I always loved Halloween growing up. For one magical evening, I could transform myself into a clown, Dracula or any other flavor of the month costume and create future cavities as I devoured candy from the kindness of strangers. I deeply appreciated every freebee I was able to lasso into my trick-or-treat pillowcase, but it was finding the “mother loads” that made my night.  I’m talking about the families that gave out regular sized candy bars and didn’t care if you took more than one.  Every neighborhood had a mother load, but once they were discovered an army of kids raided them until every last morsel of chocolate was gone. That’s the thing with mother loads; they’ll make you ecstatic for a short period of time and then they’ll disappear for at least for one year, possibly forever.

The same is the case with Film Tax Credits.  While they serve as “mother loads” for the filmmakers lucky enough to grab a piece of them, there’s clearly not enough “candy” to go around. So, in an effort to help you get your own piece, here’s some information on film tax credits and what they can do for you.

The Basics
Film tax credits are incentive programs designed to entice film productions to shoot in their state. Generally speaking, these tax credits are reserved for the amount of money spent on below the line costs within the area giving the tax credit. This means money paid to above the line costs like talent, director, writer and producer, usually won’t count. However, there are areas that allow tax credits for above the line costs, if you meet certain requirements.

The Upside
A number of tax credits are structured like cash rebates, so film productions can be paid back in cash once the proper paperwork is filed. With the economy still struggling, filmmakers can use tax credits as a solid way to severely reduce the amount of money their film needs to recoup in order to become profitable.  Simply put, everybody wins. The state giving the tax credit gets an infusion of cash spent on their residents and services and the filmmakers utilizing the tax credit get cash back for doing so. It’s a beautiful honeymoon of a deal for both sides.

The Downside
Each state has limited funds to give. For example, just last week California announced its $100 million dollars of tax credit funds allotted for 2010, were fully spent on the very first day of funding.  The $100 million was dispersed to 30 applicants, who were selected randomly. But, there are already 45 films on a waiting list for the 2011 California film funds, which won’t be available until July 1, 2011.

The other potential downside is that there is a constant push by several state legislatures to repeal their own state’s film tax credits.  Several politicians find them to be a waste of the public’s money. So, many programs are constantly in jeopardy of either being reduced, suspended, or officially closed. Thus, filmmakers should have a clear understanding of the tax credit status of the state they’re trying to shoot in. The easiest way to do this is to contact the film commission responsible for the area where the production desires to shoot.

The Blind Side
Read the instructions and procedures of each offer closely and  follow them to the letter of the law.  If you don’t, your tax credit could be delayed or deemed invalid.  There’s nothing worse in business than having a stack of cash abruptly taken away because certain procedures weren’t followed.

The Best Film Tax Credits Available

  1. Michigan – Hail, hail Motown, the Motor City, and every other filmmaker-loving part of the Wolverine state, because they have the most aggressive program. Michigan film tax credits are 40%, which can swell to 42% if the production shoots in a designated “core community.”  Furthermore, all above-the-line personnel qualify for the 40%-42% tax credit as “direct production expenditures.” This is very important, because the above-the-line personnel cost is usually quite a hefty chunk of an independent film’s budget (especially the actors). Thus, allowing these costs to be included allows for the film production to receive a much greater cash rebate. As for the below-the-line costs, Michigan offers the full 40%-42% tax credit for costs deemed “direct production expenditures,” and 30% tax for costs deemed “qualified production expenditures.”

    Furthermore, the way to ensure your production qualifies for the 40%-42% tax credit is to be a resident of Michigan for at least 60 days before your application is approved. Proof of residency can be achieved by having a Michigan driver’s license or a Michigan voter’s registration card. If you’re not willing to become a Michigan resident to save several hundred thousand dollars to several million dollars, then you can either wrangle a Michigan based producing partner to file the application, or settle for the 30% tax credit given to non-residents of Michigan. For more information about the Michigan Film tax credit, please visit: http://www.michiganfilmoffice.org/For-Producers/Incentives/Default.aspx

  2. Louisiana ­ – The home of the “Big Easy” is an amazingly fun, ridiculously friendly place to shoot.  Their tax credit is between 30%-35%,  (usually 30%) and both residents and non-residents of Louisiana are eligible. Since these tax credits are fully transferrable, film productions can elect to transfer them to the state of Louisiana, in exchange for an immediate check for 85% of the tax credit’s value.  Only production costs that are spent within the state of Louisiana are eligible. For more information, please visit the Louisiana Film Office http://www.louisianaentertainment.gov/film/content.cfm?id=61

  3. New York – The “Big Apple” has quite a big bundle of green waiting to give to filmmakers. New York is putting their “money where their mouth is” to the tune of $2.1 billion dollars over the next five years. On average, that’s $420 million per year, $35 million per month, and about $1,166,667.67 per day.  Needless to say, utilizing New York as a production location is something to think about given their commitment to supporting filmmaking.

As for other places to help filmmakers turn their dream into a reality,  here’s a list of  states that offer transferrable tax credits (which means they can be turned into a cash refund).

  • ALASKA – 30 % Base Film Tax Credit. Add 2% if it’s filmed in rural areas. Add 10% for wages paid to Alaska Residents and an additional 2% if the qualified expenses are incurred between October 1 and March 30.
  • ARIZONA20% for productions spending $250,000-$1,000,000 in Arizona and 30% if more than $1,000,000 is spent on qualified expenditures.
  • CALIFORNIA – 25% for independent productions with budgets under $10 million.
  • CONNECTICUT – 30%.
  • GEORGIA – 20% Base Film Tax Credit, plus 10% more for using an animated Georgia promotional logo in the finished product.
  • ILLINOIS – 30%.
  • MISSOURI – 35%.
  • NEW JERSEY – 20%.
  • PUERTO RICO – 40%.
  • RHODE ISLAND – 25%.
  • WEST VIRGINIA – 27% Base Film Tax Credit, with 4% more if at least 10 local hires are made on the production.

Several other states offer some form of film tax credits, but the “transferrable” tax credits listed above are the ones filmmakers should focus on. For more information on any of the state film incentive programs, just contact the various state film commissions.

It’s so refreshing for me to see so many states offering healthy film tax credits. When I graduated UCLA Film School in 1994,  it was virtually unheard of for states to entice film productions  with public funds.  Today we have a full-blown film tax credit civil war between several states,  making the immediate future of independent film production look quite healthy.  But, just like  the “mother loads” I enjoyed on many Halloween nights, these film tax credits could  be eaten up and sent into extinction sooner than anyone is willing to admit. So,  filmmakers would be wise to start utilizing them today!

Thanks again for lending me your eyes and I’ll see you next Tuesday!

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  1. Jack Binder says:

    Film Budgets are the key to opening the door to the film tax credit. Filmbudget.com has been providing proven budgets to the industry since 1997.

    Great article, thank you Film Threat!

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