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Fiscal Cliff Bill Preserves TV/Movie Tax Credit

Some $430 Million in Deductions over Next Two Years Maintained 1/03/2013 9:25 AM Eastern
 
Among the tax breaks that were extended in the fiscal cliff legislation adopted by Congress at the 11th hour this week are ones for TV and movie producers.

According to the bill language, among the tax breaks being extended is one for TV and film producers who spend the majority of their production dollars in the U.S. rather than Canada or other foreign locations. That could represent up to $430 million in deductions for Hollywood over the next two years, according to estimates from Congress' Joint Committee on Taxation.

The tax break was instituted as part of the 2004 American Jobs Creation Act to try and level the playing field with Canada and stem the flight of production to other countries that provide incentives, including their own tax breaks.

TV and film producers are allowed to deduct production costs up to $15 million in the year they are paid (up to $20 million if a significant amount is spent in certain depressed areas, like low-income communities or the Gulf Coast region) rather than recovering them through depreciation. But they can do so only if 75% of the production cost is spent in the U.S.

The Motion Picture Association of America, a big backer of tax incentives both at the state and federal levels, pointed to the economic benefits that will accrue from continuing the incentive program.

"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," said MPAA spokesperson Kate Bedingfield.  "[2.1] million American workers are employed as a result of the American film and television industry, and our industry is responsible for $137 billion in total wages to American workers.  A strong American film industry contributes to a strong American economy."

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