PRODUCTION INCENTIVES

• Tools for 2010
• Updates by Jurisdiction
• What's New at EP?
• Maximize Your Incentives with EP
• Upcoming Appearances

*NEW* The Essential Guide to U.S. & International Production Incentives, 2010, 2nd Edition, edited by Joseph Chianese, Marco Cordova, and Barbara Rosenfeld, will soon be available. Contact our group to PRE-ORDER your copy at no charge. The guide will be available for pick up at the Produced By Conference, June 4 - 6, in Los Angeles.

Monthly Production Incentives Email Updates Archive of previous newsletters is now available. Click here to sign up for our newsletter.

Follow the EP Production Incentives Group on Twitter for instant updates on incentives and events at www.twitter.com/filmincentives.

Recent Updates, as of May 26, 2010, have been posted to the website.

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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.

U.S. FEDERAL
The American Jobs and Closing Tax Loopholes Act includes a number of retroactive one-year extensions to expired tax provisions, including the expensing of film production costs for qualifying U.S. films under Internal Revenue Code section 181. Legislators would like to complete action in the Senate so that a final bill can be delivered to the President before the Memorial Day recess. (See page 19 of the Summary from the House Ways & Means Committee.)

The Organization for Economic Co-operation and Development (OECD) has published a discussion draft on the application of Article 17 (artistes and sportsmen) of the OECD model tax convention. Comments are due before July 31, 2010. These comments will be examined at the September 2010 meeting of the Working Party.

U.S. STATE AND LOCAL
The MPAA website contains state-by-state data compiled for 2008, which includes the number of film and television projects filmed locally, the economic impact of this activity in terms of direct jobs and wages paid, as well as an overview of production incentives.

In addition, the site contains a 2010 Economic Contribution Report, and accompanying Factsheet, as well as 2009 Theatrical Market Statistics and recent government filings.

ARIZONA
The regular legislative session ended before the proposed new film incentive legislation (SB 1409) passed in the House. Supporters of film incentives are hopeful that a special legislative session will be convened so that the a replacement program can be passed before the current program “sunsets” at the end of this year.

CALIFORNIA (from Special Update sent May 21, 2010)
Newly adopted amendments to the California Film & Television Tax Credit Program include the following changes: (1) reclassify "independent films" as "feature films" when the budget of "qualified" expenditures exceeds $10 million (previously, the reclassification occurred if the total budget exceeds $10 million), and (2) exclude "animated production" from the definition of "Qualified Motion Picture" (an animated production that is issued a credit allocation letter in compliance with emergency regulations will continue to be eligible for the credits allocated).

The Permanent Regulations, Agreed Upon Procedures, revised Guidelines, and Forms can be found on the Film Commission website. The California Film Commission will begin accepting applications for the next round of fiscal year tax credit allocations on June 1, 2010, beginning at 9:00 am. Applications will not be accepted earlier than that time, but must be submitted no later than 3:00 pm. (There is a waiting list for applicants for the current, fully subscribed fiscal year should pending credits become available prior to June 30.)

The State Board of Equalization (BOE) published a discussion paper explaining provisions of the California sales and use tax credit for film and television productions. A meeting has been scheduled for June 24, 2010, to discuss comments and input.

COLORADO
Effective July 1, 2010, the 10% film production rebate eligibility requirements will be loosened. The new law: (1) eliminates the requirement that 75% of the total below-the-line expenses take place in the state, (2) reduces the in-state local hire requirement from 75% to 25%, and (3) reduces the local spend for out-of-state productions from $1,000,000 to $250,000. The new law expands the scope of the 10% rebate to include television commercials.(See HB 10-1180 or Colorado jurisdiction page.)

CONNECTICUT
The Governor signed legislation on May 7, 2010, amending provisions of the film tax credit and the state-certified project investment credit, effective July 1, 2010, for income years beginning on or after January 1, 2010. The new law: no longer includes “development” in “production expenses or costs,” and defines “compensation” as base salary or wages. The project eligibility tests have been broadened: by reducing the “principal photography days in the state” requirement from 50% to 25%, and by adding a third option for projects spending $1 million or more in post-production costs within the state. The definition of “eligible expenditures” for state-certified projects has been expanded to include “capital leases or purchases.” (See SB 176 or Connecticut jurisdiction page.)

