This Tuesday, April 17, 2018 marks the last time you will file personal tax returns under the old tax code. Beginning this taxable year, many of the itemized deductions offered to individuals have been eliminated in favor of a larger, standard deduction. While the pros and cons of this change have been analyzed and debated on both sides of the aisle, an interesting remnant of the old deduction framework still remains, which applies to producers of television, film and live-theatrical productions (albeit in slightly different form) --
Section 13201(g) & (h) of the new Tax Cut & Jobs Act allows taxpayers to deduct 100% of qualified production costs for film, television, and live theatrical performances in the tax year in which the production is placed into service (i.e. the year in which distribution first occurs) after September 27, 2017 and before the year 2023. In replacing the similar deduction offered under Internal Revenue Code Section 181, this new section possesses two key distinctions from the old code section:
The deduction may not be claimed until distribution of the program occurs (under Section 181, such costs were immediately deductible); but
There is no cap on the total deduction that can be taken (under Section 181, the deduction cap was $15 million, and qualification depended on the percentage of services performed in the United States by actors, directors, producers, and production personnel).
For qualified content producers, inclusion of Section 13201 within the new Tax Cut & Jobs Act is particularly meaningful then, because it allows for every qualified dollar spent on production to become an above-the-line reduction of an individual’s taxable income. For this reason, Section 13201 can also play a critical role in a filmmaker’s pitch to potential investors to raise production capital. Determining when the deduction can be realized may be tricky if distribution of the program won’t occur right away, so make sure to work with the right entertainment-focused legal and tax professionals to ensure accurate accounting.
If you would like further guidance regarding Section 13201, or any other production-related legal matters, please call AltView Law Group at (310) 230-5580 for a free consultation or email firstname.lastname@example.org.