Producers will continue to be able to deduct the costs of producing qualified film and television productions from a production company’s U.S. taxes because the federal government has made those deductions permanent.
On Sept. 30, 2011 the Internal Revenue Service (IRS) posted a notice on the Federal Register—Deduction for Qualified Film and Television Production Costs—that lists details of the film production tax deductions, which were already in use, but which became permanent Sept. 29.
The notice contains final regulations relating to deductions for the costs of producing qualified film and television productions, the IRS says. Those “final regulations reflect changes to the law made by the American Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005, and affect persons that produce film and television productions within the United States.”
The temporary tax deductions were enacted by Congress “to promote film and television production in the United States,” and a film or television production is qualified for the deductions “if 75 percent of the total compensation” for the production is for services performed in the United States by actors, directors, producers and other production personnel, the notice says.
In addition, the notice says qualified film or television company owners can “deduct production costs paid, or incurred” by the owner of a production in the taxable year the costs are paid or incurred, in lieu of capitalizing the costs and recovering them through depreciation allowances, if the aggregate production costs do not exceed $15 million ($20 million if a significant amount of the aggregate production costs are paid or incurred in certain designated areas) for each qualifying production.”
The final regulations use the term “pre-amendment production” to distinguish productions that are subject to the maximum aggregate production costs limit listed in the American Jobs Creation Act of 2004 and modified by the Gulf Opportunity Zone Act of 2005, and are subject to the maximum production costs deduction limit in the Tax Extenders and Alternative Minimum Tax Relief Act of 2008. Several provisions of the final regulations are specific to pre-amendment productions and are designated accordingly, the notice says.