FLORIDA
SB 1752, an act relating to economic development, was sent to the Governor for signature on May 17, 2010. The Governor has 15 calendar days after receipt to sign the bill or veto it. If not signed or vetoed within this period, the bill becomes law. In addition to other “jobs” programs, the bill would create a transferable corporate income tax or sales and use tax credit of 20% for qualifying “certified productions” (including interactive digital media), with two 5% bonuses for: (1) “off-season” projects, and (2) “family-friendly” projects.

The legislation is to be effective July 1, 2010, through June 30, 2015. The credits cannot be claimed before July 1, 2011, and can be carried forward for 5 years. The credits can be transferred once but the number of transferees is determined by the irrevocable election between corporate income and sales and use tax credits. The Department of Revenue will buy the credits at 90% of their face value.

The legislation provides multiple “queues” (for different types of entertainment projects), with varying levels of local spend and resident hire requirements (cast and below-the-line crew). The incentive is capped at $8 million for general production queue projects and at $500,000 for commercial and music video queue projects. Wages and compensation are capped at $400,000 per person.

Annual funding caps are as follows: 2010-2011 = $53.5 million; 2011-2012 = $74.5 million; 2012-2013, 2013-2014, and 2014-2015 = $38 million. Annual funding is allocated between the various project queues. Surplus credits from the smaller queues can be carried forward to the next year’s general production queue.

IOWA
A schedule to review certain economic development and tax incentive programs has been mandated by legislation signed by the Governor (SF 2380). The film tax credits will be reviewed in 2013. In the meantime, no further film projects will be registered for tax credits until July 1, 2013.

KENTUCKY
The regular legislative session ended without passing HB 530, capping the film tax credit. The Governor has called a special session to begin on May 24, 2010, to resolve the budget issue. The Film Office has been assured that the film industry credits will not be taken up in the budget and that they will remain intact as passed last year.

MARYLAND
Proposed legislative changes to the film tax incentive (SB 98 and SB 976) did not make it out of committee before the end of the legislative session. The incentive program remains unchanged. (See Maryland jurisdiction page for more information.)

MASSACHUSETTS
The supplemental 2010 budget was passed without any changes to the film tax credit. The credit remains uncapped.

MICHIGAN
SB 1264 has been introduced to make the film tax credit non-refundable. The tax credit would remain transferable. The bill was sent to the Committee on Finance. No further action has been taken. For information on other bills introduced this session, visit the Michigan Legislature.

MINNESOTA
The Film Office remains intact despite an effort to eliminate it in the budget-cutting bill. Snowbate funding for 2011 has been eliminated, but efforts will continue to reinstate a robust incentive fund.

MISSOURI
HB 1587 would increase the annual cap on film credits frpm $4.5 million to $10 million, effective August 28, 2010. The bill also expands the qualifying spend to include vendors in counties adjoining the state. The bill has been referred to the Committee on Job Creation and Economic Development.

NEBRASKA
LB 1073 and LB 1074, designed to establish a film tax incentive, were postponed indefinitely on April 14, 2010.

NEW JERSEY
The Governor proposed to eliminate $15 million in film tax credits for 2011 while a study is undertaken to evaluate the credit’s effectiveness in creating full-time, permanent jobs. Negotiations continue and there is a possibility that the film tax credits will remain intact. A final budget is expected prior to July 1, 2010.

NEW MEXICO
The Gross Receipts Tax Rate Schedule effective July 1, 2010 is now available.

Former state Sen. Rawson, newly appointed to the State Investment Council, has requested a report analyzing whether the film loans have been a successful investment for the state (see Business Week article).

NEW YORK
The state budget is now more than a month overdue (see WNED-AM 970 NEWS article). See New York jurisdiction page for more information concerning the Governor's proposed budget’s annual funding of $420 million a year through 2014, as well as a number of other incentive program changes and a summary of bills previously introduced relating to the state film production credits.

NORTH CAROLINA
HB 1957 was introduced recently to enhance the North Carolina production tax credit.

SOUTH CAROLINA
South Carolina Film Commissioner Jeff Monks has advised that a change in policy allows an applicant to request an increase from 10% up to 20% on rebates for wages paid to non-residents. The cap remains at $3,500 per person.

