TV series producers appear to be the major beneficiaries thus far from a federal tax break aimed at keeping small-budget features from fleeing the U.S.
That was a key conclusion Wednesday evening from a panel hosted by a pair of showbiz tax experts: Ernst & Young senior partner Jeff Tolin and PricewaterhouseCoopers partner Rick Rosas. The “Making Cents of New Tax Incentives” event, sponsored by the Academy of Television Arts & Sciences, drew more than 100 people to CBS Studio Center in Studio City.
Rosas and Tolin focused on the nuances of the film provisions contained in the American Jobs Creation Act, signed into law last fall by President Bush. The language allows producers of films with budgets under $15 million to immediately write off their costs in a single year — if 75% of their principal costs are incurred via shooting in the U.S.
Previously, producers had to amortize those costs over several years.
“While the legislation was designed for the writeoff to be taken for independent films, TV really has the right scale to take advantage of these incentives,” Rosas asserted. “On the TV side, it’s being used a lot.”
Rosas and Tolin indicated that feature producers appear to be less inclined than their small-screen brethren to take advantage of the new provisions because of their concerns that production costs will exceed the $15 million cap. They also noted that the language contained in the legislation applies to all features — including animation and documentaries — and may even be broad enough to be applied to costs on TV news and sports programming.
Rosas and Tolin asserted that they disagree with assertions that the bill unintentionally opens an avenue for investors who sell a film to be taxed at the 15% capital gains rate rather than the 35% income tax rate.
“That would be an interpretation that is not going to happen,” Tolin declared, adding that Congress is likely to make certain by correcting the language.