Fiscal Cliff Deal Included Tax Provision to Boost U.S. Film Production

Tucked into the fiscal cliff legislation passed by the Senate early on Tuesday and by the House late in the evening was a provision that extends a tax provision designed to boost film production.

The provision, called Section 181, allows producers to expense the first
$15 million of production costs if 75% occurs in the U.S. The provision
is actually modest when compared to incentives offered by other
countries, and it is not a tax credit but a deduction. 

But according to ABC News, the provision has a value of $430 million. It is an extension of a provision that was part of a jobs bill in 2004, the the congressional action extends it for two years. However, one of those years has already passed: The provision is retroactive to Jan. 1, 2012 and runs through the end of this year.

Rep. Howard Berman (D-Calif.) and Rep. David Dreier (R-Calif.) proposed legislation in May to extend the provision, but no action was taken. Berman and Dreier are not returning in the next Congress.

A spokeswoman for the MPAA said in a statement, “The film and television industry is a vital component of the nation’s overall economy, has a positive balance of trade with virtually every country in the world, and has been a significant contributor to growth in our economy…A strong American film industry contributes to a strong American economy.”

That the legislation was inserted into a much larger piece of legislation is not unusual. It also spares the industry from having to fight for the beneficial tax provision in the next fiscal standoff in two months, when loopholes, credits and other IRS sweeteners may be under much greater scrutiny. 

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