Tax Incentives to Lure Film Production to US and Halt Runaway Production Moves Through Congress
By Tom McClimon
November 3, 2003
Movie and television productions made outside the United States cost the US economy over $10 billion in lost revenues in the 1990s. This so-called runaway production is the result of countries like Canada, Australia, and Mexico offering tax incentives to production companies to make their films outside the US
Over the past couple of years, efforts have been made in Congress to help "level the playing field" and provide incentives in this country in order to retain these productions. The Conference of Mayors has passed two resolutions in support of these efforts and mayors have lent their voices to the efforts being made on Capitol Hill.
Recently, both the House and the Senate have taken steps to address this issue. In a recently passed "Jumpstart Our Business Strength" S.1637 (JOBS) bill, the Senate Finance Committee included language which provides tax incentives to film and television production companies to film in the United States. The provisions would allow the cost of qualifying films to be immediately expended in the year the expenditures occurred. The proposal would limit the provision to expenditures for productions costing between $200,000 and $15 million. A higher expenditure cap of $20 million would apply to productions located in empowerment zones. At least 75 percent of the wages expended on the production must be for services performed in the United States.
While the House Ways and Means Committee, in its bill "American Jobs Creation Act" HR 2896 did not pass any direct runaway production provisions, Chairman Bill Thomas did indicate his desire to include runaway production provisions in the final bill that will be worked out between House and Senate conferees. The House bill did include some provisions relating to film production which might indirectly assist in efforts to produce more films in the United States. The first provision reducing corporate income tax rates for domestic film production where 50 percent or more of the total compensation are for services performed in the United States by actors, production personnel, directors and producers. The second provision allows for special royalty exclusions on income earned overseas provided that at least 50 percent of their production services were performed in this country.
Both the Senate and House bills now await action by the full House and Senate.