The Film Business

First Time Filmmaker F-Up #12 – I Don’t Care about Tax Incentives

tax rebates

The F-Up

If someone came up and offered you 10 to 50 percent of the funds for your movie, would you take it? Unfortunately, many new filmmakers wind up missing out on money for their film purely because “taxes” and thereby “tax incentives” sound boring or intimidating and they don’t want to deal with that.

I promise you that once you understand a little bit about tax incentives, you will agree they are perhaps the most exciting part of filmmaking there is. A tremendous mistake many first-time filmmakers make is either being unaware of how great tax incentives truly are or, worse yet, simply not bothering to utilize them.

How to Do It Right

Tax incentives are so valuable that it has become increasingly rare for any film, independent or studio, to go into production without taking advantage of some tax-incentive program—regardless of where the movie is actually supposed to take place.

Money from tax credits can be used to help finance your film, pay back your investors, or a combination of the two. Tax credits vary state by state, region by region, and country by country.Types of tax incentives vary greatly, but the most common are:

  • Refundable Credits: This involves getting a check directly from the state. When you file the tax return for your business (the one created to make your movie), your movie will receive a credit based on a percentage of all the expenses that qualify. If your movie owes a lot in taxes, that credit will reduce what it owes. More likely, the credit will be worth a lot more than your movie owes in taxes, so you’ll get a refund check. That’s real money your movie can use.
  • Transferable Credits: Unlike refundable credits, these credits can be used only to offset tax liability and cannot result in a refund check directly from the state. However, what you can do is sell the credit to another business or individual and let them use the credit to reduce what they owe in taxes. So the sale is how you turn the credit into real money your movie can use. Generally, you’ll have to sell the credit for less than its value to make the purchase appealing to the buyer.
  • Nonrefundable and Nontransferable Credits: These credits cannot result in a refund check from the state, and you cannot sell them. Your movie can use these credits only to offset tax money it owes to the state. These are generally the least appealing kind of tax credits.
  • Rebates: The government sets aside money to give out based on qualified expenditures. That money is paid directly to production companies based on a percentage of qualified expenditures

The pros and cons of different incentives should be explored as they pertain to your project, but no matter what, they should definitely be explored! Most of the time, surprisingly friendly people staff the offices that run these programs. This is because it is their job to attract productions to their respective regions. So let these friendly folks help you understand their programs better. If there is a location or locations you are thinking about shooting in, research the tax-incentive programs, and do so as early as possible to make sure you get your paperwork in before you miss any deadlines or the rules change. Should you discover that the place you are thinking about making your movie does not have a good tax-incentive program, I strongly encourage you to consider shooting someplace else.

Excerpted from First-Time Filmmaker F*&^ Ups by Daryl Bob Goldberg ©2011 Elsevier Inc. All Rights Reserved.

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MasteringFilm, powered by bestselling Routledge authors and industry experts, features tips, advice, articles, video tutorials, interviews, and other resources for aspiring and current filmmakers. No matter what your filmmaking interest is, including directing, screenwriting, postproduction, cinematography, producing, or the film business, MasteringFilm has you covered. You’ll learn from professionals at the forefront of filmmaking, allowing you to take your skills to the next level.