PRODUCTION INCENTIVES

• What's New
• Updates by Jurisdiction
• Upcoming Appearances
• Maximize Your Incentives with EP

Recent Updates as of June 16, 2011, have been posted to the website.

EP Expands into Philadelphia's Sun Center Studios
Entertainment Partners has expanded and opened a new office in Philadelphia, Pennsylvania (PA)! Learn more.

EP Joins Louisiana Film Organization
EP has been granted Executive Membership in the Louisiana Industry for Film and Entertainment (LIFE) organization. Learn more.

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U.S. Updates
For more information on incentives in each state, visit the U.S. Overview on our website and click on the state of interest.

ALABAMA
A bill (SB 255) that would allow bundling of qualified television projects and commercials within a consecutive 12-month period to meet the spend test and cap the qualifying expenditures at $10,000,000 ($300,000 for a soundtrack and $200,000 for a music video) was passed and is awaiting the Governor's signature. The exemption from the payment of the state portion of the sales, use, and lodging taxes is also capped on the first $10,000,000. If signed or otherwise enacted, the bill is effective immediately.

CALIFORNIA
A bill (AB 1069) to extend the film and television tax credit for five more years with additional funding of $100,000,000 per year passed in the Assembly and is now in the Senate. If passed and enacted, the film credit would be extended through June 30, 2019.

Applications for the 2011-2012 year were accepted on June 1; the annual funding has been fully allocated. A wait list will be maintained for any funds that become available. (See California Film Commission)

CONNECTICUT
Governor Malloy signed budget legislation (SB 1239), including changes to one of the three alternative project criteria qualifying tests (increasing the local principal photography days test from 25% to 50%) and to the rules for tax credit transfers for some tax credit holders, effective May 4, 2011.

Tax credit holders subject to either the corporate business or insurance premium taxes (in Chapters 207 and 208) are not subject to these limitations. Likewise, there is an exception from the limitations for projects that are "created in whole or significant part" in a "qualified production facility," as determined by the Department of Economic and Community Development.

If neither exception applies, the amount of the credit (in percentage terms) that can be transferred in a single "income year" is limited. No more than 50% of the credit can be transferred by a tax credit holder through December 31, 2011. Beginning January 1, 2012, no more than 25% of the credit can be transferred in a single income year.

Efforts are underway to address a limitation on the amount of tax credits that can be used by insurance companies to reduce their premiums tax. A recent amendment limits that amount to 30% a year, effectively decreasing the value of the transferable film tax credit. (See Connecticut Mirror)

FLORIDA
Governor Scott signed legislation (HB 143) making a number of changes to the film incentive, effective July 1, 2011. Those changes include: additional funding of $4,000,000 for each of the last three years of the program; rules regarding priority in the queues; three new bonuses, all of which are capped at an aggregate total credit of 30%; and rules limiting transfers by an initial tax credit transferee.

HAWAII
Two bills (HB 1308 and SB 318) containing proposed increases to the film production tax credit were heard in conference committee but legislators were unable to reach the agreement necessary to pass the bills out of conference before the committees recessed.

ILLINOIS
Governor Quinn signed legislation (SB 398 and SB 4) on May 6, 2011, to create a sunset date for the Film Production Service Tax Credit. The credit will sunset in 10 years, through May 6, 2021. After that time, the General Assembly may extend the sunset date with five-year intervals.

Another bill (SB 1286) has been introduced that would expand the scope of the incentive to include accredited animation projects, talk shows, and reality programming.

LOUISIANA
A bill (SB 264) to make minor technical changes to the film tax credit was amended in the Senate and sent to the House for consideration. The amended bill adds a 5% credit for an "approved investor" in lieu of the 5% payroll credit.

MAINE
A bill (LD 1069) that would create a loan program has passed and is awaiting the Governor's signature. If enacted, the program would provide a "forgivable" loan of up to $500,000 per qualified visual or digital media project, capped at 20% of the pre-production and production budget. A project must have a total budget in excess of $100,000 with 75% or more filmed in the state to qualify for loan "forgiveness." Another bill (LD 384) has been carried over to the next session, which if passed, would create a cash rebate for qualified film companies that also invest in local infrastructure.

MARYLAND
Governor O'Malley signed an incentive bill (SB 672), effective July 1, 2011. The new law converts the cash rebate to a refundable tax credit, with an annual aggregate cap of $7,500,000. Unused amounts in any given year will carry forward to the next year.

The incentive rate remains at 25% of qualifying expenses except for television series, which may qualify for 27%. For a project to qualify, the minimum local spend must exceed $500,000. Qualified wages exclude amounts paid to those earning more than $500,000. The incentive is set to sunset June 30, 2014.

MASSACHUSETTS
Lisa Strout has been selected to lead the Massachusetts Film Office, effective June 15, 2011. Lisa is an industry veteran, formerly with the New Mexico Economic Development Department. (See Massachusetts Film Office)

MICHIGAN
The fiscal year 2012-2013 budget was passed in record time with a direct appropriation of $25,000,000 from the general fund for film incentives. (See MLive)

In addition, Governor Snyder signed legislation (HB 4361 and HB 4362) to replace the business tax with a corporate income tax, effective January 1, 2012. Film production and infrastructure tax credit holders have an option to elect to continue paying the business tax until all credits are used. The election must be made for the first tax year after 2011.

A bill (SB 383) was introduced to reinstate the credit with limitations designed to ensure a greater return to the state on its investment by giving discretion to the state on the amount of the credit to be awarded, among other changes. That bill passed in the Senate and a substitute was adopted in the House.

