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.
Unfortunately we cannot find anything on the books for an extension of Section 181 for 2012. As was the case for 2011, an extension may come around later next year. But as of now, we don’t see any sort of imminent extension on the horizon. Let us know if you see or hear something and we’ll do the same.
That’s right! There is no more waiting, wondering or debating. Yesterday afternoon, President Obama signed legislation which extended unemployment benefits, income tax cuts and…extended Section 181 until December 31, 2011.
We imagine that we will be getting a lot of questions about how 181 actually works (it’s been awhile) with investments in qualified film and television productions. So please feel free to search for past posts on our site email questions email@example.com. We can answer general questions but remember, we are not your lawyer or CPA (yet).
Last night the House passed the Senate’s version of HR 4853. HR 4853 will be known more for extending the Bush tax cuts and unemployment, but like any true piece of US legislation, tucked deep within Section 744 of HR 4853 is an extension of Section 181 until Decemeber 31, 2011. All that is left is for President Obama to sign the Bill and it becomes law!
What a ride. Stay tuned for more updates and how the revived Section 181 will work with film and music video or television productions.
Just when you think something is gone for good, scientists, or in this case Republicans, figure out a way to bring it back. Section 181, which we had declared dead as a Dodo, is back! The Senate Amendment to the House Amendment to the Senate Amendment (only in America) to H.R. 4853 provides for an extension of Section 181 benefits through December 31, 2011. The relevant text of the proposed Senate Amendment which is currently being debated in Congress today is below and the full text can be found by clicking here.
(a) IN GENERAL —Subsection (f) of section 181 is amended by striking ‘‘December 31, 2009’’ and inserting ‘‘December 31, 2011’’.
(b) EFFECTIVE DATE—The amendment made by this section shall apply to productions commencing after December 31, 2009.
Now readers of our site and other film makers who have been following this saga know all too well that there have been similar proposals and promises of extensions over the last year. Our job is not to report on the likelihood of success of any of these amendments, but to only let you know that they do, in fact, exist. This Bill shows promise of passing relatively soon, so we will keep you posted the best we can. If you get any news, please post a comment so others can follow along.
As always, STAY TUNED!
AND TELEVISION PRODUCTIONS.
Film makers, it is time to accept defeat. Section 181 is gone, baby gone. We have tried to report the ups and downs of this seemingly harmless (in that it is overwhelmingly positive and supported by both sides of the aisle) piece of legislation. At times it seemed like the renewal of 181 was a foregone conclusion; in fact at one point, there was a bill introduced that would have made the tax incentive permanent. Call it bad luck, bad timing, or just plain old U S of A politics, but it looks like we are going to be without this powerful tax incentive for the foreseeable future.
According to our source at the IRS (the original author of the section), 181 is not only not going to be extended, but it is not likely to be reintroduced for several months or even years. The last hope for 181 was its inclusion on the most recent Tax Extender Act. Unfortunately, due to major political issues like the Stimulus Package and Health Care, 181 was left on the cutting room floor.
So what can film makers do when making a pitch to potential investors? The best suggestion we have is to rely on the state tax credits. There are still a lot of healthy packages and incentives out there in quite a few states including Michigan, Illinois, and Louisiana. When seeking funds through private placement, language can still be added to the documents highlighting these state tax credits which, when applied for correctly, can lead to real dollars. Those dollars can either be used toward the production budget itself or to immediately pay back your investors.
As always, we stand ready to lend a hand to film makers and offer legal and business advice for those seeking private financing for their projects. Unfortunately, our plan will no longer be able to rely on good ol Section 181 anymore. 😦
7/23 UPDATE: The official text of the enrolled version of HR 4213 is now available here: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4213enr.txt.pdf
Unfortunately, Section 181 is NOT included. So until further notice, the incentive that meant so much to so many film makers is gone. We are still hopeful that a Congressperson will re-introudce the legislation and will continue to monitor the situation, but for now, the outlook its less than great.
7/22 UPDATE: HR 4213 passed Congress and was signed by President Obama today. However, the text of the law has not been published and it is unclear if the extension of Section 181 was included. If Senator Reid’s amendment replaced HR 4213 in its entirety, Section has not been extended. As always, stay tuned.
