Hi ,
Today we highlight using Tax Incentives when pitching to investors. In particular, let's talk about Section 168 (k) of the US Tax Code.
Why Use Tax Incentives?
A tax incentive is like getting free money, so making a film in today's economic climate without utilizing available film tax incentives is like throwing money away. Almost every city/state/country has incentives luring you to film in their location by making your film cost significantly less to film in their location.
Additionally, our federal government offers you a way to save your investors HUGE amounts of tax dollars.
What is Section 168 (k) of the IRS Tax Code?
US Federal Section 168 (k), formerly Section 181, helps accelerate ROI and attract film investors. In 2018, the Tax Cuts and Jobs Act of 2018 (TCJA), reinstated a policy, Section 168(k), with similar tax effects to Section 181 Film Tax Deduction, which had been on and off again from 2004 through 2016.
Section 168k provides a 100% tax deduction for the investor in a motion picture, television series or live stage production, shot in the US, during the first year of distribution. There are other changes to the new law, such as caps being eliminated, the year in which the costs can be deducted (when the production is 'placed in service,') and in what form the deduction is taken, like depreciation. In order for your investors to take the deduction you must qualify the film
under Section 168(k) and you must get distribution.
Another major change from 181 to 168(k) is that your investors can only use it as a deduction against other passive income – not all income. Too often, we see filmmakers tell their investors they can take a deduction in the current year, against any income. This is incorrect, and please never mislead your investors.
Please consult your attorney or tax expert on exactly how this new law applies to your investors and production.
Further Reading:
