How To Tag Your Budget for the California Film Tax Incentive in Showbiz Budgeting

California Film Commission Logo and Title Screen for Tagging your Budget for the CA Film Tax Incentive

The California Film Commission demonstrates how to tag your Showbiz budget for the CA film tax incentive.

UPDATE: As a followup to our webinar on the California film tax incentive program 3.0, let’s take a moment to review just how to tag your budget to take full advantage of the California production incentive.

While there are some great new features to the film tax incentive program in California for 2020, this instructional video from the California Film Commission remains an excellent starting place. To get your film budget in shape for taking maximum advantage of the California incentives, watch the video below:

Now let’s break down some of the finer points of tax incentive budget tagging from the California Film Commission here.

What subgroups do I need in my budget for the California film tax credit?

The CFC makes great use of subgroups in Showbiz Budgeting for properly tagging your California film tax incentive items. Here are the four film budget subgroups to use for tracking the California incentive:

  • Qualified Wages – the film commission suggests the subgroup QW
  • Qualified Expenditures (Non-Wages) – here the suggested subgroup is QE
  • Visual Effects – subgroup VU
  • Non-Qualified Expenditures – subgroup NQ

Is there a suggested chart of accounts for the California film tax credit 3.0?

The subgroups above will make more sense in context if you review the downloadable chart of accounts for the California film tax credit program 3.0 from the CFC’s website. You’ll find some additional categories for your project’s budget there, including XX for production expenditures outside the state of California.

After setting up subgroups, CFC demo video goes on to demonstrate how to do the actual tagging of your film budget for the California incentive. This can be done either line-by-line or by highlighting several budget line items at once and applying a subgroup in bulk.

Per the CFC, this includes tagging Visual Effects budget line items as VU in addition to QW or QE, in order to calculate your JOBS ratio bonus points for the film tax incentive in California.

Speak to an entertainment payroll expert today to discuss budget tagging for the CA film tax incentive in more detail.

Production Incentives Roundup: Where We’ve Been, Where We’re Going in 2020

With folks in Santa Monica from around the world for the kickoff of the 2019 American Film Market and Conferences, where Media Services is the Presenting Sponsor, we thought it’d be a great time to round up some upcoming production incentives offerings from around the United States, particularly California.

California, Here We Come (for Incentives Program 3.0)

California is about to have a slew of new changes to its production incentive offerings, as Program 3.0 launches in July 2020. CA will get $330 million to go into their incentives pot. This time there will be even more allocated for independent productions, and independent projects with budgets under $10 million will have their own basket of credits to pull from. This is a major development, as the current program has large and small independents competing for the same film incentive funds, sometimes to the detriment of the smaller ones.

The Golden State will also roll out a new career-based training program as well as having a new requirements showing efforts to hire more women and minorities on productions. Production must also sign a pledge condemning any sexual harassment on the job.

The state will additionally have a brand-new incentives bonus for areas outside Los Angeles. This has become a common trend we are seeing in more and more states. It helps spread production through a state and create good faith for legislators whose districts lie outside a production area. Look for California to have an increase in independent production next year, due to these filming incentives enhancements.

The current 2.0 production incentives program is seeing its window close on applications for relocating or reoccurring TV series, as November 4-8 is the final time frame. Features will have one last chance to apply to the current program: March 9-13, 2020.

New York Production Incentive: Start Spreading the News (to Web Commercials)

New York recently had some welcome news for branded content specialists as in 2020, they will allow for online commercials to qualify for the New York Commercial production incentive. This forward-thinking expansion will broaden the New York incentive outside the traditional broadcast commercials they currently cover. Look for more info and rules about this evolution to come in January.
New York also made a slight change for tax credit programs which affects the overall credit allocation. Any New York credits dispersed in 2020 will have a .025% reduction applied to them that will in turn cover diversity job training in the state.

