Tax Law Renews Section 181 Production Incentives
December 17, 2010

President Obama signed a new tax law that reinstates Section 181 of the Internal Revenue Code. That’s good news for film and television producers. Briefly stated, Section 181 permits an immediate tax deduction for up to the first $15 million of qualifying production costs (more in certain circumstances). Importantly, the reinstated Section 181 applies retroactively to films that commenced principal photography on and after January 1, 2010. This may provide an unexpected significant tax benefit to films already produced in 2010. Section 181 is an elective provision and a film production wishing to take advantage of it for a 2010 production will need to make an appropriate election. The election is made with the filing of the tax return for the period in which the film was produced. As a result, a film production company that has used (or is considering the use of) a short first taxable year, e.g., to receive a state film tax incentive refund, should consider what steps it may be able to take to utilize Section 181 for its 2010 film.

On a going forward basis, the reinstated Section 181 will apply to films whose principal photography commences on or before December 31, 2011.

If you have any questions about this law or any other film or television finance matters, please contact Bernard Topper at 212.826.5547 or btopper@fkks.com or Tom Selz at 212.826.5535 or tselz@fkks.com.