by Carole Dean
Our award-winning podcast, The Art of Film Funding is dedicated to exploring the world of film financing and tax incentives for filmmakers. We recently interviewed the renowned entertainment lawyer Corky Kessler. He is directly responsible for shepherding the tax law 181 and helping to create the new tax law 168. The purpose of this interview was to determine how and when you use these lucrative tax laws created for features, theater, and documentary filmmaking.
Currently Corky Kessler works at Filmojy, whose mission is to support film makers by providing guidance and funding for movies in the United States under section 181 and 168.
Grandfathering under section 181 of the U S Tax Law
To use section 181, you need to qualify and you must meet specific requirements. Corky explains you need a screenplay, summary budget, one day of photography with dialogue, and investor’s documents. Once you have these you can be grandfathered under section 181 for life. That way you can shoot whenever you get the funding, there is no expiration date.
Corky says the best countries for film shoots with attractive incentives are England, France, Germany, and Canada. This is where Corky and FILMOJY can help filmmakers with presales and navigating the process of shooting in these countries.
The highest state rebates currently are New Jersey, New Mexico, Georgia, and Louisiana.
Understanding section 168 versus section 181
Corky informed us that section 168 and section 181 under the US tax law are both beneficial. Section 181 offers more advantages for filmmakers with budgets of 15 to 20 million. Section 168 has certain limitations and requires timely action for maximum benefits. Your benefits are reduced by 20% for each year you don’t screen your film. The law says that investor’s write off happens when you put your film in service and Corky says that means when you screen it to an audience. 168 requires that you screen the film in the year you make it to get 100% write off and each year that passes you lose 20% of that write off. Section 168 has no upper limit; it can be a $100 million budget and you still get your U.S. tax law return.
Raise 25% of the funding and get the balance with tax and state credits.
Corky gave an example of investors who are 35% taxpayers. With the 181 they can get a 35% reduction on their taxes. Now when you shoot in one of these states with 40% rebates New Jersey, New Mexico, and Louisiana, you can guarantee your investor’s that they are covered by $0.75 on every dollar spent. There is no other business in which you can do this. You’ve got 75% of your investment back before you even start and if you can get presales, you can get 100% back.
For more questions on this subject, you can call Corky at (312)925-2110. Tell Corky that you read this blog or heard our interview, and he will take good care of you. He’s one of our great film funding, tax specialist attorneys in the film industry. Corkykessler@aim.com
You can listen to the full interview here:
She is creator and instructor of Learn Producing: The Ultimate Course for Indie Film Production. 26 classes which will teach indie filmmakers how to produce their films.
She hosts the weekly podcast, The Art of Film Funding, interviewing those involved in all aspects of indie film production. She is also the author of The Art of Film Funding, 2nd Edition: Alternative Financing Concepts. See IMDB for producing credits