Montana: Incentives Are Back in Big Sky Country

Montana’s production incentive came roaring back earlier this year. The state resurrected a transferrable film tax credit that gives clients upwards of 25% on labor in the state, as well as 20% on qualified Montana production spend. A trifecta of bonuses can bring that 20% film credit up to 30% and even higher. They have a low minimum spend and $5 million in the incentives tank, ready to go for productions in the area.

Mississippi Re-Incentivizes Non-Resident Labor for Productions

Mississippi had become one of the forgotten states for production in the last two years since their production incentives program stopped qualifying non-residents working in the state. However, earlier this year, they brought that element of the incentive program back. Production is increasing in the state as a result, and hopefully some more positive changes to their legislation next year will continue that trend.

New Mexico Riding High with Latest Incentives

New Mexico was of course in the spotlight this year, and we covered it here. They have a 25% refundable rebate, a grab-bag of bonuses, a bunch of infrastructure, and their innovative new production partner program will continue to attract companies like Netflix and NBC Universal to the state. Look for New Mexico to explode in 2020.

Bumps in the Night: Colorado, Pennsylvania, Rhode Island and Hawaii Film Incentives Get Fund Increases

Colorado’s production incentive recently received a much-needed bump in its film funding, adding $1.25 million to the pot. So they have a $2 million dollar funding cap right now on a very good rebate program. Applicants can still get 20% on all labor and spending incurred in the state. They hope the bump will bring some new shows to the area and give rise to an even larger increase in funding next year.

In addition to the surprise increase to Colorado and its funding, Pennsylvania received $5 million increase to their already impressive $65 million funding pool. Hawaii managed a massive 43% increase to their $35 million cap, ending at $50 million and with hopes for more next year. Rhode Island also received a $5 million bump to their $15 million pot.
Illinois has extended their program to 2026, Arkansas extends theirs to 2029, and Ohio continues to fund its program.

Tried and True Incentives Giants

Throughout 2019 incentive productions have continued to succeed. Georgia remains a strong filming state, Louisiana has really picked up steam again, and states like Alabama, Ohio, South Carolina and New Jersey are getting some great productions.

Making Their Way Back

North Carolina and Florida are working hard currently to bring work back to their filming communities with help from their production incentives. We look forward to tracking their progress in 2020 and beyond.

The Definitive Guide to New Mexico’s Film Tax Incentive

payroll tools incentives icon

As one of the first states in the U.S. to offer production tax incentives, New Mexico’s program has had its share of changes over the years.

From blockbusters to Breaking Bad

In 2011, the program seemed to have hit its high-water mark when three major features were shot there: Thor, Fright Night, and Cowboys and Aliens. Just after that, talk of capping the program took the forefront, giving pause to the bigger studios considering the state for production incentives.

New Mexico hot air balloonsFollowing that 2011 whirlwind of tentpole features, New Mexico began to realize what most states had not yet: that TV was really the ace in the hole when it came to the state’s economic impact from productions. Thus the so-called “Breaking Bad Bill” was born. The state was once ahead of the curve in creating a bonus incentive on top of their base incentives, adding an extra 5% to TV series and Pilots meeting certain criteria.

The success of Breaking Bad was unprecedented. What’s more, shooting Albuquerque for Albuquerque made it a showcase for New Mexico, spawning tourism and ancillary business, such as the ubiquitous RV tours that continue to this day. The dream of landing another such showcase became attractive not just to New Mexico, but to other states as well.

This started a trend in which many states are keener to bag a (hopefully) long-running television series than a one-and-done feature. So even though New Mexico did get a somewhat low cap, they succeeded still by incentivizing TV shows and other independent projects.

What’s new with the New Mexico film tax credit?

The focus on TV has now carried forward, and New Mexico has once again gone through the next evolution of their production incentive. As it stands now, New Mexico offers 25% in a refundable credit on any qualified-spend items purchased through New Mexico vendors, as well as any New Mexico resident wages.

The 25% tax incentive is also applicable to nonresident talent, given certain criteria are met. New Mexico does not have a minimum spend, which makes it attractive to independent productions. The funding cap also doubled, from $55 million to $110 million – great news in itself, but even more on this in a moment.

