PRODUCTION INCENTIVES

• New York State Budget Signed
• Highlights of Incentive Changes

A fiscal year 2010-2011 budget has been passed by the legislature and signed by Governor Paterson. Included in the budget is $2.1 billion in new film incentive funding, or $420 million a year for 2010-2011 and each of the following four years (through 2014-2015). Up to $7 million of that amount may be allocated annually to the new 10% post-production credit, which is available to projects not eligible for the 30% production credit.

The new legislation contains: (1) special rules for accessing the new funding ("pool 2"), (2) additional requirements to meet the definition of a "qualified film production facility," (3) a new requirement for 10% of principal photography shooting days to be in a qualified facility (except for qualified independent film production companies and pilots); (4) a 10% post-production credit with related definitions; (5) information sharing provisions; and (6) rules to ensure promotion of the state and compliance with local sales and use tax requirements. Please see our highlights of the new legislative changes below and view the New York jurisdiction page on our website.

The State legislature is now out of session until January 2011, unless an extraordinary or special session is called. The proposed legislation to modify the New York City incentive has "died," and will have to be re-introduced in the next session.

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The new film incentive legislation is contained in A09710/S6610-C, as amended by A11679/S8465, both of which were signed by Governor Paterson on August 4, 2010, according to the legislature's website.

FUNDING

• $420 million a year is provided for 2010 through 2014 ("additional pool 2");
• Up to $7 million of that amount can be allocated to the new post production credit;
• If the annual "pool 2" allocation is depleted by the production credit and funds remain unallocated for the post production credit, those funds may be reallocated to the production credit;
• Pool 2 funds cannot be claimed before the later of: (i) the taxable year the project is complete, or (ii) the taxable year immediately following the allocation year for which the credit is allocated by the Governor's Office for Motion Picture and Television Development ("Governor's Office").

DEFINITIONS

• "Qualified independent production company" is:
• Principally engaged in the production of a qualified film,
• With a maximum budget of $15 million,
• Controls the film during production,
• Is not a publicly traded entity OR owned more than 5% by one.
• "Qualified film production facility" must contain:
• At least one sound stage,
• Minimum of 7,000 square feet of contiguous production space,
• Sound proofing of "NC" 30 or better,
• Heating and air conditioning for shooting without the need for supplemental units,
• A permanent grid with sufficient built-in electric service for shooting without the need for generators,
• Column-free with a clear height of 16' or more under the permanent grid,
• An armory owned by NYS/NYC will not be considered to be a "film production facility" unless it meets the criteria above or is used by a qualified independent film production company OR
• Upon petition to the Governor's Office establishing that no qualified film production facilities are "available" in NYC on the estimated start date for principal photography.
• "Qualified post production costs":
• Incurred on a "qualified film" in a "qualified post production facility,"
• Costs of production of original content using traditional, emerging and new technology,
• Costs for picture sound/music editorial, visual effects, animation, etc.,
• Exclude costs of editing of previously produced content.
• "Qualified post production facility":
• Post production facility in NYS

PROJECT CRITERIA

• Except in the case of a "qualified independent film production" company or pilot, at least 10% of the total principal photography shooting days must be spent at a qualified facility;
• All applicants must include:
• A NY promotional video approved by the Governor's Office in each DVD or other media for the secondary market OR
• A statement of support from the Governor's Office AND an approved logo in the end credits, AND
• Certify that it will purchase taxable tangible property and services only from companies registered to collect and remit NY state and local sales and use taxes
• "Qualified production costs" do not include post production costs unless the portion of the tangible property and services in NY equal or exceed 75% of the total post production costs within and outside NY.

INFORMATION SHARING/EXCHANGE

• New disclosure provisions regarding information contained on the application and claim forms.

POST-PRODUCTION CREDIT

• 10% of qualifying "post production costs,"
• Excluding costs claimed for or used in the calculation of any other credit,
• Annual allocation capped at $7 million,
• To be eligible
• Qualified post production costs at a qualified post production facility must be greater than or equal to 75% of the total post- production facility costs.
• Credit may be claimed in year of completion
• Refund of 50% allowed in first year,
• Balance paid without interest in the following year.

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