This material is for informational purposes only and should not be viewed as tax advice with respect to our production activities. For such advice, you should consult with your tax adviser. For Investors and Advisers - the information below provides more details for Section 181 U.S. Federal Income Tax break as well as Pennsylvania state tax credit.
How your investment is assured a return of 50-100% for Film & Television production in the United States
(This summary is not to be construed as a securities offering and is intended for research and information purposes only)
If you are an individual Investor, Private Equity Firm, Hedge Fund, HNW Investor, Asset Manager, Fund Of Fund, Or Regional Company and are looking for a high-yield, absolute-return alternative investment that also can generate substantial Federal and State Tax Incentives, Credits, Cash Rebates, while at the same time be part of a structured film finance opportunity that can offer an absolute return of 50-100% on capital before revenues, offer long-term multiple exit strategies, and liquidity options, then continue reading.
PRODUCER'S STATEMENT:
“Investing in our motion picture projects includes a level of safety investors haven’t experienced before in the entertainment industry. We’ve taken the time to research recent tax legislation, and we’ve hired an attorney who can explain how your investment is 100% tax deductable. We’ve gone through the steps to make sure the IRS will recognize your deduction. Therefore, you’re risking approximately 50-60 cents on the dollar. How many investments in this market and in this economy, can promise that a significant portion of your money is completely protected? After reviewing the tax deduction information on this website, we will be happy to share with you how we’re going to make an exceptionally good movie with attractive profit potential"
NOTE FOR INVESTORS:
The first thing you as an investor want to know is how an entrepreneur will protect your money. Once that issue is addressed then you want to hear about profits and exits. Investors invest for a variety of reasons, but a unifying concept for all investors is simple. Many Investors are fearful of losing their money.
This fear often overrides the desire for profits. The fear of losing money is a stronger motivator than the desire for profits.
Most entrepreneurs assume an investor wants to hear about a massive ROI (return on investment). They start talking about exit strategy (the method in which investors extract their capital from a successful venture). This is putting the cart before the horse.
Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers), to greatly minimize his or her risk on what would ordinarily be a somewhat risky investment. For example, if a tax payer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Pennsylvania which has a tax credit up to 25%, an investor will be eligible to recapture seventy five percent (60%) of their investment in a qualifying production. This recapture is realized before the film is even released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.
MINIMIZING INVESTOR RISK with United States Film Subsidies
The American Jobs Creation Act Of 2004 and the 2004 enactment of Section 181, marked an unprecedented change in U.S. policy toward the phenomenon known as "Runaway Production" for the film industry. Hollywood, like many American industries, had grown tired of the high cost of labor and taxes in the United States. Canada and other countries identified the potential financial benefit and took advantage by successfully luring American film and television production onto their soil, taking enormous amounts of production dollars with them. The government’s reaction was to include Section 181 within the American Jobs Creation Act of 2004. Section 181 offers tax incentives for investors in independent film and television productions produced within the United States.
SECTION 181: You’ve heard of farming subsidies. A few years back savvy film lobbyists created subsidies for the film industry. As they outlined the dangers of runaway film production to Canada, Eastern Europe and Australia, Congress passed legislation that resulted in Section 181 of the IRS Tax Code.
Put simply, Section 181 states that investment in a motion picture shot in the US is 100% tax deductable for the investor in the same year invested.
Under Section 181 an investor may deduct the money which is invested in a film or television production from his or her passive income earned in the same year. If the investor is actively involved in the operation of the production, he or she may deduct the amount of investment from all active income earned in the same year. Productions with budgets below $15,000,000 (up to $20,000,000) which have at least seventy-five percent 75% of its production completed within the United States qualify under Section 181. Investors can be either individuals or businesses.
Here are some Investor broad strokes for the Section 181 Tax Deduction:
-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 budget cost.
- 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 businesses.
- 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.
WHAT IT MEANS FOR INVESTORS:
Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers) to greatly minimize his or her risk on what would ordinarily be considered a risky investment. For example, if a tax payer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Michigan which has a tax credit up to forty percent (40%), an investor will be eligible to recapture seventy five percent (75%) of their investment in a qualifying production. This recapture can berealized before the film is released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.