Section 39, DEPARTMENT OF PARKS, RECREATION & TOURISM, page 422, paragraph 39.10 of the Wage Incentive (Proviso) Legislation was amended to read: “(PRT: Motion Picture Rebate Percentage) From the amount set aside pursuant to Section 12-62-50, the South Carolina Film Commission may rebate to a motion picture production company, up to twenty percent of the total aggregate South Carolina payroll for persons subject to South Carolina income tax withholdings employed in connection with the production. From the amount set aside pursuant to Section 12-62-60, the South Carolina Film Commission may rebate to a motion picture production company up to thirty percent of the expenditures made by the motion picture production company in the State. Motion picture production companies that have previously been approved at the lower percentages may reapply for the higher percentages only if the project that was approved is still in production in South Carolina as of the effective date of this proviso.”

Parliament, a group that supports the creative communities, released a report on the impact of film incentives in the state.

TEXAS
The Texas Film Commission announced that the Austin Film Society (AFS) will be accepting applications for the 2010 Texas Filmmakers’ Production Fund (TFPF) until June 1, 2010 from filmmakers residing in Texas for at least 1 year. The fund is available for production, post-production, and distribution of eligible projects. The TFPF also provides Kodak film stock and in-kind services from Seattle-based Alpha Cine Labs.

VIRGINIA
The Governor signed HB 861 and SB 257 on April 11, 2010. These bills create a refundable tax credit for years beginning January 1, 2011, in addition to the Motion Picture Opportunity Fund (with funding of $2 million for the biennium beginning July 1, 2010).

The minimum local spend is $250,000, with a funding cap of $2.5 million for the 2010-2012 biennium and $5 million for subsequent biennia. The credit is calculated at 15% of qualifying expenses (20% in economically distressed areas), with an additional 10% to 20% of aggregate resident payroll (depending on local spend), plus 10% of the total aggregate resident payroll for “first time cast and crew.” Qualifying compensation is capped at $1 million.

WEST VIRGINIA
The legislative rules to implement the Film Industry Investment Act have been amended to include a definition of “television series” and a new procedure for allocating funds to television series.

International Updates

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

AUSTRALIA
The 70% local qualifying Australian production expenditure (QAPE) requirement for projects with budgets between A$15,000,000 to A$50,000,000 has been removed, effective July 1, 2010. The minimum spend requirement for the Post, Digital and Visual Effects Production offset (PDV) has been reduced from A$5,000,000 to A$500,000, effective July 1, 2010. (See press release.)

CZECH REPUBLIC
A recent news article describes what is expected to be a three-step process for applicants seeking benefits under the new film subsidy program. The annual budget of the Czech Film Fund is €16 million, with no project-related caps. Approval from the European Commission is expected shortly.

INDIA
A report entitled “Policy for India’s Services Sector” calls for the Government to consider giving incentives for local film production. In the alternative, the authors suggest filing a claim with the World Trade Organization against jurisdictions providing “tax subsidies disguised as tax credits” for local film production. (See Economic Times article.)

MEXICO
President Calderon announced a new film incentive program in February.  Final details are to be published in early June 2010. The incentive involves a cash rebate to supplement the IVA rebate, up to a total of 17.5%. Producers can receive up to 7.5% of qualified local spend. The program requires a registered taxpayer in Mexico and a minimum spend of 70 million pesos on production (including post) or 20 million pesos in post-production expenses.  The reimbursement fund has US$20 million this year, which can be increased to $40 million if need be.

SERBIA
The Serbian Film Commission is proposing a cash rebate of 15% to 20% of all direct spending by international productions. The USAID Competitiveness Project has worked with the industry to develop a strategy to promote the country’s key advantages. Serbia’s parliament is planning to debate the proposal to offer tax incentives for international film productions next month. (See Balkan Insight article and Reuters article.)

SOUTH AFRICA
The Department of Trade and Industry advised that funding has been approved for the next three fiscal years as follows: R246,899,000 for 2010-2011, R268, 873,000 for 2011-2012, and R290,305,000 for 2012-2013. There is a one-line budget, which includes foreign and South African productions. (See South Africa jurisdiction page for more information.)

UNITED KINGDOM
Andy Weltman, Senior Vice President - US Production, is now heading the UK Film Council’s US operations, together with Tara Halloran, Senior Executive, Industry Relations. (See United Kingdom jurisdiction page for more information.)

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EP and EPPS Expansion in Connecticut
We now have an account representative, Scott Brant, to work closely with all our Connecticut clients from our new office in Stamford, CT. Please email Scott for additional information regarding our Connecticut services or to schedule a meeting.

Website and Comparison Tool
Visit www.epincentivesolutions.com for the most up-to-date incentives information, including a new extensive glossary covering types of incentives, eligibility criteria, benefit limits, and other key issues to consider. Be sure to check out the Comparison Tool that enables you to compare incentives in up to three different jurisdictions.

