In large part due to the DGA's leadership role in an entertainment industry-wide Alliance, a landmark tax incentive provision written expressly to address the problem of runaway production was included in the "American Jobs Creation Act" (H.R. 4520).
Recognizing that effective implementation of the new tax-incentives will take industry education the DGA is taking the lead in familiarizing our members with these new provisions so that they (and the producers they work with) can begin to utilize the legislation.
On January 11 in Los Angeles and February 3 in New York City, the Guild hosted member meetings for those in all Guild categories to find out — from the experts who worked with the DGA to create the provisions — how to convert new law into production savings.
DGA PAC Chair Taylor Hackford opened the discussion in Los Angeles with some history on the DGA's fight to get "runaway" legislation passed, addressing the specific role of the DGA PAC Leadership Council in our long, yet rewarding, outreach campaign with Washington.
"Our power is what we do and our ability to articulate what we do," Hackford said. "We are the people making films. The PAC Leadership Council meetings have, for the first time, allowed legislators from both sides of the aisle to come into this building and talk to directors.
"These meetings work," he continued, "because we're very result-oriented. When we express the plight of runaway production, the pain and the suffering it's caused this industry, along with fact that this is a great industry with the best talent in the world, the legislators listen. We tell them we're speaking for the industry and all those who collaborate with us on films — and they listen."
Both the Los Angeles and New York meetings were led by tax law experts from Ernst & Young. Jeffrey Tolin, National Director of Entertainment Service at Ernst & Young in Los Angeles, spoke in both cities, bringing his more than 25 years of public accounting and corporate tax experience in motion picture and television production, distribution and exhibition to the seminars. He was joined in LA by Gary Gasper, Managing Partner, Ernst & Young Washington Council in Washington DC, who specializes in corporate taxation and was one of the DGA's lead lobbyists helping to shepherd the runaway production provisions through Congress. Tolin was accompanied in New York by Robert Rozen, partner at Ernst & Young and former Legislative Counsel to the Majority Leader in the U.S. Senate where he participated in the development of every major tax bill from 1986 to 1994.
In both seminars, the experts guided members through the DGA supported provisions and other industry-relevant provisions in the "American Jobs Creation Act."
Domestic Film Production Incentive Program
The panelists began by outlining the first provision, known as the "Domestic Film Production Incentive Program," or New Section 181 of the Internal Revenue Code. This program allows investors in qualifying film and television productions to elect to immediately deduct the cost of qualifying film expenditures in the year the expenditure occurs. Qualified film and television productions include any production of a motion picture (whether released theatrically or directly to video cassette or any other format); miniseries; scripted, dramatic television episode; or movie of the week. The first 44 episodes, including the pilot production, of a scripted dramatic series are eligible. In the case of a film co-produced by multiple investors, the deduction for qualifying expenditures must be allocated among the owners of the film in a manner that reasonably reflects each owner's proportionate investment and economic interest in the film. Qualified films do not include sexually explicit productions as defined in section 2257 of title 18 of the U.S. Code.
This proposal applies only to qualifying film or television productions the aggregate cost of which does not exceed $15 million. For television, this cap is on a per episode basis. A higher expenditure cap of $20 million is permitted for productions the aggregate costs of which are "significantly incurred" (i.e. shot) in:
- areas eligible for designation as a low-income community under the New Markets Tax Credit program or
- areas eligible for designation by the Delta Regional Authority as a distressed county or isolated area of distress.
Please see the accompanying sidebar by clicking here more details.
To qualify, at least 75 percent of the total compensation expended on the production must be for services performed in the United States. Qualifying compensation includes payments for services performed in the United States by actors, directors, producers, and other relevant production personnel. Compensation does not include participations and residuals. The new domestic film production incentive program will be in effect for qualifying productions commencing after October 22, 2004 and before January 1, 2009.
