Home | In the News | FAQs | Science of Producing | Hollywood Minefield | Accounting | GMT Team | Slate of Films | Conclusion | Contact

100% Tax Write Off

Bush's 100% Tax Write-Off for Movies, TV & DVD’s

The congressional extension of the Bush 2004 tax cuts also included the extension of the 2004 Motion Picture Tax Exemption Law (known as Section 181). This tax law provides a 100 percent tax write-off in the year which you invest in a Movie, TV or DVD production.
How the TV/Movie Tax Law Works

Here's our understanding of the Tax Law on Movies/TV shows. Have your accountant or tax attorney review the law and the tax opinions to see if they come to the same conclusions.
Here are the highlights of the Bush Tax Law:

  1. Congress made family films up to 15 million dollars 100% tax deductible for the investor in the year of investment. What other investment can you do with a 100% write-off per the IRS Code?
  2. If the investor is in the maximum tax bracket, the investor realizes a cash back tax deduction of 42% of the investment immediately in the current tax year.
  3. If the investment is held longer than a year, then the payments back to the investor are capital gains taxed at 15% of the money received back.
  4. Congress also gave a 9% top line tax credit to the investor. This means that for every 100 dollars paid back to the investor, only 91 dollars is subject to tax.

How the Numbers Work on the Film Tax Write-Off
Let's put this all into an example to better understand what a great tax benefit is being offered by this Tax Exemption Law:
The investor invests one million dollars. The investor writes off the entire million dollars in the current year. Investor gets back (or saves) $420,000 that does not have to be paid on the investors first million in income for that year. The money returned to the investor from the actual investment comes back as capital gains taxable at 15 to 22% (depending on tax bracket). The returned money also has a top line tax credit of 9%—so when the million is returned the investor only has to declare $910,000 . . . giving the investor an additional savings of $37,800 (42% of $90,000). If the investor immediately re-invests the returned million dollars, the whole process starts over again if the tax law continues to be renewed. Of course, this works on smaller invested amounts too.

Obama Tax Bill Resurrects Credit for Indie Filmmakers and Investors

By Jeff Steele
Published: December 19, 2010 @ 11:50 am
The new tax bill that Obama recently signed into law will extend the Section 181 film tax credit to the end of 2011. In addition, it can be applied retroactively to all qualifying films produced in 2011 and 2010.
The bill allows producers to deduct the cost of qualifying expenditures in the year they occur rather than having to amortize those costs over several years. This is great news for independent filmmakers and their equity backers.
The bill was originally signed into law as part of George W. Bush’s 2004 Jobs Creation Act, but it expired at the end of 2008. Now it has been resurrected as part of the controversial Republican lead tax bill. I don’t think most indie producers had this in mind when the media and Democrats labeled the bill as tax credits for America’s richest 2 percent . . . but then again, that’s the same 2 percent that provides most of the equity that backs indie films.

Tax Opinion Letters Available By Email

We have two attorney tax opinion letters plus notes from a Section 181 Tax Seminar that we'll email to you immediately upon request. Think about it—It's really rare that you can make an investment in family entertainment, get a 100 percent write-off, and impact the culture at the same time.

Home | In the News | FAQs | Science of Producing | Hollywood Minefield | Accounting | GMT Team | Slate of Films | Conclusion | Contact