EPPS Participating Vendor List
A participating vendor list is now available for EPPS Purchasing, Inc., which provides production equipment and supplies, at competitive rates, in certain states to help maximize your production incentives. Please contact Marco Cordova at 818.955.6278 regarding our EPPS Purchasing, Inc., services.

Want to be a participating EPPS Purchasing, Inc., vendor? Please contact Mary Ann McBride at 412.956.7325 for more information.

EP Incentive Solutions
Please contact EP's production incentives specialists by email or by phone at 818.955.6216 if you have any questions regarding your next production. We can help you budget your next production and find the most beneficial incentives at no charge. We also provide fee-based services for production incentives administration, finance facilitation, corporate-structure planning, and agreed-upon consulting projects. Visit our Services section for more information and contact information for our EP Incentive Solutions specialists.

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Entertainment Partners has purchased Workers' Compensation policies from local brokers throughout the United States to help maximize your production incentives! Listed below are those production incentives states where EP currently has a local policy.

Florida
Hawaii
Illinois
Louisiana
Mississippi
New Jersey
New Mexico
Pennsylvania
Texas

More policies to be announced soon!

Entertainment Partners has an office in each of the following states to help maximize your production incentives (more to open soon!):

California
Connecticut *
Florida
Georgia **
Louisiana ***
Michigan ****
New Mexico *****
New York
Pennsylvania ******
Utah


* EP and EPPS Purchasing, Inc., have a full-time Account Representative in Connecticut to help maximize your production incentives benefits. Please contact Scott Brant at 203.291.9399 for more information regarding our services in Connecticut.

** EP and EPPS Purchasing, Inc., have a full-time Account Representative in Georgia to help maximize your production incentives benefits. Please contact Karen Sortor at 678.690.8469 for more information regarding our services in Georgia.

*** EP and EPPS Purchasing, Inc. have full-time employees working in our Jefferson Parish office to help maximize your production incentives. Please contact Ryan Broussard at 504.296.2502 for more information regarding our services in Louisiana.

**** EP and EPPS Purchasing, Inc. have a full-time Account Representative in Detroit to help maximize your production incentives. Please contact Blane Hailemichael at 313.573.0018 for more information regarding our services in Michigan.

***** EP and EPPS Purchasing, Inc., have an office at Albuquerque Studios. EP provides super loan-out services in New Mexico to help maximize your production incentives. For more information contact the EP Production Incentives Group.

****** EP and EPPS Purchasing, Inc., have a full-time Account Representative in Pennsylvania to help maximize your production incentive benefits. Please contact Mary Ann McBride at 412.956.7325 for more information regarding our services in Pennsylvania.

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Produced By Conference 2010
20th Century Fox Studios, Los Angeles, CA
June 4 - 6, 2010
Presented by the Producers Guild of America and hosted by 20th Century Fox Studios, the Produced By Conference brings together the entire producing profession for a weekend of discovery, learning, and creative inspiration.

Joseph Chianese will moderate a panel entitled "Produced in the USA: An Update on Domestic Tax Incentives" on Saturday, June 5, from 9:45 to 11:00 am. This panel provides the latest insights on the incentives available to producers. Our experienced experts will provide their sound advice about the right questions to ask in order to assess the best tax incentive for your next production. Panelists are Thomas Adamek (President, Stonehenge Capital Company, LLC), Andrew Matthews (President, RKO Pictures, and Financial Consultant), Bryan Yaconelli (Vice President Production, Management and Finance, Overture Films), and Jennie Yamaki (Director of Physical Production, Mandate Pictures).

Visit us at the Entertainment Partners booth to pick up a copy of the new 2nd Edition of The Essential Guide.

Entertainment Industry Conference
Hyatt Regency Century Plaza Hotel, Century City, CA
June 16, 2010, at 9:20 am
Top-tier, expert business speakers will discuss industry issues, including the economy; production/talent tax issues, new media/shifting revenue streams, the use of music in film, TV and new media, love and divorce Hollywood style, ethics and risk management, and foreign tax issues that are vital to your business. Joseph Chianese will participate in the “Production/Talent Tax Issues” panel. Issues discussed include domestic production deduction (IRC 199), film investment production (IRC 181), deferred compensation (409A), and domestic and international production incentives. Register for the webcast on the CalCPA Education Foundation website; fee required.

Please visit the Happenings section of our website for more information on upcoming events as it becomes available.

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