Film Tax Incentives
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Entertainment Payroll Services - Film Tax Incentives
The film and television industry provides a healthy boost to the local economy wherever they film, as well as substantial tax income for the State, which has created fierce competition in recent years. Whether it’s a feature film, commercial shoot, television pilot, or other entertainment project, many States offer competitive tax incentives to lure production companies to their location. Each incentive plan is different, including the rules in place for qualifying, which means it is worthwhile to do a little research into which State has the best offerings for your project.
The film tax incentive programs are generally in place for a specific period of time, and the details are sometimes subject to change, so it’s always best to visit a State’s film/production incentive website to find any recent updates—but below is a brief overview of some of the more popular tax incentive programs currently in place.
- Georgia Film Tax Incentive
- Texas Film Incentive
- Louisiana Film Tax Incentive
- New York Film Tax Incentive
Georgia has one of the most competitive programs in the industry, which is one of the reasons the State has seen a production boom in recent years. One of the most attractive features of Georgia’s incentive plan is that it includes transferable tax credits. This means that if your production company has little or no tax liability in the state, you can transfer (sell) these tax credits to another Georgia taxpayer. It’s also one of the highest incentives as a percentage if you include the uplift, making it one of the best returns on your expenses.
Here are the highlights and important notes for the Georgia Entertainment Industry Investment Act:
- 20% Base transferable tax credit on qualifying projects
- 10% Uplift by including an embedded Georgia logo with a link to Tour Georgia Film’s website in your credits before the BTL crew credit roll. This brings the cap to 30% transferable tax credit on qualifying projects.
- There is a minimum spend of $500,000.00 to qualify for the tax incentive. However, a single production company can meet the minimum requirement with multiple projects as long as they occur within the same tax year.
- The tax credit can either be used against your tax liability in the state or transferred (sold) to another Georgia taxpayer (one-time sale or transfer)—usually through a tax credit broker. Carry forward of 5 years.
- Wages for both resident and non-resident workers qualify as long as they are working in the state.
- There is a qualified spending wage cap of $500,000.00 (per person, per project) for W-2 employees. For loan-outs there is no wage cap, but there is a required Georgia loan-out withholding of 6% for their earnings to qualify and loan-outs must register with the state.
- Georgia payroll fringes count as qualified expenditures, including Georgia payroll taxes. Your payroll handling fee will also qualify for the tax incentive if you use a Georgia based company.
- Qualified expenditures also include travel (in-state and out-of-state), hotels, working meals, and postproduction.
For a full list of qualified expenditure items, you can visit the Georgia Entertainment Industry Tax Incentive website for their detailed brochure:
Texas does not have a state income tax, so it differs from most States’ incentive plans by offering a cash payout rather than a tax-based incentive. Texas’ incentive plan is a little less flexible than some states—only wages for Texas residents qualify towards spending, and the project must include an overall figure of 70% Texas residents as part of paid cast and crew members to qualify at all—but the upshot of the program is that it pays out as a cash grant. The minimum spend is also lower than many incentive plans, which means lower budget projects can benefit.
The Texas entertainment industry incentive program is based on a tier system determined by the type of project and the amount of total qualified spending:
Film and Television Projects
- 5% for $250,000.00 to $1 Million spent
- 10% for $1 Million to $3.5 Million spent
- 20% for 3.5 Million + spent
- 5% for $100,000.00 to $1 Million spent
- 10% for $1 Million + spent
For Video Game Projects, Reality Television, or Visual Effects projects, you can visit the Texas film incentive website for a detailed breakdown of their incentive tiers:
Here are a few other quick highlights and important notes regarding the Texas incentive program:
- Qualified expenses include up to $1 Million in wages per person/per project (Texas residents only).
- Texas payroll fringes that count as qualified expenses include payroll taxes (Social Security, Medicare, FUI, SUI) and Pension, Health & Welfare contributions.
- Qualified expenditures also include travel (in-state and out-of-state), equipment, working meals, legal fees and postproduction.
- There is an extra 2.5% incentive available for all types of projects and spend amounts when working in an “underutilized or economically distressed area.” At least 25% of the total shooting schedule must take place in these areas to qualify. A full map of qualifying areas is included on the Texas film incentives website: http://gov.texas.gov/film/incentives/underused_areas
- Projects expecting $300,000.00 or more in grant payments must include an audit opinion letter from an independent CPA.
Louisiana has one of the most appealing tax incentive programs in the nation, including a high base rate, some unique bonuses for qualifying productions, and the option to sell your transferable tax credits back to the State at 85% face value. Here’s a list of the highlights and distinctive features for the Louisiana program:
- 30% Transferable tax credit base rate. Note: this is lowered to 25% if you do not include an approved Louisiana promotional graphic in your credits.
- Both resident and non-resident labor qualifies towards the credit.
- Additional 15% on base investment for state-certified productions based on a screenplay meeting Louisiana ownership criteria.
- Additional 15% on state-certified productions using music that meets Louisiana ownership criteria (applies to musical expenditures only).
- Additional 10% Louisiana payroll tax credit for using in-state labor (Louisiana residents). This additional 10% applies only to the first $3 Million dollars for W2 workers. Not applicable on loan-outs.
- -$300,000 Minimum in-state spending to qualify. Production companies can include up to three separate programs to hit the minimum spend amount.
- Qualified expenditures include Louisiana payroll fringes, equipment, travel (in-state and out-of-state), hotels, completion bonds, working meals, and marketing costs.
- Louisiana transferable tax credits can be applied to tax liability in the state, transferred (sold) to other Louisiana taxpayers, or sold back to the State at 85% face value. 5-year carry forward on tax credits.
- No residency requirements for labor, vendors, etc.
- Must include 6% withholdings for loan-outs to qualify.
The New York film tax incentive program uses non-transferable, refundable tax credits—which offers a little less flexibility than other State film incentive programs for “cashing out”. However, the program features a fairly high base rate along with some unique uplifts that make it particularly beneficial for production companies with postproduction work. Here’s an overview on the parameters and components of the New York film tax incentive program:
- 30% Base rate non-transferable, refundable tax credits for production and postproduction on qualified projects. No carry forward on tax credits.
- 5% Additional rate for postproduction projects taking place in upper New York (outside of the MCTD).
- Up to 10% additional credit on qualified labor in specific areas. There is a $5 Million cap on the credit increase, and the additional credit is set to end in 2019. A map of qualifying areas in New York can be found here: http://esd.ny.gov/businessprograms/Data/Film
- Qualified projects: feature films, television series (including relocated television series), TV pilots, and TV films.
- There is no per-project cap or cap on qualified labor expense. However, there is a program cap of $420 million per year.
- The postproduction tax credit program is considered separate and has a yearly program cap of $25 million.
- Only BTL labor counts towards qualified expenditures.
- No required loan-out registration or loan-out withholdings.
- A screen credit is required in order to qualify.
- If the total tax credit refund on a project is $1-$5 Million, the credit will be claimed in equal, yearly installments over two years. $5 Million+ tax credit will be claimed in equal, yearly installments over 3 years.
- Qualified expenditures include: travel (in-state only), set construction, postproduction, and payroll handling fees.