FAQs & Glossary
The Federal Government and most U.S. states offer production incentives for motion picture and television productions. A number of jurisdictions also offer incentives for commercial advertisement, digital programming, post-production, video game production, animation, and other production types. More than a dozen international jurisdictions offer production incentives for foreign producers.
Governments have long used incentives to foster economic growth, build infrastructure, and create jobs. Incentives are used to attract industries that are viewed as important to the local community. Production of filmed entertainment is especially amenable to incentives because it is highly mobile, environmentally “clean”, capital-and labor-intensive, and effective in promoting tourism.
Tax credits can be refundable or non-refundable, and transferable or non-transferable.
Each jurisdiction defines which type of business entity is eligible to apply for and claim its production incentives. Many jurisdictions require that the company be exclusively engaged in the business of film production. Some jurisdictions specify the legal structure and/or residence required for eligible production companies.
Each jurisdiction defines the types of projects eligible for the incentive benefits. In some jurisdictions, television projects are excluded. In other jurisdictions, the scope of eligible projects is very broad, including film, TV, video, digital programming, interactive games, commercial advertisements, animation, etc. Some pilots and treatments qualify. Adult programming, news, weather, sporting events, infomercials, reality shows, etc. are often excluded. In addition, many jurisdictions require that the project be intended for commercial exhibition and/or that a distribution deal be in place.
Most jurisdictions have a minimum spend test; some have a minimum number of local shooting days/stage days, resident employee requirement, or some other test so that the project will satisfy the jurisdiction’s goals in building its local industry, revenue base, employment, etc.
Each jurisdiction defines the goods and services that constitute qualifying expenditures for purposes of calculating the incentive benefit. In most jurisdictions, local goods and services directly used in the production are included in the benefit-calculation base. Some jurisdictions allow expenditures incurred in other jurisdictions, but used for local production, to qualify. In some cases, both pre-production and post-production will be included. In most cases, marketing and distribution expenses will be excluded. Entertainment Partners’ handling fees and Workers’ Compensation insurance fees are qualified expenditures in many jurisdictions.
For jurisdictions with annual funding caps, it is important to know the fund balance and amount appropriated to date. Find out what is necessary to be certain that the amount needed by your project will be committed to it. Determine which jurisdictions with funding caps allocate funds to productions either on a first-come, first-served basis or on a discretionary basis. Some jurisdictions carry over unused incentive funds to the following year, and some jurisdictions do not carry over any unused funds.
Are the cast and crew subject to tax in the jurisdiction where the filming occurs? If so, what steps must be taken to ensure compliance? If any members of the cast or crew have established personal service or loan-out corporations through which their services are provided, is the corporation required to register to do business in the local jurisdiction? Are payments to the corporation subject to tax and/or withholding in the local jurisdiction to qualify for the incentive benefits? Is the corporation subject to tax at the entity level in addition to the tax imposed on the talent?
Is there a test for qualified residents? When is the test applied (e.g., date of payment, date of services, date of claim, etc.)? How is it proven?
Can a local company be used to qualify goods and services that are unavailable or do not originate within the jurisdiction as eligible spend? If so, what requirements must be met?
Certain jurisdictions require acknowledgement of support as a condition in order for the production to receive certain incentives and/or uplifts and bonuses.
Salaries for individuals who hold creative influence over a production. Including but not limited to: screenwriters, producers, directors and actors.
Salaries for individuals that supplement or support the production. Including but not limited to: assistants, coordinators, non-lead actors and extras.
Time frame in which production companies and/or buyers are allowed to utilize earned tax credits.
Money paid to a qualifying production company based on the amount of qualifying expenditures and/or jobs created.
Bilateral or multilateral agreements between one or more countries allowing certain incentives that would otherwise only be available to local productions.
A rebate that is administered directly from the government (state, city or local) to a qualified production for meeting certain criteria.
A company that an individual utilizes as a bill-to entity for the payment of their services with the purposes of corporate legal protection.
A tax credit that can only be used to offset the tax liability of the production company.
The minimum investment or criteria a production company must have in a jurisdiction to be eligible for an incentive.
Incentives, such as: cash rebates, tax credits and/or upfront/backend production funding, offered by specific jurisdictions.
Expenditures on a production meeting specific qualifications within a jurisdiction.
Productions meeting specific qualifications within a jurisdiction. Eligible productions include but are not limited to: Feature Films, Scripted Television, Miniseries and Documentaries.
A tax credit similar to a Cash Rebate, but it is administered by the local taxing authority and claimed by filing a tax return.
A tax credit that may be sold or assigned to another taxpayer.
The designated end date for an incentive program.