The ability to negotiate the appropriate location, and one offering tax and/or cash-in-hand incentives, can be a godsend when seeking funds to start and complete a production.
However, at times, a seemingly dream incentive becomes a nightmare when trying to wade through the grants, tax rebates, or cash-back deals offered by about two-thirds of U.S. states, every Canadian province and territory, and a growing list of countries around the globe.
That said, eye-catching incentives from film and TV commissions and entities can certainly be important in helping achieve and overcome some of the many demands a production faces.
Eye-catching is one thing, reality is another, as not all of those tantalizing offers are as wonderful as they appear at first sight, at least when it comes to actual cash in hand!
Take that “20 percent back” offer. Is it a grant requiring months of wait time and reams of complicated paperwork? Is it cash in hand? And if so, when will you get it? Is it a tax break? And if so when will you get it? Do you have to work with a local production company to get a break, or use local talent, or can you just walk in, work, and collect as you leave? Having a very experienced accountant (and attorney) on hand to decipher and clarify many of the incentive offers is definitely a must in order for everything to be clear.
When looked at by savvy financiers, your deal may be the key to full financing. “You have 20 percent of the budget (through incentives), that’s great, I’ll give you the other 80 percent,” the deal seems to say.
However, it isn’t always as easy at that. If the financier decides he wants the 20 percent back once the project is posted and out the door, or at best a few months after that, your 20 percent back can then become a nightmare. The incentives come with so many riders you could go crazy trying to fathom the oft-times confusing, even seemingly contradictory, rules. Your crew, so carefully put together, might have to be reconfigured because local talent must be involved in order to receive that incentive. Your percentage return is not actual cash in hand that you will receive immediately, but a tax credit, which could take a while. In some instances “it could be as much as two years,” said Dave Bowers, principal of the Fort Washington, Pennsylvania-based Film Incentives, an entity specializing in providing certain incentive services. Backers don’t always want to wait that long, even for a return that seems really good (on paper at least).
To start with, who and what can even qualify for these incentives? Some states and countries won’t provide them for a variety of subjects, which could include one, or several, of the following: fiction, commercials, animation, mu-sic videos, documentaries, children’s content, TV production in general, TV episodes or series, productions without the inclusion of local content or talent, and even productions with certain themes. Thankfully, others generously reimburse for almost any genre and every local expenditure (which also includes local hires), production costs, and certain other services.
Sadly, some U.S. states have removed their incentive programs, believing they don’t sufficiently benefit the local industry, talent or economy, and showed a negative on their books, while others, such as California, finally gave in and introduced incentives just a few years ago.
Confusion also abounds as to who is doing what. Some years the incentive parameters go up and some years they go down. Other years someone pulls out of the program, or someone else joins in. All of this results in having to do detailed research each and every time you need money to film something.
A new tweak to the incentive package arrived in the U.S. around 2005, and now means that production tax credits are a growing re-sale business in some states (Georgia, for example). Many production companies may not have a registered business in a state they are working in and the tax credit they receive will not do them any good.
Help is at hand through entities such as Film Incentives which are able to sell off this credit to entities or individuals who do live and work there and will buy them for anywhere between 85 percent and 95 percent of the value. The production company can then write off this loss. However, if a production company expects to return to that state within five years they may well be allowed a “carry forward” to utilize the unused credit at that time.
Within the U.S. there’s often a rule insisting on local hires in order to qualify for rebate incentives, but in Canada and most countries overseas, hiring local talent and even utilizing a native production entity is a must in order to qualify. Thus, the local entity actually receives the incentive and splits it with you! Those savvy enough will set up their own company in that country — though there may be some “residential” obstacles to overcome — and “team up” with their own overseas company. And don’t forget to rent out equipment, transportation, etc., to your U.S. company in order to get a break on that, as well! Often, the beauty of that will be a generously reduced business tax on your “foreign division” and full receipt of the overall incentive.
Should you be shooting a series with a long production schedule in some overseas territories you may even receive quarterly payments of your cash-back share during production. Though it could be “an anomaly,” according to Film Incentives’ Dave Bowers, Malta is one such territory, and offers a 40 percent cash incentive. The amount could go as high as 50 percent of eligible expenditures for a production described as a “Difficult Audiovisual Work.”
According to the website “Film Production in Flanders,” the federal government of Belgium and the government of Flanders offers “a tax exemption of [an incredible] 310 percent on the sum that an organization invested in Belgian audiovisual work.”
Additionally, they cover up to nearly 66 percent of eligible audiovisual spend in Flanders. According to Jan Roekens, head of Production at Screen Flanders, “colleagues in the French-speaking territory of Belgium (Wallonia)” also come close to that same level of incentives, through the Wallimage service.
Other limitations to watch out for everywhere, include a minimum limit on your production costs and a maximum limit on the amount you can claim back.
Closer to home, the San Antonio Film Commission offers what it claims to be the most competitive local incentive program in Texas with a 7.5 percent rebate program, which, when added to the state program, means a rebate total of 30 percent.
Additionally, the local Film Commission and the Parks and Recreation Department of the City of San Antonio waive filming permit fees for productions of all sizes.
On the east coast, New Jersey offers a tax credit of 30-35 percent, plus a two percent diversity bonus, as well as an exemption of state sales tax.
Louisiana offers a redeemable tax credit, meaning a production can “redeem a tax credit with the State for cash at an effective rate of 88 percent of the tax credits earned after payment of transfer fees.”
North of the border, different Canadian regions’ incentives, when combined with federal incentives, offer tax credits ranging from 32 percent to 70 percent of eligible labor costs, along with local qualifying spends, which range from 20 to 30 percent.
For producers shooting in certain European countries there are other financial possibilities. In addition to a national tourism program (available almost anywhere else in the world as well), there are government film entities (local and national) and/or tourism bureaus in cities, regions, departments, arrondissements, and cantons (known by different names in different countries), covering every hamlet, village, town, and city. They will not only help your shoot while there but also provide some financial aid, as you are promoting their area. While the financial amount is by no means huge, their assistance certainly is and can also save money and time on a whole host of things.
Working out the best location, not just for what looks good on screen but looks just as good on a bank statement can be as sticky as molasses. But the right decisions can be just as sweet.
By Mike Reynolds
Audio Version (a DV Works service)