Tuesday
Jul212009

Tax Incentives

As of 2004 the Federal GOVERNMENT AMMENDED THE TAX CODE TO HELP INDEPENDENT FILMMAKERS. Bill HR 4520 (2004) allows us to offer a great tax incentive if you invest in our feature film. The film budget must be below $15,000,000. Your investment is 100% tax deductible. This is a code section 181 special election. The investment can be taken as a deduction the same year that the money is spent making the film.

    Example: If you invest $100,000 in a $500,000 budgeted film once the money is spent in the production of that film you can take a $100,000 off your income tax. It is that simple. If the production spans two years then the portion spent in year one applies to that years taxes and the portion spent in year two applies to those. Don’t pay Uncle Sam, invest with Black Shield Pictures, LLC.

    Retail Investors who either want to take a 100% Federal deduction under Section 181 or “The American Jobs Creations Act” against their passive income, or corporate investors and family offices that want to take the deduction against their ordinary income can leverage their investment with monetized state tax credits to get a return before a return. In practical terms a $50,000 investment in a film will generate approximately a $17,500 federal tax reduction assuming an investor's tax rate is 35%, and, a $15,000 cash return from the sale of a film production tax credit assuming the film is shot in Illinois using the 30% state tax credit.The same holds true for larger private equity players or regular C corporations that want to reduce their overall federal tax liability. For larger deals a $10 million dollar film shooting in Illinois, $5 million would be equity, $5 million would be non-recourse debt through international pre-sales of a film. Assuming a discounted rate of about 28% ( from 30% ) tax credit from Illinois, that equals approximately $2.8 million dollars back into a film fund before revenues. Now assuming a Section 181 deduction is applied at a federal tax rate of 35%, an additional $1.75 million dollar reduction in Federal income taxes may be achieved so in effect investors are getting back almost $4.6 million dollars on a $5-10 million dollar investment before revenues, additional pre-sales, licensing, etc.