Choosing the Right Production Incentives

Scouting for shooting locations has changed significantly during the COVID-19 pandemic, requiring new criteria like safety protocols, less densely populated locations, and self-contained production hubs. 

Nonetheless, some considerations have remained the same. Producers still want to find unique locations that offer infrastructure like sound stages, production service companies, post-production services and qualified crews. Most importantly, production incentives remain a vital consideration in choosing a filming location in order to subsidize ever-growing production costs. 

Given the significant impact incentives can have on a production, they are an important factor when choosing a location and must be weighed carefully. Here are five key questions producers should consider when selecting an incentive-based location. 

1. Do you understand the type of incentives you are pursuing? 

Incentives exist on many levels, including state, federal, municipal, and provincial. And some are even field-specific, like for example, VFX and animation. Among the options, there are different categories of incentives, which is why it’s important to understand which ones best suit your production’s needs. The type of incentive can impact the timing and, potentially, the net value of your incentive.  

Here are the different categories of incentives: 

REBATES 

Rebates are funds paid to the production company directly from the respective domestic or international film office (or other state agency) and do not require the production company to file a tax return in the jurisdiction.

TAX CREDITS

These are credits against tax liabilities owed to the state in which the production took place. In order to monetize these credits, they generally come in two forms, refundable and transferable:

• REFUNDABLE TAX CREDITS: Refundable tax credits are similar to a rebate, with the exception that the production company must file a tax return to receive the tax refund. Once all tax liabilities are paid for, the production will receive the remaining amount in the form of a rebate from the state. Sometimes this can come at a discounted rate (for example, Louisiana guarantees producers a partial refund at 88%).

• TRANSFERABLE TAX CREDITS: These credits are non-refundable. However, any remaining amount not used to offset the production company’s tax liability can be sold (or transferred) to other companies or individuals with a related state income tax liability. The credits are sold at a discount, usually at about 90-94% of face value (as in Georgia). Note: Massachusetts gives producers the option to sell their credit to 3rd parties, or allow the State to provide a partial refund at $0.90, and, some states (e.g., California and now Tennessee) allow the tax credit to be offset against Income/Franchise Tax and Sales & Use Tax.

NON-REFUNDABLE/NON-TRANSFERABLE TAX CREDITS

These are credits that cannot be monetized (refunded or sold) by the production company and therefore must be used toward any tax liabilities owed to the state. 

2. Do you understand the criteria to qualify your production for the related production incentives? 

States and countries have different qualification requirements for incentives. It’s important to know what they are and honor them. The most common requirements can be a minimum budget and/or spend, as well as a set-number of production or sound stage days. There may be a necessary local crew hiring requirements, or the qualification of local residents only (e.g. Canada) and diversity hiring and/or reporting requirements – or even end title credit requirements. For example, including the Georgia Peach Logo in the end credits of a production shot in Georgia is worth an additional 10% Georgia tax credit.

International locations - like within the United Kingdom and European Union – will have their own unique criteria, too. For example, many European countries require productions to pass a cultural test, which involves ensuring the source of content, a specific number of local crew, talent, and locations are used. 

3. Do you know what costs qualify for, or impact, the incentive? 

Not all costs (or 100% of a cost) will qualify for an incentive. Knowing what is – and is not – covered is important to understand before making your location decision, in order maximize the production’s financial benefits. Incentives may have qualifications pertaining to resident vs. nonresident labor, above and below the line talent, or even caps on compensation, and specific in-state vendor requirements. 

In addition to these considerations, the personal tax situation of the cast and crew in a selected jurisdiction can impact some production’s incentives too (e.g., New Mexico’s Gross Receipts Tax for ATL Loan-Outs or Hawaii’s Excise Tax on Non-Resident Loan-Outs). 

4. Are you confident you know everything you need to know? 

Choosing a film location based on a desired incentive is only the start. After making a choice, it’s important to be clear and confident about every element of an incentive in order to maximize benefits and minimize problems. Application processes, current incentive laws, and the above particulars, all need to be understood in full. As do all legislation, regulations, policies and procedures related to the incentive(s). 

Awareness of pending legislation, which may impact your production, is also critical as laws are continually changing. Are there project caps and/or annual funding limitations determining when and if you will receive the cash benefit from your incentive? These are only a sample of what needs to be fully understood for a chosen incentive. 

5. Do you need expert help? 

If you want true confidence and certainty, it’s important to rely on the expertise of others – especially given the complexity of incentive laws. That’s why Entertainment Partners has the experts and the resources to help you navigate the laws and procedures throughout the entire process (or handle the entire process for you).

With the industry’s most comprehensive collection of information about international production incentives, our newly enhanced production incentives tools will help you make your creative vision a reality. Visit our Production Incentives page to view incentives by geographic location, the Incentives Estimator to calculate savings by North American locations, or the Jurisdiction Comparison tool for quick side-by-side views of incentives in up to 3 locations at once. In addition, learn more about how our Incentives Administration team can take the guesswork out of the incentive process, maximize your tax credits, and help you secure the financing you need.