New Federal Bill Proposes 20% Federal Tax Credit for Film and TV Productions

A bipartisan group of lawmakers has introduced a new federal bill, the Motion Picture, Television and Entertainment Revitalization Act, aiming to establish a 20% tax credit for eligible film and television productions in the United States. The proposed legislation seeks to address the ongoing exodus of film and TV production from the U.S. by offering a national incentive, according to reporting by TheWrap and Spectrum News. The bill, spearheaded by Senators Adam Schiff (D-Calif.) and Tim Scott (R-S.C.) in the Senate, and Representatives Laura Friedman (D-Calif.), Nathaniel Moran (R-Texas), Linda Sanchez (D-Calif.), and Brian Jack (R-Ga.) in the House, has garnered support from various industry groups, including the Motion Picture Association and unions like IATSE and the Directors Guild of America, as noted by TheWrap.

Financial Structure: Base Rate and Bonus Incentives

The core of the proposed legislation is a 20% base tax credit on U.S. labor expenses for qualifying film and TV productions. This uncapped credit would cover a broad range of labor costs, including those for production crews, above-the-line personnel such as actors and writers, and post-production and visual effects work, according to the Los Angeles Times and The Hollywood Reporter. The incentive can increase to a maximum of 30% through a series of 5% bonus uplifts. These bonuses are designed to encourage specific production activities:

An additional 5% for independent projects.
An additional 5% for productions that film at least 30% of principal photography days in a rural qualified opportunity zone or a federally declared disaster area.
An additional 5% for projects filmed in 10 or more states across the country.
An additional 5% for productions that demonstrate an increase in domestic production relative to a historical foreign-based amount.

These bonus categories are detailed in reports from the Los Angeles Times and The Hollywood Reporter.

Eligibility and Exemptions for Productions and Expenses

To qualify for the federal tax credit, projects must meet specific criteria outlined in the current text of the legislation. A project's budget must exceed $1 million, and at least 75% of its filming must occur within the United States, as reported by The Hollywood Reporter and Spectrum News. Eligible expenses primarily focus on U.S. labor, encompassing costs for production crews, actors, writers, and specialized post-production and visual effects labor, according to the Los Angeles Times. However, certain types of productions are explicitly exempt from the tax credit. These exclusions include news programs, talk shows, soap operas, live sports broadcasts, social media videos, commercials, and corporate videos, as specified by The Hollywood Reporter.

Interaction with State-Level Incentives

A key feature of the proposed federal tax credit is its design to complement existing state-level film tax incentives. The federal incentive would be eligible to be "stacked" on top of individual state tax credits, creating a combined incentive package for productions. This approach is similar to systems currently in place in countries like Canada and Australia, according to The Hollywood Reporter. This mechanism aims to make the U.S. more competitive globally in attracting and retaining film and television production.