The new version of the tax incentive retains the 5% TV bonus. So as long as a show has at least six episodes and spends $50,000 per episode in the state, producers can realize a combined return of 30% in refundable tax credits. Veteran shows like Better Call Saul and Longmire continue to take advantage of this offering. Pilots may be able to capitalize on the TV bonus incentive as well.

Not wanting to leave features out, the state also offers a 5% bonus for features utilizing specific facilities. Plus, there is a brand-new rural bonus that gives 5% to those productions filming at least 60 miles outside the Bernalillo and Santa Fe areas.

The Netflix loophole changes everything with New Mexico’s tax incentive

It’s the addition of the “New Mexico Film Partner” language in the incentive that once again puts the state in a unique situation and makes this newest signed legislation a gamechanger. It basically says that if a production company agrees to make projects in New Mexico and invest in a New Mexico production facility for at least 10 years, they are exempt from the state annual incentive cap.

This is huge, for two reasons.

1. Big players are free to spread their wings

Freedom from the incentive cap allows “Film Partner” companies like Netflix and NBC Universal to fully capitalize on New Mexico’s 25-30% offerings with no concerns about funding allocations. That encourages them to bring their big productions to the state, since they can realize the full savings.

2. The little guys can still wet their beaks

Because the Film Partner studios won’t be using up all the cap, this also means New Mexico tax incentive dollars that go to those shows won’t deplete the $110 million fund for the smaller films and TV series. This effectively creates an enormous increase in film tax credit funding for productions in New Mexico.

This unique Film Partner program is ambitious and keeps New Mexico ahead of the curve. NBC Universal and Netflix have both committed to large facility investments in Albuquerque, basically creating or revamping top-tier studio space. The state and Albuquerque have both chipped in toward those costs through allocated funds, but they know it means a big slate of projects is coming down the pike. That means more tax revenue and jobs will be following close behind.

These commitments mark a major leap forward in creating longevity for New Mexico production, as it will build up infrastructure as well as increase the production crew base in the state.

What are the challenges of the New Mexico film tax incentive?

There are some unique hurdles when filming in New Mexico. First, not everything qualifies for the 25% in refundable credit. Indeed, some Above the Line does not qualify at all. Directors, writers, producers, and costume designers, just to name a few, do not count towards the credit. In addition, nonresident Below the Line crew only qualifies for 15% refundable tax credit, and pre-approval of that crew is necessary.

Super Loan Outs don’t have to be super expensive

Additionally, in order for that nonresident talent to qualify, New Mexico income tax withholding is required and, in some cases, a “Super Loan Out” is needed to pay gross receipts tax on the talent’s behalf. So features and shows wanting to take advantage of New Mexico’s film tax credit generally need to partner with a production payroll service that offers a Super Loan Out.

It’s important to ask how much the payroll service charges for that Super Loan Out, as with some providers it can amount to a whopping 1% of the talent’s gross pay… meaning if you are paying a topliner $5 million, your production will pay $50,000 just for the Super Loan Out.

At Media Services, we charge a nominal flat fee for our New Mexico Super Loan Out service, rather than a percentage that keeps running up your invoice no matter how much you pay your talent. The cost savings can be substantial depending on how you are billed, so it always pays to ask up front.

Questions about the New Mexico film tax incentive or Super Loan Outs?

Ask an Incentives Expert

Also check out our August 2019 guest spot on the New Mexico Film Office podcast, NMFO Filmcast – featuring our own Ryan Broussard.

Former Ambassador Colleen Bell Named New Head of California Film Commission

Production crew member discussing healthcare with doctor

Colleen Bell, a former daytime television producer and President Barack Obama’s pick for U.S. ambassador to Hungary, will take the reins of the country’s largest film commission as its new executive director. The appointment by California Governor Gavin Newsom comes days after longtime director Amy Lemisch stepped down from the post. Lemisch is credited with having replaced California’s unpopular lottery system with a robust new film tax credit in 2014, which has attracted new feature production as well as drawing runaway television series back to the state.