GOVERNMENT SPONSORSHIP: State Film Incentives passed onto Investor
In addition to the Section 181 tax deduction, the motion picture can be filmed in a state with rebates or transferrable tax credits. If the film Producers elect to do so, they can pass this subsidy onto our investors upon release of the rebate. As an example, if a $1,000,00.00 movie shoots in Pennsylvania and spends every penny in the state (or, through a pass through corporation that pays state taxes) the state of Pennsylvania will issue a 25% tax rebate, worth approximately $250,000.00, that can be sold for a little less than face value. That check can then passed onto to the investors. This is a considerable risk minimization for the Investor. With state film incentives alone, the investor is only risking 75 cents (average) on the dollar if the project is produced in Pennsylvania. In essence, the investor risks 50 to 75 cents on the dollar and the government is picking up the balance on a delayed time table. There are currently 38 states in the United States that have some type of tax credit or rebate plan. We are planning to film Echoes in Pennsylvania.
MARRIAGE of Gov't Sponsorship and Section 181:
Combine Section 181 federal tax break with a state film tax rebate.
By coupling the two together you can reduce an investor’s risk by 50-100%. Think about that. It does depend on how much the investor earns annually, how much they’ve invested in the movie and where the movie will be produced…but, it is possible that an investor could invest in a motion picture…and risk nothing.Conservatively, the risk could be 50% of your investment. That means for investing $100,000.00 you are assured to recoup $50,000.00 in tax deductions and rebates. Depending on the math and the possible film pre-sales to foreign territories, Investors could recoup 100% of their investment before the film is distributed.
Here is an example. The movie needs 2,000,000. Investor X wants to invest 1,000,000 into the film. Their annual income is 5,000,000 and they have 10M in assets. Their annual taxes are approximately 1.75 M (35% tax bracket) and they have absolutely no tax write-offs to take advantage of. If they invest $1,000,000 they’ll be risking $650,000.00 investment in the motion picture, and will have saved themselves approximately $350,000 in federal income taxes. So, that means the investor is risking 65 cents on the dollar. But, wait! The movie is going to shoot in the state of Pennsylvania. PA will give you a 25% rebate. That means they’ll grant you a 25% tax rebate on your gross spend in the state, minus tax rebate broker fees. That’s around $230,000. This rebate can then go to the investors. Investor X will now be getting approximately $580,000 in tax deductions and rebates from the Federal Government and the State of Pennsylvania for their $1,000,000 investment in the motion picture. Under this scenario, Investor X's actual risk is less than 50 cents on the dollar. And the upside is the investor will receive revenues from world-wide distribution sales and licenses of the motion picture. Additionally, 9% of the future gross revenues from each Section 181 qualified project is non-taxable under Section 199.
INVEST BEFORE SECTION 181 EXPIRES 12/31/2011:
In order to optimize this opportunity and be successful, interested investors should contact qualified film producers with their interest. A qualified accountant and/or attorney are always a good idea when utilizing the benefits of Section 181.
We are happy to speak with serious or curious investors and work with you to maximize investment dollars to produce commercially viable motion pictures that will profit in the marketplace. For questions related to Section 181 or equity investment for film and television production please contact Stephen Felt by using the Contact Us tab or Attorney Hal "Corky" Kessler @ (312) 346-1460.
Domestic Film Production Incentive ProgramRevised Section 181 of the Internal Revenue CodePRIMARY BENEFITSQualifying Film Expenses Immediately Deductible. (Courtesy of the DGA.)Producers or active financial participants in qualifying film and television productions may elect to immediately deduct the cost of qualifying film expenditures in the year the expenditure occurs.
Section 181 Extensions for 2010-2011:
SEC. 744. SPECIAL EXPENSING RULES FOR CERTAIN FILM AND TELEVISION PRODUCTIONS.
(a) In general.-Subsection (f) of section 181 is amended by striking "December 31, 2009" and inserting "December 31, 2011". 111th Congress, House and Senate: (.pdf files)
LINKS
Pennsylvania Tax Rebate Info
IRS Tax Code 181 Link
IRS Code and Scenarios
(This summary is not to be construed as a securities offering and is intended for research and information purposes only)
If you are an individual Investor, Private Equity Firm, Hedge Fund, HNW Investor, Asset Manager, Fund Of Fund, Or Regional Company and are looking for a high-yield, absolute-return alternative investment that also can generate substantial Federal and State Tax Incentives, Credits, Cash Rebates, while at the same time be part of a structured film finance opportunity that can offer an absolute return of 50-100% on capital before revenues, offer long-term multiple exit strategies, and liquidity options, then continue reading.
