Monday, December 20, 2010

[MISP] Fwd: 181 production tax incentive approved through 2011

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President Obama's $858B tax bill has extended a significant federal
tax
incentive to film and TV producers. Section 181 of the Internal
Revenue Code
known as the "runaway production incentive" allows investors to
deduct the
cost of qualifying expenditures IN THE YEAR THEY OCCUR instead of
amortizing
costs over several years after the film has gone to market.

The first $15M in production costs are included (with a rise to $20M
if the
project's aggregate costs are "significantly incurred" in "low-income
communities"). The incentive is elective, allowing producers and
investors to
choose whether to expense the production costs in the first year or
not.

Section 181 covers TV, too, for "up to $20M per episode, with a
maximum of 44
episodes, which is huge," according to Corky Kessler, entertainment
attorney
with Deutsch, Levy & Engel.

"Seventy-five percent of budgeted wages have to be performed and paid
in the
U.S.," said Kessler, "but they don't have to be paid to U.S.
citizens."

Section 181 can be combined with state and local incentives to achieve
significant savings. "I tell investors they can have a recovery
potential of 50
to 77 cents on every dollar when they combine the benefits of state
and
federal," said Kessler.

(Look for additional comments from Kessler within the next week. He is
also
slated to be on an upcoming Sundance panel.)

The recently signed tax bill represents its second extension with a
run through
the end of 2011. This extension is retroactive to the beginning of
2010, so it
applies to projects that began principal photography on or before
January 1,
2010.

In addition to attracting investors with these tax incentives, Section
181 is
intended to help keep production jobs in the US.

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