New Federal Tax Credit Could Boost U.S. Film and Television Production

A new bill introduced in Congress aims to bring film and television production back to the United States by offering a significant federal tax credit. Proposed by Representative Laura Friedman, the Motion Picture, Television, and Entertainment Revitalization Act would establish a 20% tax credit on qualifying U.S. production labor. This initiative could potentially increase to 30% with additional bonus incentives, encouraging productions to spend more money and create jobs domestically.

The legislation is designed to counteract the trend of productions moving overseas to take advantage of more favorable tax incentives offered by other countries. By providing a federal incentive, lawmakers hope to make the U.S. a more competitive location for the film and television industry. This could lead to a substantial increase in job creation and economic activity across the nation.

Key Requirements for the Tax Credit

To qualify for the proposed federal tax credit, productions must meet specific criteria related to budget and domestic activity. The bill sets a minimum production budget of over $1 million. Furthermore, at least 75% of principal photography days must take place within the United States. This requirement ensures that the core filming activities are anchored domestically.

Post-production and visual effects work also have specific location requirements. These services would qualify for the credit if at least 75% of their associated costs are incurred within the United States. These detailed tests aim to ensure that the tax credit directly supports U.S. labor and services throughout the production process.

Bonus Incentives to Reach 30%

The proposed bill includes four bonus routes that could increase the base 20% tax credit by an additional 10 percentage points, bringing the total to 30%. These bonuses are designed to reward specific types of production activities and investments. One bonus route offers an additional 5% credit for filming in rural areas or federally declared disaster zones, encouraging production in less-traveled locations.

Another bonus is available for productions that qualify as independent. This provision aims to support smaller studios and independent filmmakers. Additionally, a bonus can be earned by demonstrating multi-state spending, requiring at least $10 million in qualified compensation across 10 or more states. The final bonus is tied to increased domestic production compared to a historical foreign base, incentivizing a shift away from international filming.

Transferability of Tax Credits

A key feature of the proposed legislation is the ability for producers to transfer unused tax credit value to another taxpayer. This provision is particularly important for productions that may not have enough federal tax liability to fully utilize the credit themselves. By allowing them to sell the credit, even productions with lower tax burdens can benefit from the incentive. This mechanism aims to maximize the impact of the tax credit program and ensure that its value is realized by the industry.

Exclusions from the Program

While the bill targets film and television production, it specifically excludes certain types of content. News programs, live sports broadcasts, talk shows, and daytime dramas or soap operas are not eligible for the credit. Additionally, social media content, advertising, and corporate videos are also excluded from the program. These exclusions narrow the focus of the tax credit to qualifying feature films, television series, and visual effects work, ensuring the incentive is directed towards the intended sectors of the entertainment industry.

Addressing the Shift of Production Abroad

The introduction of this bill comes after years of Hollywood lobbying for federal support as productions increasingly moved to countries like Canada and the United Kingdom. These nations offer substantial labor-based incentives that can be combined with local programs, making them attractive alternatives for producers. The proposed federal credit could potentially be combined with existing state-level incentives, creating a powerful package of support for domestic production. This legislation represents a significant effort to bring jobs and investment back to the United States, making it a more competitive global hub for film and television creation.

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