Tax Law Extension Provides Major Tax Benefits for Investors of Film and Television Productions
by Carole Dean
In my recent interview with entertainment lawyer Corky Kessler, he was excited to tell us that he helped reinstate IRS Revenue Code Section 181 for five more years. The reinstated Section 181 offers tax benefits for digital media producers. This tax law is most beneficial for features and documentaries with budgets up to 15 million or 20 million. It will greatly help producers of those projects attract financing.
Expense Production Costs
The reinstated Section 181 is straightforward. It’s the same law that was created for the Jobs Act of 2004. It’s been extended and approved for five years until 2025. It allows investors in a media production to expense all production costs when it is paid. This creates a loss for the production which creates an immediate tax benefit.
The rules are that 75% of the costs of the film or television project must be spent and performed in the United States. The balance of 25%, can be shot anywhere. This means you can take advantage of other countries tax deductions like Canada or Germany. Many countries have good tax incentives for you to shoot in their country.
US Tax law 168 is still in effect so you have a choice of using the reinstated section 181 or the 168. The 168 has no limit on the size of the budget and you must “Put the film in service” to get the write off. Those are two main differences and you can only use one of these, 168 or 181.
Cover Your Investor’s Money
“The good thing about the 181 is that I can cover the investor’s money.” Corky explained. “I can tell the investor that I can cover almost every dollar that the investor puts in. I can cover 70 to 76 cents on every dollar, which is amazing. There’s no other business that you can cover their investment, 70 to 76 on the balance.”
The 181 law allows up to a $15 million loss. Or you can go up to a $20 million loss if you spend a significant amount in a low-income or depressed area. For the person who has a 15 or $20 million dollar movie or even lower, the 181 is still better and you can grandfather your films.
Need Just One Day of Photography to Get Grandfathered In
“So, as soon as you have a screenplay, “ Corky says, “ and you have a summary budget, you are ready. You do one day of photography with some dialogue that doesn’t have to remain in the project. And you need your investment documents, which I can prepare, but you don’t need investors. Once you have these things, you can get grandfathered into 181 forever. That will never expire.
“Now when your film is grandfathered, you can change your screenplay or teleplay. If it’s television, that’s acceptable. You want one day of photography with some dialogue. You can shoot it on your iPhone. It doesn’t matter, and you don’t have to use it in the project. Also, the investor documents that I prepare, those can change. Once you have these set up, you are grandfathered forever. There’s no end date.”
How to Learn More and Take Advantage of Reinstated Section 181 for Your Film
Filmmakers that want to know more about Section 168 or the 181 benefits and how to grandfather their films, can contact Corky via email at Corkykessler@aol.com or on his cell phone at 312-925-2110.
For more information on both the 168 and 181 see this blog: https://fromtheheartproductions.com/how-to-get-your-film-funded-with-new-tax-law
Carole Dean is president and founder of From the Heart Productions; a 501(c)3 non-profit that offers the Roy W. Dean Film Grants and fiscal sponsorship for independent filmmakers. She hosts the weekly podcast, The Art of Film Funding, interviewing those involved in all aspects of indie film production. Her new class “How to Fund Your Film” is available on Vimeo on Demand. She is also the author of The Art of Film Funding, 2nd Edition: Alternative Financing Concepts. See IMDB for producing credits.