receipts tax (sales tax) is charged. (This incentive
is used primarily for commercials andPSAs)
The
Production Tax Rebate
New
Mexico offers a 25% Tax Rebate on all direct production
expenditures, including New Mexico labor, that
are subject to taxation by the State of New Mexico.
As
previously stated, this is a refund, not a credit,
on the full amount of the expenditure, not just
the tax portion. (i.e. if the expense of an item
including tax is $100, the rebate is $25). There
is no minimum spend required, no cap, and no sunset
clause.
The
rebate applies to feature films, television, regional
and national commercials, documentaries, video
games and post-production. Out-of-state actors
will also qualify, though under a separate tax
structure.
Requirements
for 25% rebate include:
•The
script cannot be obscene in nature. Any non-scripted
projects (reality television, documentaries, etc…)
must submit a treatment and/or synopsis and indicate
if it involves any potentially hazardous conditions,
minors or animals, and its compliance with state
laws.
• The film shall contain an acknowledgment
that the production was filmed in the State of
New Mexico.
• Productions shall agree to pay all obligations
the film production company has incurred in New
Mexico.
• Productions shall agree to publish, at
completion of principal photography, a notice
at least once a week, for three consecutive weeks,
in local newspapers in regions where filming has
taken place to notify the public of the need to
file creditor claims against the film production
company by a specified date. This information
will also be posted on the web site of the New
Mexico Film Office for sixty (60) days.
• Productions shall agree that outstanding
obligations are not waived should a creditor fail
to file by the specified date.
• Productions shall agree to delay filing
of a claim for the Production Tax Rebate until
the New Mexico Film Office delivers written notification
to the Taxation and Revenue Department that the
film production company has fulfilled all requirements
for the credit.
• Productions shall agree to enter into
a contract with the New Mexico Film Office (Production
Tax Credit Agreement), accepting the terms of
the above.
Film
Investment Loan Program
New
Mexico offers a 0% loan, with backend participation
in lieu of interest, for up to $15 million per
project (which can represent 100% of the budget)
for qualifying feature films or television projects
– animation included. Terms are negotiated
and the budget must be at least $2 million.
Key
requirements in order to qualify for the loan
program include that:
- A
guarantor for the principal amount of the loan
must be in place
- The
script must meet Eligibility requirement
- The
film must be wholly or substantially shot in
New Mexico – at least 85% of principal
and second unit photography. Animation projects
must spend at least 85% of their production
budget in New Mexico.
- A
signed distribution contract from a reputable
and appropriate distributor for significant
rights must be in place (See Step Seven for
more details on distribution)
- 60%
of Below-the-Line (BTL) payroll and body count
must be allocated to New Mexico residents
The
NTTC Program
Nontaxable
Transaction Certificates (NTTCs) are used primarily
for commercials, PSAs and documentaries).
If
a filmmaker chooses to use the Nontaxable Transaction
Certificates (NTTCs) on a given expenditure, the
same expenditure may not be counted toward the
Tax Rebate Programs.
The
State of New Mexico charges a gross receipts tax,
or sales tax, at the point of sale. As an incentive,
the state issues the company in question with
Type 16 Nontaxable Transaction Certificates (NTTCs),
which work much like grocery-store coupons.
A
certificate is presented at the point of sale,
and no gross receipts tax is charged.
The
program is used primarily by producers of local,
regional, and national advertisements.
Aspects
of the production which qualify for NTTCs are:
- The
cost of a story and scenario to be used for
a film;
- Salaries
of talent, management and labor; including payments
to personal services corporations with respect
to the services of qualified performing artists,
as determined under Section 62b(a)(A) of the
Internal Revenue Code of 1986;
- Cost
of the construction and operations, wardrobe,
accessories, and related services;
- Costs
of sound synchronization, lighting, and related
services;
- Costs
of editing and related services;
- Rental
of facilities and equipment (including location
fees); and
- Other
direct costs of producing the film, not including
lodging, rental of vehicles, or catering
New York
New
York City’s film and television production industry
is expanding rapidly as a result of new tax incentives
designed to attract big production companies to
both the city and the state, NYC Mayor, Michael
Bloomberg announced in March, 2005.
