Film Tax Credits: A Complete Guide

The Film Tax Credit Program is designed to provide financial assistance in the form of a tax credit for certain individuals and businesses involved with film production.

In order to qualify, you must be an individual who is not primarily engaged in the business of producing films, or a corporation that does not have more than 95% of its assets devoted to producing films.

You also need to be engaged in qualified production activities anytime during your taxable year.

What Are Film Tax Credits?

Qualified productions are short-form productions (less than 30 minutes) and long-form productions (over 30 minutes).

The amount of the tax credit varies according to how much money was spent on qualified production activities within California as well as how many jobs were created by those expenditures.

Film Tax Credits

As with most other types of incentives, film tax credits can provide job creation in the areas of special skills, experience, and training.

Special skills include professional photographers, musicians, and writers.

Incentives for film job creation may also be granted for those who start or expand businesses in their own areas of expertise. It is important to note that film industry-related incentives are different from those for corporate and private job creation.

To encourage film job creation in a community, various incentives are available.

Many times, people in the film industry and the local community benefit from one another.

For instance, an individual may obtain a tax credit to start a small photography studio.

That individual would not have access to the capital required to do so.

But, the same individual could later use that capital to create jobs for other individuals who might want to take up photography as a hobby. These individuals would then be able to redeemable tax credit payments for future years.

There are many ways in which the government provides film tax credits. However, it is important for individuals to understand how the tax benefits play into the equation of economic growth.

   

Film Tax Credits – It’s All About Revenue

As movie production increases, so too does the amount of revenue realized from these activities. The more movies produced means more tax revenue is realized.

Also, the larger the number of productions – generally speaking – means the greater the economic impact on the community.

When looking at the basics of how the film tax credits work, it is easy to see how they are so beneficial to the community.

But what most individuals don’t realize is that there is more than just one way to gain from these incentives.

In addition to the production level of the industry, there are several other variables that are important in assessing the productivity of these activities.

The amount of money spent on individual productions, for example, is an important component in this equation.

This is why it is also included in the calculation of the film tax credits.

Because of this, it is no surprise that there are often a number of individuals who choose to take advantage of the film tax credits in Massachusetts.

If you have any plans to shoot in the state, you may want to take a close look at the incentives that are available to you.

Massachusetts is a popular location for film production because of the many professional and amateur producers that are based here.

Massachusetts when making their films so it makes sense for them to take advantage of the tax credits available in the state.

The film tax credits in Massachusetts can either be used to produce or sell tax credits. If you plan on using the incentives to produce your movies, you should make sure that you know what is required.

Film Tax Credits Requirements

There are several requirements that must be met before you can start getting the reductions. Most of the time the rebate will be applied to first-time expenditures.

This means that if you spend money on a certain activity that has to be done to get the rebate, you will have to pay taxes on that expenditure even though it was eligible to receive a rebate the first time around.

If you plan on filming in Massachusetts but are not interested in getting tax credits, you may still want to consider a Massachusetts Resale Tax Credit.

This is especially true if you have purchased properties in the state that you are going to want to use during the course of your movie production.

For example, if you purchased a condo in West Springfield and decided that you want to buy a house in the same neighborhood, but don’t have the money to purchase the house before you make your film, you can redeemable a tax credit.

In this case, you can use that money towards the payment of the taxes on the house that you purchased in the first place.

The advantage of this is that it is a refund and not a production expenditure.

The Economist Reviews State Film Tax Credit Programs

With the recent upsurge in filmmaking, many states have been eager to attract productions with lucrative tax incentives.

However, there are still many questions about how successful these programs really are.

For example:

The Economist has found that for every $1 a state invests in attracting film and television production they receive between $3-$5 of economic benefits back.

Some studies say that more than 70% of all jobs generated by film and TV projects go to residents living outside the state where filming takes place.

There is no clear consensus on whether or not policymakers should allocate funds for these programs because there isn’t enough research available yet.

What Is Film Tax Relief?

Film production is a complicated process.

Tax reliefs are designed to make it easier for the industry to create and produce films in Britain, with all of the benefits that entail.

The film tax relief is a government incentive offered by HMRC in the UK (Her Majesty’s Revenue and Customs) which has been available since 2007.

It offers up to 25% off on qualifying expenditure incurred in Britain as long as certain criteria are met.

Film Tax Credits Incentives

Film tax credits are incentives that are given to filmmakers in the form of a refundable tax credit.

These credits are given by state and local governments, as well as other regional entities such as counties or zones.

The goal is to promote economic development through film production and filmmaking in general.

Motion Picture Association Fails To Refute Damaging Film Tax Credit Study

The Motion Picture Association (MPA) of America has failed to refute a damning new study that shows film tax credits are ineffective at creating jobs and boosting the economy.

The report by the Washington-based Tax Foundation found that every government dollar spent on film incentives creates just $1.11 in economic activity – meaning, for every job created by such programs there is a cost of more than $200,000 per year.

Alaska Ends Film Tax Credit Program

In the last few weeks of 2015, Alaska ended its film tax credit program.

This is a huge blow to production in the state and has caused an outcry from many people within the industry.

The state was one of only six that offered such incentives for filming, so it’s a big loss to filmmakers who were hoping to shoot there.

California Triples Film Tax Credit

California is tripling the film tax credit program as a way to combat runaway productions. California’s production industry has been in decline for years, but Gov.

Jerry Brown signed Assembly Bill 1839 into law earlier this month and it takes effect immediately.

AB1839 will increase the state’s tax credits from $100 million per year to $330 million annually through 2022, which will hopefully help bring more projects back home so that local actors, crew members, producers, and other professionals can work on them.

More Film Tax Incentives Not A Solution For California

In a recent article from the LA Times, writer Steve Lopez argues that more film tax incentives will not solve California’s high poverty rate.

In this article, he compares California to Texas which has been able to create jobs and grow its economy with fewer taxes than California.

He also mentions how many Californians are leaving for other states because of the lack of opportunities in this state.

Total Tax Credits Allocated

Tax credits are a portion of your income that you can use to reduce the amount of taxes owed. In order to receive tax credits, it is necessary to file an income tax return.

There are two types of tax credits:

• refundable, and
• nonrefundable.

A refundable credit will be given as cash if the taxpayer’s total tax due is less than or equal to their total earned credit amount for the year; otherwise, they will not get anything back.

Non-refundable credits cannot reduce your federal taxes below zero so you may need additional sources of taxable income in order to utilize these deductions fully.

Maryland Film Tax Credits: A House Of Cards

The Maryland Film Tax Credit has been a boon for the state, but it’s also created a competitive environment that is unsustainable.

In order to keep up with other states like Georgia and New York, Maryland would have to double its tax credit from $7 million per year to at least $14 million per year.

In 1995, only one film was made in Baltimore City; this number has increased exponentially and the industry now generates over $300 million annually for the city’s economy.

The State of Maryland needs to take steps now so that it can continue benefiting from this booming industry in years to come.

Maryland Governor Touts Benefits Of Film Tax Credits, Despite Evidence To The Contrary

In spite of the evidence to the contrary, Maryland Governor Larry Hogan (R) is touting film tax credits as a good thing for his state.

A recent study by USC professor Tom Schatz has shown that states with higher levels of economic inequality are more likely to have lower per-capita incomes and higher rates of poverty.

This is because earnings from low-income jobs tend to be spent on necessities rather than saved or invested in ways that could increase future income.

Inequality also increases disparities in education, housing, and healthcare access – all factors that contribute to success later in life.

So why is Gov. Hogan so eager for these credits? The answer may lie in the fact that they are funded through an increased sales tax rate.