When President Obama signed the $858 billion tax bill into law Friday, he extended a significant federal tax incentive to film and TV producers.

The tax law contains a provision that reinstates Section 181 of the Internal Revenue Code — the so-called runaway production incentive — which allows producers to immediately deduct the cost of qualifying expenditures in the year they occur rather than having to spread or amortize those costs over a period of years after the film goes to market.

The deduction applies to the first $15 million of qualifying production costs. The amount rises to $20 million if the project’s aggregate costs are “significantly incurred” in areas eligible for designation as a low-income community.

The incentive is elective, which means that producers can run the numbers to decide whether to expense the production costs in the first year. The election needs to be filed with the project’s tax returns.

Section 181 covers TV as well as film productions. “For television it applies to $15 million or $20 million per episode, with a maximum of 44 episodes, which is huge,” said Corky Kessler, an entertainment attorney with Deutsch, Levy & Engel. “A lot of companies don’t know this. They’re throwing dollars away.”

Some conditions apply. “Seventy-five percent of the service wages in your budget have to be performed and paid in the U.S.,” Kessler said, “but they don’t have to be paid to U.S. citizens.” In addition, sexually explicit content doesn’t qualify.

Kessler, who specializes in advising producers on the ins and outs of Section 181, will participate in an incentives panel at the Sundance Film Festival. He stressed that Section 181 can be combined with state and local incentives to achieve significant savings. “I tell investors they can have a recovery potential of 50¢-77¢ on every dollar when they combine the benefits of state and federal,” he said.

Section 181 was enacted in 2004 and written to sunset at the end of 2008. The recently signed tax bill represents its second extension and it’s now scheduled to be on the books until the end of 2011. The most recent extension is retroactive to the beginning of this year, so it applies to projects that began principal photography on or before Jan. 1.

“The revived Section 181 applies to films produced in 2011 and applies as well to films produced in 2010,” said Bernard C. Topper Jr., an attorney with Frankfurt Kurnit Klein & Selz. “Filmmakers who produced a film in 2010 should not overlook this tax benefit and should check the filing requirements now that must be met to qualify for 181.”

“Given the aggressive efforts by other countries to attract film productions with tax incentives, the extension of Section 181 should help keep production jobs in America,” said another Frankfurt Kurnit Klein & Selz attorney, Thomas Selz, who heads up the firm’s entertainment group.