7/21 UPDATE: Yesterday, July 20, 2010, the Senate had a Cloture Vote on whether or not to move forward on HR 4213, the Unemployment Bill which includes an extension of 181. The Senate needed a 60-40 vote to move forward and, thankfully, it got it! So, hopefully by the middle of next week (possibly Tuesday), there will be a final vote on HR 4213. Closure is one excruciating step closer.
As most of my film related readers know, I have been doing my best to stay on top of the renewal/extension process of Section 181 (just search my past posts). Unfortunately, over the past several weeks, there is nothing real or solid to report other than the fact that the federal tax incentive for films produced in the United States seems to be lost in legislative oblivion. When HR 4213 passed both the House and the Senate, I thought we were home free. Yet, due to the fact that the incentive was grouped with unemployment benefits (a rather hot topic in politics these days) and other high profile tax credits, Congress debated, modified, an altered HR 4213 so much that it had to go back to committee. Now, more than six months after it officially expired, Section 181 is still stuck in limbo.
Senators who promised a quick resolution and renewal of 181 have all but shut up at this point (see this post for the empty promise from Reid and Baucus). According to the office of the biggest supporters of Section 181 and a Representative who actually introduced legislation to extend 181, Representative Diane Watson, the extension is not any closer to being approved. Officially, the bill, which has passed both the House and the Senate, is back in committee to “work out the differences between the versions of the bill which passed both houses” (according to www.govtrack.us). The question is, when will a government who is struggling to agree to anything finally agree to deal with additional tax incentives or credits?
So what are film makers to do? The film makers we at L4M represent are keeping their books as if Section 181 will eventually be renewed. Yet, to the potential investors, we cannot advise and do not include promises of federal incentives. We continue to work with State offices to capitalize on the best State tax credits while continuing to keep an eye (a sleepy, tired eye) on 181.
Bad news. Section 181 seemsto be cursed. A better explanation is that the extension is linked to a huge political battle over extending unemployment insurance. Washington at its best. Read more here. http://www.opencongress.org/articles/view/1921-Dems-Lose-Big-on-Unemployment-Insurance-Tax-Extenders-Vote.
Originally Published on May 29, 2010
The House voted to pass HR 4213 with some minor revisions and amendments. After passing the House and the Senate earlier this year, Congress could not present the bill to the President until proposed changes (which likely means more pork was added) were debated. Thankfully for film makers, an extension of Section 181 through December 31, 2010 remained as part of the bill without any modification. The extension will permit films that were or are being produced in 2010 to utilize the tax deduction.
Even though it still looks like we are on the right track (which we have been for about 6 months), Congress adjourned for a week long holiday. So the Senate and President will not see this Bill until at least June 7.
Obviously, this extension will be great news for everyone associated with making movies in the United States. To find out more about Section 181 or to figure out how it can help with your film’s money raise, please feel free to contact us at josh@lawyer4musicians or firstname.lastname@example.org. Remember, HR 4213 is not a law yet (not until the President signs it) and this blog does not contain legal advice upon which you may rely. Thanks to all readers who help us stay on top of this and correct any misinformation that is out there.
The answer, as of what we know, is not yet. Rumors continue to run wild, but according to the Speaker of the House’s Office, the Senate’s Committee on Finance and the record of Congress activity for today, May 11, 2010, there were no applicable votes on Section 181 or any Bill which includes the provision.
Our friend at Facebook: Extend Section 181 may have started this rumor, and I hope it is actually becomes fact, but we just simply cannot confirm any sort of extension yet. Keep checking here for updates.
We spoke with the Senate Finance Committee today and unfortunately, the wait for Section 181 passage continues.
According to the Committee which spearheaded the most recent Tax Extender Bill of 2009 (HR 4213) that passed the Senate had substantial differences from the original bill passed by the House. Accordingly, the bill has to be “re-introduced” to the House. I am not sure of the next steps or a time-line for those steps.
So again, while it looks promising, the extension is not law yet.
If you have questions about the legal steps necessary for raising money for your film or music video, please feel free to contact us.