Maximizing your Production's State Tax Credit

I recently attended a seminar with representatives from Amper, Politzner & Mattia, certified public accountants and consultants in New Jersey, who are familiar with the accounting procedures associated with applying for a Film Production Tax Rebate or Credit. They had some very interesting things to say about how productions need to prepare properly for getting the most out of the production credit and rebate programs offered by states. I have taken the liberty of extracting some of the notes and outlining them below, and encourage everyone involved in this process to educate themselves as much as possible so we are better informed about what needs to be done to get the most from the tax incentive programs.

If you need more information, you can contact the firm directly at 732-919-1400 or visit their website at www.amper.com

Payroll Testing Procedure (for final audit with the state)
• Agree wages recorded in the bible to paycheck stubs or payroll register.
• Review time cards to determine location worked
• Review production reports to determine location worked

Non-Payroll Testing Procedures (for final audit with the state)
• Agree expenditures per bible to vendor invoice
• Verify if expense is incurred in State
• Verify type of expenditure

Qualifying Expenses
• Compensation paid for services within the state
o Paid to individual employees
o Paid to loan-out companies
o Employer payroll taxes/fringes
• Payments for goods and services within the state
• Payments for rental of property and equipment within the state

Common Pitfalls
• Applying for too little credit (better to overestimate your expenditure in the initial application)
• Not Obtaining proof of loan-out
o May be required prior to the initial payment to loan out
• Poor record keeping for petty cash

Best Practices
• When recording payroll transactions include employee name as the vendor name
• Make sure employees indicate work state/locality on time card for every day worked
o locality may be required in certain states
• Get Loan out companies to register up front
o Consult with legal council
o Incorporate registration requirement in the contract
• Take care when recording petty cash receipts
• Educate production staff on state guidelines before they spend petty cash in order to maximize the credit
• Consult with the state film department regarding local vendors that can be used
• Educate those involved in the process early
• Keep an open dialogue with the state department issuing credit
• When in doubt, consult with a qualified CPA with industry experience

Film Credit Trivia
Q: I need to purchase an item not sold in the state issuing the credit. Is there any way to get the expense to qualify?
• In NJ? Have the item shipped by the vendor via common carrier or by the vendor’s own vehicle.
• In MA? As long as the item is used in MA the expense will qualify. Make sure there is adequate documentation of the item’s use to hold up during audit.
• In PA? Consider using a qualified intermediary in the state/locality