The information provided below is a summary of a federal program and is provided by Ernst & Young and the Directors Guild of America on an informational basis only. It should not be viewed as tax advice with respect to your production activities. For such advice, consult with your tax advisor.
The American Jobs Creation Act (H.R. 4520), signed into law in 2004, includes new tax provisions to encourage domestic film production. Film and television productions benefit in three ways:
Section 181 — This section of the IRS tax code allows an immediate tax write-off of production expenditures for domestic film and television productions with aggregate costs under $15 million (or, in certain low income areas, productions with aggregate costs under $20 million). This means that for qualified productions, production expenses may be deducted in the year the expenditure occurs, instead of being depreciated over a period of years using the traditional income forecast method. For a production to be eligible, at least 75% of the total compensation must be for services performed in the United States by actors, directors, producers, and other production personnel.Click here for a more detailed explanation of this provision.
Click here for a list of frequently asked Questions about this provision.
Click here for the Writer’s Guild of America Section Section 181 Brochure
Section 199 — This new section of the IRS tax code provides for a 9% deduction for income from domestic production activities, when fully phased in. This deduction applies to multiple industries, not just the film and television industry. The amount of the credit is limited to the lesser of 9% of the net income generated by the domestic production or 50% of the taxpayer’s W-2 wages. For a production to be eligible, at least 50% of the total compensation for actors, productions personnel and others relating to the production of the film must be for services performed in the United States.Click here for a more detailed explanation of this provision.
Income Forecast Method Clarification — The law also clarified several issues relating to the income forecast method, the traditional method of expensing production costs.