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Section 181 - Federal Film Tax Incentive:

  The “Fiscal Cliff” bill passage which occurred in the early hours of New Years Day (2013) contains an extension of the IRS code Section 181 (Deductions for Qualified Film & Television Production Costs) through the end of 2013.

In an earlier blog I gave a very layman's explanation of how Section 181 works for you as a producer trying to raise financing - i.e. pitching those who have the right kind of "passive income" to use Section 181 for a tax write off.

You can see the blog here http://wp.me/pb8cT-4t

The DGA and the IFTA put together a good brochure - you can see it at this link http://www.film.ca.gov/res/docs/pdf/Section-181-12-4-08.pdf

I have had several requests about this, so I know a lot of you are looking forward to making use of it in your pitching to prospective financiers.

Here's some more items of interest:

  • 100% of the motion picture costs are deductible in the same year of investment.
  • 75% of the motion picture must be shot in the US to qualify for Section 181.
  • There is a 15 to 20 million dollar budget cap.
  • There is no minimum film production budge-TV pilots, TV episodes (up to 44), short films, music videos and feature films all qualify for Section 181-
  • Section 181 can be applied to active income or passive income. -
  • Investors can be either individuals or businesse-
  • Section 181 is retroactive.-
  • There is no expectation for film distribution or film completion.-
  • The motion picture’s corporation issues Schedule K-1’s to the investors so they can take advantage of Section 181.

Some more IRS links:

  1. This is where it all started, Feb 9, 2007:  http://www.irs.gov/pub/irs-regs/td9312.pdf
  2. This is the first regulation, easier to read, dated Mar 19, 2007:  http://www.irs.gov/irb/2007-12_IRB/ar10.html
  3. This is a ruling by the IRS dated Oct 19, 2011, where it says that the previous wording above is the still applicable:   https://www.federalregister.gov/articles/2011/10/19/2011-26972/deduction-for-qualified-film-and-television-production-costs
  4. Way down on page 47 of this legislation it says "EXTENSION OF SPECIAL EXPENSING RULES FOR CERTAIN FILM AND TELEVISION PRODUCTIONS: (a) IN GENERAL.—Subsection (f) of section 181 is amended by striking ‘‘December 31, 2011’’ and inserting 25 ‘‘December 31, 2013’ - so, it's legal and still in the same wording - at least for 2013. http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf

According to Daily Variety the provision is retroactive to Kanuary 1, 2012 and runs to the end of 2013.



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