How the Film Production Tax Credit Works

Transcription

1 How the Film Production Tax Credit Works Legislation enacted in April 2013 extended funding for the NYS Film Production Tax Credit Program. The new funding allocates $420 million per year for calendar years inclusive. Of the $420M, the set-aside for the post-production credit will be increased from the current $7M to $25M per year beginning in For more detailed information about the Program go to How much is the credit? The Film Production credit is a refundable 30% tax credit on qualified costs incurred in NYS. Beginning in 2015, productions with budgets over $500,000 can receive an additional 10% credit on qualified labor expenses incurred in the following counties: Allegany, Broome, Cattaraugus, Cayuga, Chautauqua, Chemung, Chenango, Clinton, Cortland, Delaware, Erie, Essex, Franklin, Fulton, Genesee, Hamilton, Herkimer, Jefferson, Lewis, Livingston, Madison, Monroe, Montgomery, Niagara, Oneida, Onondaga, Ontario, Orleans, Oswego, Otsego, Schoharie, Schuyler, Seneca, St. Lawrence, Steuben, Tioga, Tompkins, Wayne, Wyoming, or Yates. What kind of costs qualify? Qualified production costs are for tangible property or services used or performed within NYS directly and predominantly in the production of a qualified film. Qualified costs generally include most below-the-line items associated with production such as labor costs incurred on set construction, crew, and camera equipment, film stock, developing and printing of a film etc., and generally exclude costs of stories and scripts, and wages for writers, directors, producers and performers (other than extras without spoken lines).

2 Are there any project caps or other restrictions? There are no per project caps, and there is rollover in the annual $420 million allocation going forward until For the additional 10% credit on qualified labor expenses incurred in specific counties, (see above), a maximum of $5 million per year can be allocated. Who can apply? The incentive applies to production costs incurred in NYS. Eligible productions include: Feature Films Episodic television series Television pilots and presentations Television movies and miniseries Relocated Television Productions* Certain categories of productions are excluded from the Program, including, but not limited to, documentaries, news or current affairs programs, interview or talk shows, instructional videos, sport shows or events, daytime soap operas, reality programs, commercials, music videos. *Relocated television production means a talk or variety program that filmed at least five seasons outside NYS prior to its first relocated season in NYS, the episodes are filmed before a studio audience of 200 or more, and the production incurs at least $30 million in annual production costs in NYS or at least $10 million in capital expenditures at a qualified production facility (QPF). What kind of production company are you? A qualified film production company means a corporation, partnership, limited partnership or other entity or individual which or who is principally engaged in the production of a qualified film and controls the film during production. Independent productions are qualified film production companies (Level 1) that are separately defined in the law. The first step is to determine which type you are. A LEVEL 1 production is a qualified production that: a. has a production budget of no more than $15 million, AND b. is being produced by a company in which NO MORE THAN five percent of the beneficial ownership is owned, directly or indirectly, by a publicly traded entity A LEVEL 2 production is a qualified production that: a. has a production budget over $15 million, OR b. is being produced by a company in which more than five percent of the beneficial ownership is owned, directly or indirectly, by a publicly traded entity.

3 What are the Program threshold requirements? There are two separate threshold requirements and each must be separately met in order for certain types of costs to be eligible for the credit. Facility Threshold refers to qualified costs incurred during and related to work at a production facility. Location/Other Threshold refers to principal photography shoot days in NYS outside a production facility. A production must meet the facility threshold, but does not have to meet both thresholds, in order to participate in the Program. A production facility generally means a building and/or complex of buildings and their improvements and associated back-lot facilities on which films are, or are intended to be, regulatory produced and must contain at least one sound stage. A qualified production facility (QPF) must be within NYS and meet certain statutory criteria. Armories may also be considered qualified production facilities. For a complete list of qualified production facilities, check the Governor s Office For Motion Picture and Television (MPTV) website at or call What is the Facility Threshold requirement? All productions are subject to the facility threshold requirement, but the criteria for a QPF are different for a Level 2 production company shooting in NYC. For any production outside NYC, (Level 1 or Level 2), a QPF must contain at least one sound stage having a minimum of 7,000 ft 2 of contiguous production space. If the production is in NYC and is a Level 2 production, a QPF, in addition to the 7,000 ft 2 sound stage requirement must: be soundproof with a noise criteria (NC) rating of 30 or better; have sufficient heating and air conditioning for shooting without the need for supplemental units, incorporate a permanent grid and sufficient built-in electrical service for shooting without the need for generators, and be column-free with a clear height of 16 under the permanent grid.

