The following post briefly outlines Washington Filmworks’ (WF) understanding of Section 181. While this article serves as an overview of the tax policy, WF encourages filmmakers to contact an attorney to learn more.
The enactment of Section 181, as part of the American Jobs Creation Act Of 2004, signaled a change in U.S. policy towards filmmaking in the United States. By minimizing investor risk through film subsidies, Section 181 helps to support film and television production and to prevent “runaway production” of the film industry.
Over the past few decades, many American film and television productions have been lured away from the United States. This shift in production resulted in the loss of enormous amounts of revenue. Recognizing the need to support the American film industry, Congress passed legislation that brought about Section 181 of the U.S. Tax Code. Section 181 currently falls under the American Taxpayer Relief Act of 2012, extending the incentives for film productions until December 31, 2013.
What is Section 181?
Section 181 states that an investment in a motion picture shot in the United States is 100% deductible for the investor in the same year invested. In simple terms, an investor may deduct the first $15,000,000 – $20,000,000 of the aggregate production costs on a qualified film or television production in the same year. This is great news for investors who can minimize their risk of investment by taking advantage of Section 181.
Here are some important facts about how Section 181 functions:
- 100% of the motion picture costs are deductible in the same year of investment.
- 75% of the costs expended must be for services performed in the US to qualify for Section 181.
- The deduction is capped at $15 to $20 million per project. If there are multiple investors seeking the deduction, benefits of the provision must be allocated between all investors.
- There is no minimum film production budget cost.
- Any film or video taped production qualify. Television shows are limited, up to 44 episodes, including the pilot.
- Investors can be either individuals or businesses.
- There is no expectation for film distribution or film completion.
Washington State film incentives further protect investors. These incentives support the film industry, and strengthen the economy in Washington by providing jobs to the thousands of filmmakers, talent, and crew of the Evergreen State. For more information on Washington State incentives, please go to the “Incentives” tab on our website or contact our office at (206) 264-0667.
Section 181 federal income tax break has been renewed until December 31, 2013
Film and TV Tax Incentives Renewed in Fiscal Cliff Deal, Section 181 Extended Through 2013
Hollywood Wins Tax-Break Extension In Fiscal Cliff Agreement