Many states and territories, including Arizona, Rhode Island, Georgia, Connecticut, Illinois, New Jersey, Iowa, Pennsylvania, Louisiana, Louisiana, Massachusetts, Connecticut, and Connecticut, have enacted laws to attract film production and provide economic development and incentives. is tax credits for movies sold.
Traditional tax credits have historically been part of state and federal programs focused on priority real estate development, including the restoration of historic structures, energy and other activities that stimulate economic growth.
With film projects, production companies earn a transfer tax credit on general production eligibility and salary costs. It can be translated into 20% – 30% of the total cost of production for the film, directly in the form of a tax credit given to the production company. It can be used to offset a state tax liability or to sell to another taxpayer.
In Illinois, there is a 20% tax credit based on Illinois Production Costs, plus an additional 15% tax credit based on Illinois labor costs created by the employment of people living in poverty or high unemployment areas. New Jersey offers film directors a 20% tax credit for samples that feature at least 60% film in the state, as well as a 30% loan guarantee from the New Jersey Economic Development Authority.
In Connecticut, filmmakers can earn up to 30% of their eligible production costs in Connecticut, and Massachusetts, with a minimum cost of $ 250,000, earns 20% and 25% for production and labor, respectively, when at least 50% of the film is produced in the Commonwealth. within: Note: Regulations expected in the Masters Commission offer a 25% combined tax credit, a minimum spend of $ 50,000, and a hat cap for each project.
Four new bills are being discussed by the legislature in the penitentiary, and the expected outcome in June will be a combined one. Rhode Island offers a 25% tax credit on products, with a minimum eligible cost of $ 350,000, when 51% of the total budget is spent within the state. For more information on each state's qualification & # 39; tax credit, apply to "Tax Credits" LLC. In Puerto Rico, investors are given a tax credit on a movie project equivalent to 40% of Puerto Rico residents' budget items, up to 50% of the cash invested as a share project. Up to 50% of the tax credit given to the investor may be available to the investor if a bond or letter of credit has been obtained, including the Puerto Rico Treasury Secretary, as one of the beneficiaries.
Traditional tax credits allow producing companies to earn loans to sell their loans to companies and / or net worth investors who have a tax liability within the state where the loan was obtained. Tax credits are sold in cash at a discount, collecting cash from the seller to reduce their net production costs.
Company An independent company may use these Financial Assistance Programs to reduce their state tax liability. Purchased loans can usually be used for any year during which no tax return has been filed. In general, credits can be used for any or all of the following: Individual Income Tax, Corporate Business Tax, Premium Tax, Premium Tax and Utilities Tax (Qualified taxes for compensation vary by state).
Large corporations and high net worth investors who own movie production tax credits can benefit from film production tax credits as they are able to buy US tax credit at a discount.
NJ, RI, CT and MA female loans allow the buyer to take out tax credits at least 3 years in advance, which protects the buyer from investing significant dollars in tax credits that they cannot use immediately. In Illinois, tax credits can be transferred for up to five years. The commercial and consequently sold side of these state-issued tax credits means that tax credit investors can also maintain their equity position in a movie or movie series.
For example, let's say a tax credit investor has $ 3000,000 tax credits that he has to buy. Although, as a rule, the final amount of tax credit is calculated after film production is completed, he decides to profit from potential profits and receive his tax credits.
So if a movie has a budget of $ 6,000,000, then 50% of the budget is equity ($ 3,000,000) and 25% is tax credit, the investor / tax creditor will get $ 1,500,000 and 50% equity privileges. in general international film. profit and income.
But what about the other $ 1,500,000 he still needs to receive as tax credits?
Well, if investing in his or her movie company was part of the movie package, then that money is being transferred to another movie that could be shot in a state or province where there could actually be a higher tax credit incentive that would be transferable. return to himself and to any other investor on a first come, first served basis. For multinational companies and investors, this can also be transposed and cross-linked to a multilateral country and territory transaction with significant tax credit incentives such as Manitoba, Saskatchewan, Spain, Hungary, the UK, South Africa, Australia, New Zealand, etc. : and others.
Another option would be to invest the initial tax credit directly into equity and create some additional debt tranches for a larger film group.
To find out how tax credit investing can also turn into film investing that can hedge risk and earnings through multiple films, contact firstname.lastname@example.org.