- Parent Category: Services
- Category: Payroll, Finance & Insurance
- Published on Monday, 10 November 2008 15:14
- Written by Dyana Carmella
As U.S. tax incentives become more competitive, the rivalry between states across America heats up. Consequently, it looks like runaway productions will soon be a thing of the past...
As U.S. tax incentives become more competitive, the rivalry between states across America heats up. Consequently, it looks like runaway productions will soon be a thing of the past as the economic impact of this changing tide enriches our nation. Film office officials from coast to coast and from the north to the south are offering filmmakers their own versions of incentive packages that will allow creative dreams to be fulfilled with much smaller budgets.
The professionals at Tax Credits, LLC are placement specialists who are ready and willing to help production companies find the best incentive programs to fit their project. Production companies also save time by going to Tax Credits, LLC since the company simplifies the tax credit process. P3 was able to find out more about tax credit breaks for producers with the help of Christine Peluso, who directs the National Development of Tax Credits, LLC’s Film Production Tax Credit Business. Peluso gives valuable information on what to expect from tax credits and what the future holds for these incentives.
P3: Please explain exactly what tax credits are and how a filmmaker can take advantage of this opportunity.
CP: For years, U.S. filmmakers went to Canada, Australia, New Zealand and other countries to make their films because those jurisdictions offered cash incentives. When films are made in a particular state, capital is infused into the local economy and jobs are created. It is estimated that the U.S. lost $10 billion or more per year in this "runaway production" [trend]. To lure filmmaking back to the U.S., many states have initiated their own programs which offer similar incentives either in the form of a transferrable tax credit (which is a "coupon" that offsets a taxpayer's tax liability dollar for dollar), or in the form of a rebate. These incentives are calculated by taking a percentage of the total amount of money spent on a movie within the jurisdiction and are often substantial...15-40 percent! Under these programs most, but not all, expenditures qualify for the credit. By way of example, a production company that spends $1 million (on qualified expenditures) for a particular project in New Jersey can expect to receive a tax credit for $200,000 provided all other program criteria are met. The production company can either use the tax credits to offset its own New Jersey state tax liability, or it can sell the credits to another New Jersey tax payer. The credits are sold at a discount to the buyer and the producer generally nets 88 percent or more of the face value of the tax credit.
P3: What should a producer know about actually getting a tax credit? Are there any misleading credits that appear on the surface to be good opportunities, when in actuality are just a ploy to get productions to film in a specific region?
CP: All programs vary...some are more generous, some have minimum spends and some may require that a certain percentage of the film be shot in-state to qualify. The producer should thoroughly research the criteria, regulations and reporting requirements prior to green lighting the film. Information about the programs is generally available through the state film office, the Department of Revenue and the Economic Development Authority, if applicable. We strongly suggest that the producer identify a buyer of the tax credits prior to green lighting, as well. As capital markets continue to change, it is important to know that the credits are sold for a specific price.
P3: Which states are offering great tax credits?
CP: The most popular states offering tax credits are Louisiana, Massachusetts, Pennsylvania, Connecticut, [and] New Jersey, although only $10 million in credits are available annually ─ and Illinois. In addition to offering great credits (20 percent-plus), these states have a good tax credit market, which helps the production company materialize a good portion of the value of the credit. We are closely watching the following states, which are either new or have recently expanded: West Virginia, Iowa and Georgia.
Tax credits are successfully luring filming back to the U.S. Incentives are at the top of the list when producers are scouting locations.
P3: What exactly is Tax Credits, LLC and what advantages do producers have in using your service?
CP: The professionals of Tax Credits, LLC are Placement Specialists. For the past 10 years, we have handled over 1,000 closings, placing in excess of $300 million in various tax credits on behalf of the companies who earn them. With respect to film tax credits, we work in every state that offers a "tradable" or transferable film tax credit. Our buyers are generally Fortune 100 companies with multi-state tax liabilities who expect us to identify tax-saving opportunities for them. We frequently consult with states on improving film incentive programs and help develop professional film tax markets throughout the nation.
In addition, because we have strong relationships with buyers and have helped make the credit more marketable in many states, we have been able to elevate pricing as high as possible. As a result, producers are getting more for their credits and can often use the anticipated proceeds to negotiate a financing arrangement. To that end, we have gotten involved in all aspects of the credit and have helped producers maximize their value. We also have up-to-the-minute information about each state’s requirements and have close relationships with all the right state players. If we don't immediately have an answer to your question we'll get it.
P3: What does the future hold for producers who get these types of incentives to work in a specific local?
CP: As long as states see measurable economic benefits, the programs will continue. Unfortunately, while some programs are very producer-friendly, the economic benefits are being challenged and the programs may be at risk. Producers should check with us first to determine whether a program is viable and discuss options.
P3: What else would you like P3 readers to know about this process?
CP: State incentives are a moving target...Tax Credits, LLC stays on top of the changes, allowing producers to do what they do best...produce. The best way to approach incentives and financing is to have complete and accurate information.
Tax Credits, LLC