"Domestic Production Activities" Income Deduction
This deduction is available for any motion picture film or video tape (but not sexually explicit films as defined in 18 U.S. Code Section 2257), including television programming, if at least 50% of the total production compensation constitutes compensation for services performed in the United States by actors, production personnel, directors, and producers. The new law applies for taxable years beginning after December 31, 2004.
The Next Step
In addition to the member seminar, the Guild hosted three separate meetings on January 11 and 12 with interested entertainment industry parties including agents, producers, executives, lawyers and financiers, to help familiarize them with the runaway legislation; two of these meetings were co-sponsored by IFTA. The seminars and meetings were a solid start to the Guild's continuing commitment to educate and inform our industry about the new provisions which, like all new tax laws, are complex — requiring both time and diligence on the part of producers and tax advisors to determine how best to utilize them.
At the close of both seminars, it was expressed that the DGA remains tremendously grateful to Congress for the passage of the legislation and optimistic that the provisions, combined with the growing number of state incentives, will go a long way toward keeping film and television production — and the millions of jobs it creates — alive and well in the United States.
"We are experiencing a sea change," concluded Hackford. "I believe it will result in this Guild and all the rest of our collaborators having much more work and much better livelihoods."
How to Identify Census Tracks Eligible for the $20 Million Expenditure Cap
To gain access to the mapping software and related data, you must first register yourself with the CDFIFund and subsequently register your company. Please note, you must first register as an individual and then as an company before you are granted access to the mapping data.
Furthermore, once you register a company, the website is going to ask all kinds of questions, such as the date the company was founded, the financial structure of the company, FDIC number, etc. The most important piece of information you will need to register your company is the EIN — Employer Identification Number. The EIN is also used to login as a company. These questions are tailored for financial institutions and all data fields may not need to be completed.
Follow the steps below to gain access to the mapping software and data. Please remember the first step is to register yourself and secondly, register your company.
Go to CDFIFund Website: http://www.cdfifund.gov/
- From homepage, click New User on the left column to register yourself as a new user for the website.
- Once you have registered as an individual, you will need to register a company.
- Once you have registered a company, you will need to access the company by clicking the "Access Organization" box
- Enter the EIN of the company to completely login as the company.
- From right hand column, Click "Mapping"
- Click the word "New" to the right of "NMTC Low Income Communities (this if for data pertaining to the New Markets Tax Credit)
- Check the box to the left of "Census Tracts", than click the "Zoom In" Icon on the toolbar and than click on the State on the Map for which you want to view data. (You can keep clicking the state on the map until it is "Zoomed In" enough to see each census tract by its relative 6-digit Number. To zoom out, just click the "Zoom out" icon on the tool bar and keep clicking to further zoom out, and vice versa for zooming in.)
- You will need to refer to the last 6 digits of the FPIS Number on the attached Census Tract spreadsheet AND look at column H (this is the column that represents the code for the New Markets Tax Credits). If column H has a 1 for the particular Census Tract, this means it qualifies for the NMTC. If column H has a 0, it means the particular census tract does not qualify.
- Color codes on the maps. If the color of the specific region is white (no color) it does not qualify for the NMTC. The color Blue represents that the region does qualify for the NMTC.
As you will notice, this is a rather complicated process that is not user friendly. It may be useful to call Kathy Garmezy and do a "walk-though" to fully comprehend the above directions. Furthermore, once you do gain access to the census tract data, you will notice that it does not give a clear picture of the exact location of NMTC qualifying areas.
The mapping system was designed for setting up specific maps based on a set of various addresses that are imported to the software via the website.. Unless you have a set of addresses, you will not be able to fully utilize the mapping software.
There are other websites that allow you to enter specific addresses to determine the location of the address and whether it is a qualified census tract.
The websites can be accessed through the following Internet links:
- New Markets Tax Credit Qualification Site: http://www.qsgconsulting.net/web/default.asp
- U.S. Department of Housing and Urban Development (address locater): http://hud.esri.com/egis/cpd/rcezec/ezec_open.htm
- Another website for State mapping and address data: http://map.sba.gov/hubzone/init.asp#address