4 For a Level 1 production, you must shoot at least one full day on a set built expressly for the production at a QPF. Any QPF located anywhere in NYS is suitable for meeting the facility threshold requirement. For a Level 2 production filming on a QPF within the five boroughs of NYC ONLY, the additional facility criteria indicated above must be met in order to meet the facility threshold requirement. Or, in the case of an armory, it must also be certified by the MP/TV Office. If you are shooting at more than one production facility, at least 75% of the total of all expenses related to work, (excluding post-production), done at all facilities anywhere, (i.e. in NYS or elsewhere), must be related to work done at the QPF. (NOTE: This calculation ONLY matters if you are shooting at MORE THAN ONE facility. If you are only shooting at one production facility, then 100% of your facility costs are at that facility). In addition, if you are a Level 2 production, (OTHER THAN PILOTS), at least 10% of the total principal photography shooting days spent in the production must be at the appropriate QPF. Pilots are EXEMPTED from the 10% of principal photography shooting days requirement, even if a Pilot is a Level 2 production. Pilots still must shoot one day at a QPF. Once you have met the appropriate facility thresholds for your production, all qualified costs related to work done at the facility become eligible for the credit. What is the Location/Other threshold? The Location Threshold refers to the requirement relating to the eligibility for on-location filming, pre or post-production, or any other costs for work done in NYS outside the QPF. There is no distinction between Level 1 and Level 2 productions with respect to this threshold. There are two possible ways to meet the Location/Other Threshold: 1. If less than $3,000,000 is spent on facility-related work, then at least 75% of the location principal photography shoot days must be in NYS, OR 2. If $3,000,000 or more is spent on facility-related work, then there is no required percentage of location days that must be in NYS. If you have met the appropriate stage filming requirement, and you meet one of the two criteria for the Location/Other threshold, all costs related to stage filming, location filming, preproduction and post-production qualify for the credit.

5 Is there a Post Production Threshold? There is not a separate threshold to qualify post-production costs when applying for the Film Production Credit. All pre- and post-production costs, (including Visual Effects & Animation costs), incurred in NYS become eligible for the credit once the facility and location/other thresholds have been met. What are the end credit requirements? Specific end credits requirements are required by law. Failure to comply with the end credit requirements will result in rejection of the final application for the credit. There are two ways a production can meet the end credit requirements. EITHER: 1) include in the end credits of each qualified film Filmed With the Support of the New York State Governor s Office for Motion Picture and Television Development and the New York Film logo provided by the Film Office; OR 2) include in each qualified film distributed by DVD, or other media for the secondary market, a New York promotional video approved by the Governor s Office for Motion Picture and Television Development Prior to the issuance of a Certificate of Tax Credit, every production will be required to provide proof of compliance with the end credit requirements in the form of a still shot, frame grab, edited dvd, or other materials which the Film Office may request. Am I required to use only vendors based in New York State? Qualified productions must certify they will purchase taxable tangible property and services, defined as qualified production costs, only from companies registered to collect and remit NY State and local sales tax. NYS has declared many kinds of tangible property and services exempt from sales tax when they are used specifically for film and television production. The NYS Department of Taxation and Finance Publication 28 "A Guide to Sales Tax for the Film Industry" provides a list of items considered taxable. Items that are already exempt from sales tax are not subject to this certification provision. For more information on sales tax issues go to or call the MP/TV Office. Many film and television industry vendors and service companies located outside NYS are registered to collect and remit sales tax in NYS. To determine if a given individual or company is registered, get their NYS Sales Tax Vendor ID Number, and

6 Go to: Enter Vendor Tax I.D. number to determine If the sales tax identification number provided by the vendor cannot be found, we suggest that you contact the vendor to confirm that they provided the correct number, or call the Sales Tax Information Center or and a representative can search by the vendor s name. THIS IS A NEW YORK STATE PROGRAM. PLEASE DIRECT QUESTIONS TO EMPIRE STATE DEVELOPMENT FILM TAX CREDIT PROGRAM filmcredits@esd.ny.gov