A few years back it appeared as though every state in our fine Union was scrambling to get some sort of tax incentive or tax credit on its books. The “Runaway Production” (film productions moving to Canada or beyond to save on production budgets) panic that spread across the nation caused state government officials to introduce and fast-track a wide variety of new legislation. The calm after the storm has left a rather muddied landscape with certain states eliminating their programs while some continue to thrive, albeit under the radar.
Most of the existing state film tax incentives require all aspects of production of a film or television production to take place within the state borders. Depending on how much is spent, how it is spent and the type of production, certain states provide incentives that can result in tremendous savings or “free” returns on investment (depending on your viewpoint).
A great chart of the remaining state tax incentives and the applicable requirements can be found HERE.
Coupling the various state tax incentives with the mysterious but enticing Federal Tax Incentive, Section 181 (which still exists) and you can potentially see upward of 50% of your overall investment returned in the form of credits and write-offs.
If your film or television production qualifies for one of these programs you can use it as a great way to entice investors. We don’t have to tell you how hard it is to get financing for independent film projects. Not only do you have to convince people that your film is the one that will succeed, but you have to scare the pants off them by telling them all of the risks and ways they may lose their investment through your investment documents (PPM/Offering). Throwing a few pages in these documents describing the various tax credits and incentives offered by the federal and state governments can be just the thing to get an investor off the fence and into your film production.
Websites that serve as independent fund raisers for artists are not new. Over the past decade several sites using the fan funded model have popped up (some have subsequently disappeared). The sites are natural offspring of some entrepreneurial and creative musicians and film makers realizing that the label/studio system probably is not going to work form them.
The basic premise is that you offer your friends, family and fans (the 3f’s) an opportunity to participate in the creation of your new album or film. In exchange for buying a piece of the project the 3f’s will get extras that the general public will not get. Examples of the extras that participants get are: exclusive tracks, t-shirts, signed copies of vinyls, screenings with the cast and crew, etc.
Some models have tried to take it to the next step and share income with the 3f’s who go from participants to investors when they provide money to a project. Sellaband.com is probably the most well known band investment models (now in bankruptcy, this concept obviously has some issues to figure out still). On the film side of things sites like kickstarter.com and indiegogo.com have had success in getting independent movies with fairly small budgets into production via fan participation.
But what happens when you want to raise more than $5,000 or even $50,000? I guess it depends on how wealthy your 3f’s are. For most of our clients we are trying to raise money in the several hundred thousands or millions for their projects. Their 3f’s are typically not looking to get a t-shirt or dvd out of their participation when they are putting that much money into a project. In most scenarios a participant becomes an investor and will want to see a monetary return on his investment.
Equally as important, the method for raising money with the promise of a financial return on investment follows very strict rules and regulations. When you try to raise significant funds for your project you are essentially selling securities or stock in your product. The Securities and Exchange Commission governs these type of transactions and you must follow their guidelines or risk serious consequences. Unfortunately, the legal fees for setting up an Offering (offering of a financial interest in your project) are high and you definitely cannot create an Offering on your own (even if you find an example on line). Oftentimes, musicians and film makers must go to their 3f’s just to get the money to pay for the Offering.
So with all of these barriers why to musicians and film makers go through the trouble? Several reasons. First, the old days of being discovered are over. The quantity of product is simply too high and the methods for finding talent are too vast. A&R departments are decimated and studio budgets are tighter than ever. Risks are averted on all levels. It is now a necessity for the independent to truly be independent and make their own way in the industry. Further, most musicians and film makers feel that if they get their first project produced and into commerce, the sky is the limit. This sentiment is justifiable. Film makers who are able to get a movie made and actually distributed immediately create a brand for themselves and their production company. It is far easier to sell the second feature as compared to the first. Same for musicians. A musician who has released countless EP’s and singles may not be interesting to an investor until she produces and distributes a full length album.
So as the annoying saying goes, you have to spend money to make money. Whether it is strictly as a participant structure or through an Offering, a lot of work, time and money goes into the process.
I am interested to hear from those of you have used this method; whether it is through a website or on your own door to door fund raising effort. Here are some of my friends who are using the participant method. Check out and if you like them, PARTICIPATE!
Film maker Carey Bruce and Road’s End Films are producing Forests of Mystery and using Kickstarter.com:
Talented Singer/Songwriter Levi Weaver has funded his own projects through 3f participation. Check him out here: