As most independent film makers know, Section 181 is set to expire on January 1, 2010. The tax incentive has been an incredible tool for US film makers attempting to lure investors and their money offering deductions against passive (and in some cases active) income. First introduced as part of the American Jobs Creation Act in 2004, the incentive was first set to expire on December 31, 2008. The stimulus bill or the American Recovery and Reinvestment Act breathed new life into Section 181, albeit only for a year.
So what is the plan for the film incentive?
Great question. I’ve done all the research that one man can do and I still do not have an answer. According to a source at the IRS who is an expert on the film incentive sections (181 and 199), he would not be surprised if an extension was slipped into a bill much like it was in 2008. However, he has no real basis for that opinion and urged me to just keep watching the government’s proposed bills for updates.
The committee that is in charge of introducing tax incentives is the Ways and Means Committee. I spoke to one of their tax lawyers to get her perspective. Not surprisingly, she 35, 55, 61 told me that their entire attention was on health care reform. She mentioned that if a health care reform bill was presented in the next month or two, they would probably turn their attention to tax incentive bills that are set to expire. However, she also cautioned me that, due to the economy, proposals for reducing the overall tax collected by the government are not exactly in favor.
Bottom line, there is no answer to report yet. Continue to check here, your local film office and government websites for updates. Call your representative and keep on them.
If you are planning on beginning filming in early 2010, all I can say is try to start in December. If you begin filming in 2009, you may qualify for the incentive even if you do not complete filming until 2010.