Incentives for Posse Film Investors

There are various types of incentives that film investors can take advantage of when they decide to back a film project. These film incentives come in many forms, from refundable tax credits to cash rebates, from grants to sales tax immunities, and from lodging exemptions to free locations. Investors and producers wanting to stretch their production budget would do well to understand what incentives they can use.

Some of the more common types of incentives are as follows:

  • Movie production incentives (MPIs) – This refers to any incentive offered by the state to encourage local film production.
  • Tax credits – Film companies can take advantage of tax credits to pay lower taxes to the state, depending on the minimum spending requirements that are eligible. About 28 states offer tax credits, with 26 making these refundable and transferable.
  • Cash rebates – These are paid out to film companies directly by the state, and are usually a percentage of the companies’ qualified expenses.
  • Grants – These are given out by three states and the District of Columbia.
  • Sales tax exemption and lodging exemption – Lodging taxes are offered as incentives to production companies staying for over 30 days.
  • Fee-free locations – Some states allow production companies to use state-owned locations for free.

In the United States, film incentives vary from state to state and are given to encourage in-state film production. These incentives were introduced sometime in the nineties as a response to movie productions being carried to other countries such as Canada. State programs justify these incentives by saying that in-state productions bring jobs to cast and crew members within the area.

In Alaska, for example, films, documentaries, commercials, and video projects can qualify for up to 44 percent in transferable tax credit on qualified production expenses of at least $100,000 (source: National Conference of State Legislatures).

Georgia awards an across-the-board tax credit of 20 percent based on a minimum investment of $500,000, as well as an additional 10% for including an embedded animated Georgia logo on film projects. Sales and use tax exemption and immediate point-of-purchase sales tax exemption of up to 8% can be redeemed by productions that film in the state.

Hawaii offers three different tax incentives that apply both to film and TV productions: one is a refundable 15% to 20% tax credit for production costs incurred on Oahu, Big Island, Kauai, Lanai, Maui, and Molokai. Hawaiian residents can also avail of a nonrefundable income tax credit for investing in film, TV, video, audio, and animation products, equivalent to 80% of the investment amount, payable over five years. Finally Hawaii also exempts royalties derived from performing arts products from state income taxes.

Film incentives offer an advantage to production companies and investors—it helps them cut corners and enables them to profit quickly from the production and then pay out equity to participants who have a share in the film’s earnings.

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