Speaking
on the set of the new Fox Entertainment series
‘Jonny Zero,’ Bloomberg stated that the five pilots
currently planned to be made in New York will
bring more than $15 million into the city’s coffers.
“Television
and film production in New York City is increasing,
largely due to innovative tools like our ‘Made
in New York Incentive Program’, which is showing
film and television organizations that we want
to make it easier and more profitable for them
to shoot here.”
Signed
into law in September of 2004 by Governor George
E. Pataki, the ‘Empire State Film Production Credit
Program’ provides tax incentives to feature films
and episodic television shows that shoot the majority
of their filming on qualified soundstages across
New York State.
The
Empire State Film Production Credit (New York
State) program provides a refundable 10% tax credit
for qualified feature films, episodic television,
pilots, and television movies/miniseries.
The
Made In New York (New York City) program provides
an additional 5% credit and was signed into law
by Mayor Michael R. Bloomberg on January 3, 2005.
Both programs are currently scheduled to expire
in 2011.
The
incentive applies to qualified production costs
for work incurred in New York State and/or City,
and productions must qualify by being based in
New York State and/or City. New York City consists
of the five boroughs of Bronx, Queens, Brooklyn,
Staten Island and Manhattan.
The
two programs (State and City) are similar and
have similar qualifying thresholds. Projects and
costs which qualify for the New York City credit
will also be eligible for the New York State program.
However, work incurred in New York State but outside
the City is eligible only for the State 10% credit.
For
a feature film or television project to be eligible
for the New York State credit, the production
must:
-
Shoot on a set, on a stage, at a qualified production
facility in New York State; and
- Complete
at least 75% of the total facility related expenses
at a qualified facility.
These
productions will qualify for up a 10% state tax
credit for the work done at the facility. If the
facility is within New York City, these productions
will also qualify for the additional 5% tax credit
from the New York City program.
For
location work, post-production, and costs of other
work done in New York outside the facility to
be eligible, either:
-
At least 75% of the location shooting days must
be in New York State; or
- The
production must spend at least $3 million on
work incurred at the qualified facility.
If
the facility is in New York City and 75% of location
days are done within New York City, the production
will also qualify for the additional 5% tax credit
from the New York City program.
According
to Mayor Bloomberg, New York City’s production
industry employs 100,000 New Yorkers and generates
$5 billion for the City annually.
In
April, 2005, the city of New York said it was
hoping to attract a slice of the booming Chinese
film industry after signing a deal with a Hong
Kong-based production company. The agreement with
Salon films marks the first such deal between
New York's film promotion agency and a Chinese
production company, and could result in a Hong
Kong movie being shot in the city later in the
year.
Virginia
There
is a Sales and Use Tax Exemption applying to many
film production costs, including:
- Developing
film including movie film
- Transporting
charges that are separately stated
- Hotel
and motel rooms that are occupied by a guest
for 90 or more consecutive days
- Repair
services for which a separate charge is made
- Camera
film
- Materials
used to construct costumes
- Materials
used to construct props and scenery
- Equipment
rentals
- Design
supplies
- Heating
and Air conditioning used on the set
- Scripts
- Musical
scores
- Storyboards
- Tapes
- Drafting
and art tables and supplies.
In
2006, the Virginia General Assembly approved an
appropriation to the Governor's Motion Picture
Opportunity Fund.
This
performance-based incentive provides a cash rebate
at the Governor’s discretion, taking into
consideration length of filming, job creation,
trainees hired and goods and services purchased.
The
rebate is paid to qualified production companies
at the end of physical production, and payment
is issued upon completion of a report detailing
Virginia expenditures.
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