PRODUCER'S STATEMENT:
“Investing in our motion picture projects includes a level of safety investors haven’t experienced before in the entertainment industry. We’ve taken the time to research recent tax legislation, and we’ve hired an attorney who can explain how your investment is 100% tax deductable. We’ve gone through the steps to make sure the IRS will recognize your deduction. Therefore, you’re risking approximately 50-60 cents on the dollar. How many investments in this market and in this economy, can promise that a significant portion of your money is completely protected? After reviewing the tax deduction information on this website, we will be happy to share with you how we’re going to make an exceptionally good movie with attractive profit potential"
NOTE FOR INVESTORS:
The first thing you as an investor want to know is how an entrepreneur will protect your money. Once that issue is addressed then you want to hear about profits and exits. Investors invest for a variety of reasons, but a unifying concept for all investors is simple. Many Investors are fearful of losing their money.
This fear often overrides the desire for profits. The fear of losing money is a stronger motivator than the desire for profits.
Most entrepreneurs assume an investor wants to hear about a massive ROI (return on investment). They start talking about exit strategy (the method in which investors extract their capital from a successful venture). This is putting the cart before the horse.
Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers), to greatly minimize his or her risk on what would ordinarily be a somewhat risky investment. For example, if a tax payer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Pennsylvania which has a tax credit up to 25%, an investor will be eligible to recapture seventy five percent (60%) of their investment in a qualifying production. This recapture is realized before the film is even released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.
MINIMIZING INVESTOR RISK with United States Film Subsidies
The American Jobs Creation Act Of 2004 and the 2004 enactment of Section 181, marked an unprecedented change in U.S. policy toward the phenomenon known as "Runaway Production" for the film industry. Hollywood, like many American industries, had grown tired of the high cost of labor and taxes in the United States. Canada and other countries identified the potential financial benefit and took advantage by successfully luring American film and television production onto their soil, taking enormous amounts of production dollars with them. The government’s reaction was to include Section 181 within the American Jobs Creation Act of 2004. Section 181 offers tax incentives for investors in independent film and television productions produced within the United States.
SECTION 181: You’ve heard of farming subsidies. A few years back savvy film lobbyists created subsidies for the film industry. As they outlined the dangers of runaway film production to Canada, Eastern Europe and Australia, Congress passed legislation that resulted in Section 181 of the IRS Tax Code.
Put simply, Section 181 states that investment in a motion picture shot in the US is 100% tax deductable for the investor in the same year invested.
Under Section 181 an investor may deduct the money which is invested in a film or television production from his or her passive income earned in the same year. If the investor is actively involved in the operation of the production, he or she may deduct the amount of investment from all active income earned in the same year. Productions with budgets below $15,000,000 (up to $20,000,000) which have at least seventy-five percent 75% of its production completed within the United States qualify under Section 181. Investors can be either individuals or businesses.
Here are some Investor broad strokes for the Section 181 Tax Deduction:
-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 budget cost.
- 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 businesses.
- 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.
WHAT IT MEANS FOR INVESTORS:
Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers) to greatly minimize his or her risk on what would ordinarily be considered a risky investment. For example, if a tax payer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Michigan which has a tax credit up to forty percent (40%), an investor will be eligible to recapture seventy five percent (75%) of their investment in a qualifying production. This recapture can berealized before the film is released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.
GOVERNMENT SPONSORSHIP: State Film Incentives passed onto Investor
In addition to the Section 181 tax deduction, the motion picture can be filmed in a state with rebates or transferrable tax credits. If the film Producers elect to do so, they can pass this subsidy onto our investors upon release of the rebate. As an example, if a $1,000,00.00 movie shoots in Pennsylvania and spends every penny in the state (or, through a pass through corporation that pays state taxes) the state of Pennsylvania will issue a 25% tax rebate, worth approximately $250,000.00, that can be sold for a little less than face value. That check can then passed onto to the investors. This is a considerable risk minimization for the Investor. With state film incentives alone, the investor is only risking 75 cents (average) on the dollar if the project is produced in Pennsylvania. In essence, the investor risks 50 to 75 cents on the dollar and the government is picking up the balance on a delayed time table. There are currently 38 states in the United States that have some type of tax credit or rebate plan. We are planning to film Echoes in Pennsylvania.
MARRIAGE of Gov't Sponsorship and Section 181:
Combine Section 181 federal tax break with a state film tax rebate.
By coupling the two together you can reduce an investor’s risk by 50-100%. Think about that. It does depend on how much the investor earns annually, how much they’ve invested in the movie and where the movie will be produced…but, it is possible that an investor could invest in a motion picture…and risk nothing.Conservatively, the risk could be 50% of your investment. That means for investing $100,000.00 you are assured to recoup $50,000.00 in tax deductions and rebates. Depending on the math and the possible film pre-sales to foreign territories, Investors could recoup 100% of their investment before the film is distributed.