NEW MEXICO
The Film Office has updated its guidance on the changes to its film incentive to clarify which changes are effective June 17 and which are effective July 1, 2011. Changes effective June 17 include: vendors must have a physical presence, mandatory personal income tax withholding on nonresident actors, and the one-year period to submit tax credit packages. (The Taxation and Revenue Department recently issued Bulletin B-200.25 explaining how to comply with the new withholding tax on owners of a pass-through entity.) Changes effective July 1 include: the rolling cap of $50,000,000, payout deferral rules, the requirement for an outside audit, and the limitations on expenditures.

RHODE ISLAND
The proposed 2011-2012 fiscal year appropriations bill (H 5894), if passed as currently drafted, will eliminate the transferable film tax credit effective July 1, 2011. The bill is scheduled for hearing and/or consideration on June 17, 2011.

SOUTH CAROLINA
The current version of the 2011-2012 fiscal year budget bill (H 3700) removes the film incentive package originally included by the House. It is not clear whether the House will be able to reinstate those provisions, and if so, whether the Governor would veto them.

WASHINGTON
Proposed legislation (SB 5539) to extend the sunset date of the film production cash rebate died before making it to the floor of the House for a vote. The current incentive expires at the end of June 2011.


International Updates
For more information on incentives around the world, visit our website and click on the region or country of interest.

AUSTRALIA
The Minister of Arts announced that the Federal Government had included additional funding for the Screen Production Incentive. The Post, Digital and Visual Effects (PDV) offset will be increased from 15% to 30%, available to productions starting on or after July 1, pending conforming legislation. The Goods and Services Tax (GST) will no longer be counted as qualifying expenditure for purposes of the Location Offset. Instead, the rebate rate will be increased to 16.5%. Qualifying expenditure will be extended to include additional insurances, legal, auditing, and company fees. In addition, the minimum qualifying local spend for the Producer Offset has been reduced to A$500,000. (See Screen Daily -- subscription required, AusFilm, and The Australian)

CANADA - British Columbia
The local industry is lobbying to preserve the Harmonized Sales Tax (HST). The province is holding a referendum via mail-in ballot to determine if it will return to the two-tier GST and PST system. (See The Vancouver Courier)

IRELAND
The film tax relief in section 481 has been extended through December 2015. (See Irish Film Board)

ITALY
The film tax credit has been extended through December 31, 2013. (See ANICA -- in Italian)

LITHUANIA
A Vilnius Film Office will be established to promote further production in the country. The national producers association is planning to discuss a tax incentive scheme with government representatives. The scheme under consideration is based on the Hungarian model. Insiders are hopeful that the scheme may be in place by year-end. (See Film New Europe 04/29/2011, and Film New Europe 06/06/2011)

NEW ZEALAND
The Government released expanded criteria for the Large Budget Screen Production Grant program effective May 15, 2011. The expanded criteria include an "additional grant," which is calculated at the rate of 15% on "qualifying additional expenditure" (Guaranteed Deferments and/or Participation/Residual Payments) to NZ tax residents for productions that spend more than NZ$200,000,000 (approximately US$150,000,000). The grant is capped at NZ$9,750,000 (approximately US$7,500,000) per project. No bundling of projects is allowed for purposes of meeting the NZ$200,000,000 minimum spend. (See New Zealand Film Commission)

TURKEY
The Minister of Culture and Tourism has announced support for a 25% incentive for foreign movies produced in the country. The proposal will be presented to the Ministry of Finance. (See Today's Zaman)

UNITED KINGDOM
The tax incentives remain intact despite shutting down the UK Film Council (UKFC). Both the UKFC certification unit and the Film Fund have moved to the British Film Institute (BFI), while the British Film Commission, which is responsible for attracting foreign production, is now based at Film London. (See Variety)

The UK Government is undertaking a new review of film policy, and has named a panel of eight experts. The panel's report is expected by the end of the year. (See Screen Daily -- subscription required)

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Entertainment Partners has expanded and opened a new office in Philadelphia, Pennsylvania (PA)! Procurement services will be offered through EPPS Purchasing, Inc., EP's production equipment and supplies vendor for state film incentive purposes. Through this office, EP's Incentive Solutions team will be able to provide local support to the productions currently filming in PA, as well as provide consultation to those considering filming in the state. The office is located at the new Sun Center Studios -- 63 Concord Rd., Suite 100 -- in Aston, PA. For more information, please contact Mary Ann McBride at 610.717.4221 or Marco Cordova at 818.955.6278.

EP has been granted Executive Membership in the Louisiana Industry for Film and Entertainment (LIFE) organization. LIFE works to grow the film and entertainment industries in Louisiana by making the state an inviting climate for productions. Ryan Broussard in our New Orleans office will serve on the LIFE Board of Directors.

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Peachtree Village International Film Festival
Atlanta, GA
August 18 - 21, 2011
Joseph Chianese will moderate the "Finance & Distribution" panel at the Peachtree Village International Film Festival on August 20, from 10:00 am to 12:00 pm. Panelists include: Peter Schlessel (Former President of SONY and currently President of Film District and GK Film); Stan Wertlieb (Grindstone Entertainment, Group Head of Acquisitions); Krys Cameron (SimplyME Distribution); Ric Reitz (Georgia Entertainment Credits, LLC); and Bernard Coleman, ESQ (Womble Carlyle Sandridge & Rice, PLLC). Purchase tickets.

BNA/ATLAS: International Film and TV Finance Summit
Marriott Marquis, New York, NY
September 22 - 23, 2011
EP is a sponsor of the BNA Tax & Accounting/ATLAS 11th Annual International Film and TV Finance Summit. More details to be announced soon! Register for the summit.

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