California’s film tax incentive is a hot topic in recent weeks, as controversial new abortion bills in incentives-rich states such as Georgia and Alabama have led some in the industry to call for production boycotts there. There is even talk of a new proposed provision in the California incentive that would reward productions relocating from those states in protest.

No official start date has been named for Bell, whose appointment was reported by The Hollywood Reporter.

Applications Open for New Jersey Incentives Program

NJ Asbury Park

New Jersey comes roaring back to the incentives field this year with one of the most competitive programs on the Eastern seaboard… which is saying a lot, what with heavy hitters like Georgia, New York and Massachusetts in the mix. With the new application just recently published, it’s the perfect time to get in on the potential 30-37% transferable tax credit offering in the Garden State.

The program will inevitably be compared to that of its neighbor on the other side of the Holland Tunnel. In this regard, New Jersey set itself apart by having a different credit type, qualifying labor type and a few nuances that differentiate it from others.

NJ Asbury Park
Asbury Park, New Jersey. Courtesy NJ Motion Picture & Television Commission

One size fits many

With a small minimum spend requirement and no project caps set, New Jersey can welcome all comers, big and small. The program allows for the production either to spend at least $1 million, or spend 60% of their actualized budget in the state in order to qualify. This is welcome news to smaller productions that may not make the $1 million spend but can base themselves in New Jersey for the majority of the shoot.

The state also has the attractive perk of fully incentivizing not only resident labor, but out-of-state crew working in New Jersey as well. While the state naturally has a well-established resident crew base, the years without an incentive program have made the NJ Motion Picture & Television Commission eager to build it back up to previous levels with an infusion of incoming production.

NJ Film Commission logo

The transferable credit is 30% across the board on all the New Jersey spend and labor attached to features, independent productions and scripted TV projects, with an additional 5% bonus for payments made to vendors in certain southern counties. In addition, New Jersey offers incentives specific to reality programming and digital media projects, provided they meet certain criteria.

While transferable credits are not the most liquid, they offer the benefit of not having to put down permanent stakes or wait to file a New Jersey tax return, and our sources predict the credits will go for a relatively high value on the dollar. That said, projects should always budget for a conservative return on a transferable credit, especially as markets can shift over time.

Incentivizing Diversity

One more differentiating element of this program is the Diversity Plan Incentive. While New Jersey is not the first incentive state to build crew and cast diversity tracking into its incentive, it is the first to add an additional percentage amount to the production’s credit for meeting specific diversity goals. An extra 2% on top of the base credit is available for those productions whose crew and cast are made up of at least 15% women and minorities. Other states may follow suit – California, for one, plans to incorporate some new rules and requirements aligned with diversity later this year.

Media Services offers complimentary application assistance to its payroll clients and can answer questions regarding tagging budgets for this or any other state. Clients also receive the benefit of free Showbiz Budgeting software, as well as unlimited incentive state comparisons via our Incentives Calculator.

Need help understanding the New Jersey incentive program, or that of another state? Just get in touch with us here or at 310 471 9381– we’re happy to help.

Southern Producers Lab Rewards 13 Emerging Filmmakers

The New Orleans Film Society has named the 13 up-and-coming filmmakers who will take part in the inaugural Southern Producers Lab later this month. The multi-day event will feature panels and workshops with industry experts, including Production Incentives Specialist Ryan Broussard of Media Services, who will lend guidance on how to approach incentives in various states such as Louisiana.

“This is a wonderful thing the New Orleans Film Society is doing for our Southern filmmakers,” said Broussard. “By connecting these emerging talents with the production tools they need for success on their upcoming projects, this lab will help to shape the narrative and documentary film landscape in hot spots like Louisiana, Georgia and beyond.”

Though in its first year, the Southern Producers Lab received over 100 submissions for the limited number of spots, which are divided between narrative and documentary filmmakers. Like the New Orleans Film Festival, the lab puts an emphasis on diversity in filmmaking.

Need help with incentives? Try our Production Incentives Calculator to get an estimate of how much you’ll get back in various locales, based on your budget.

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