Here is an example. The movie needs 2,000,000. Investor X wants to invest 1,000,000 into the film. Their annual income is 5,000,000 and they have 10M in assets. Their annual taxes are approximately 1.75 M (35% tax bracket) and they have absolutely no tax write-offs to take advantage of. If they invest $1,000,000 they’ll be risking $650,000.00 investment in the motion picture, and will have saved themselves approximately $350,000 in federal income taxes. So, that means the investor is risking 65 cents on the dollar. But, wait! The movie is going to shoot in the state of Pennsylvania. PA will give you a 25% rebate. That means they’ll grant you a 25% tax rebate on your gross spend in the state, minus tax rebate broker fees. That’s around $230,000. This rebate can then go to the investors. Investor X will now be getting approximately $580,000 in tax deductions and rebates from the Federal Government and the State of Pennsylvania for their $1,000,000 investment in the motion picture. Under this scenario, Investor X's actual risk is less than 50 cents on the dollar. And the upside is the investor will receive revenues from world-wide distribution sales and licenses of the motion picture. Additionally, 9% of the future gross revenues from each Section 181 qualified project is non-taxable under Section 199.
INVEST BEFORE SECTION 181 EXPIRES 12/31/2011:
In order to optimize this opportunity and be successful, interested investors should contact qualified film producers with their interest. A qualified accountant and/or attorney are always a good idea when utilizing the benefits of Section 181.
We are happy to speak with serious or curious investors and work with you to maximize investment dollars to produce commercially viable motion pictures that will profit in the marketplace. For questions related to Section 181 or equity investment for film and television production please contact Stephen Felt by using the Contact Us tab or Attorney Hal "Corky" Kessler @ (312) 346-1460.
Domestic Film Production Incentive ProgramRevised Section 181 of the Internal Revenue CodePRIMARY BENEFITSQualifying Film Expenses Immediately Deductible. (Courtesy of the DGA.)Producers or active financial participants in qualifying film and television productions may elect to immediately deduct the cost of qualifying film expenditures in the year the expenditure occurs.
- Qualified film and television productions include any film or video tape production of a motion picture or television show whose costs would otherwise be required to be capitalized but for section 181. Only the first 44 episodes, including the pilot production, of a television series are eligible under the law.
- In the case of a film co-produced by multiple investors, the deduction for qualifying expenditures must be allocated among the owners of the film in a manner that reasonably reflects each owner’s proportionate investment and economic interest in the film.
- Qualified films do not include sexually explicit productions as defined in section 2257 of title 18 of the U.S. Code.
- A higher expenditure cap of $20 million applies to productions the aggregate costs of which are “significantly incurred” in: a) areas eligible for designation as a low-income community under the New Markets Tax Credit program,1 or b) areas eligible for designation by the Delta Regional Authority as a distressed county or isolated area of distress.
- As defined by the New Markets Tax Credit program, qualifying low-income communities include any census tract if (a) the poverty rate for such tracts is at least 20%; or (b) (1) in the case of census tracts not located within a metropolitan area, the median family income for the tract does not exceed 80% of statewide median family income, or (2) in the case of a tract located within a metropolitan area, the median family income for the tract does not exceed 80% of the greater of statewide median family income or the metropolitan area median family income. Information on qualifying communities can be found at: http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=5
- A list of areas eligible under the Delta Regional Authority statute as distressed counties or isolated areas of distress can be found at:
http://www.dra.gov/about/maps.aspx - The IRS temporary regulations (T.D. 9312) outline two alternative tests to determine if costs are “significantly incurred” in qualifying low-income areas. The first test is based upon production costs and establishes a 20% threshold for the test. It compares production costs incurred in first-unit principal photography that takes place in a designated area to all productions costs incurred in first-unit principal photography. This does not include preproduction, editing and post-production costs. The second test is based upon the number of days of principal photography. If at least 50% of the total days of principal photography take place in the designated area, the production will be deemed to satisfy the significantly occurred test.
- Qualifying compensation includes payments for services performed in the United States by actors, directors, producers, and other relevant production personnel. Compensation does not include participations and residuals.
Section 181 Extensions for 2010-2011:
SEC. 744. SPECIAL EXPENSING RULES FOR CERTAIN FILM AND TELEVISION PRODUCTIONS.
(a) In general.-Subsection (f) of section 181 is amended by striking "December 31, 2009" and inserting "December 31, 2011". 111th Congress, House and Senate: (.pdf files)
LINKS
Pennsylvania Tax Rebate Info
IRS Tax Code 181 Link
IRS Code and Scenarios
