US Federal Tax Incentives for Film and TV


THR, Esq. reports on news that the US Congress has renewed a federal tax incentive program through 2011: Production Tax Incentives Extended, but Should Hollywood Care? (The text of Section 181 of the US Internal Revenue Code can be found here.) Unlike Canadian tax incentives for film and television productions, which are structured as tax credits (meaning that the eligible applicant receives an actual payment from the government), the US federal incentive is structured as a tax deduction - meaning that it can be used only to lower taxes which would otherwise be payable. The THR, Esq. article includes an interesting debate between various entertainment lawyers, some of whom laud the federal credit and others who question its practical utility:

At the most basic level, cautions tax counsel Bernard Topper of New York entertainment law firm Frankfurt Kurnit Klein & Selz, people confuse tax deductions with tax credits. Credits reduce taxes dollar for dollar: a $100 tax credit reduces your taxes by $100.

In contrast, a deduction comes off of taxable income. That results in a lower savings. For instance, if you’re being taxed at 30%, then a $100 tax deduction saves just $30 in taxes.

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