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

3 Strikes Against NY Production-Winter 2009

There have been 3 strikes that put NY Independent Film Production out of business this winter. Number one is the World Financial Crisis; number two is the end to the Guaranteed Completion Contracts offered by SAG and their continued inability to sign a new contract with the AMPTP; and number three is the empty funding pool for the NY State Tax Incentive.

In the fall, we saw many films loose their green light due to the fallout in the world economic crisis, when investors stepped to the sidelines of their financing commitments. Even though some were saying that financing a movie seemed like a safer gamble than anything in banking or the markets, those with money were not in the mood for risk. As well, so many people with money lost the money which they had to play with, the money they had for financing independent features.

Just as producers started to regroup and find alternative means of financing their indy productions, the Screen Actors Guild decided to end the existence of the Guaranteed Completion Contracts, which they had been extending to independent productions, since the last contract expired July 1, 2008. Those GC Contracts, which people called waivers, had allowed films, which were independent of companies already signatory with SAG, to produce movies without the threat of the potential SAG strike. With no GC Contracts available, bond companies like Film Finances would not bond movies against a strike, unless, in some cases, the actor contracts were written with the provision that the actors would return to that production immediately following the resolve of any strike that interrupted the production, and there was money set aside in the budget, for the cost of shutting down and restarting at the most expensive time during the production.

As if these two factors weren't enough, it became public, that all the NY State Tax Incentive Funds had been committed and essentially spent, reflecting on one hand, the giant success of the incentive program, but, on the other, grinding to a halt, almost all movie production in New York. Many of the independent productions were being funded in part by a bank loan, and in many cases that loan was based on the bank being guaranteed repayment through the tax credit money. Where there used to be no guarantee that an independent film would recoup any of the money invested in making it, with the Tax Incentive there was a guarantee. But suddenly, with the funding pool run dry, the banks were no longer willing to lend, and what had become a cornerstone of independent film financing, for New York, was no longer.

The winter is traditionally a frigid time for making movies in New York, but this winter has been the worst I have seen in the 22 years I've been in the business. Even TV pilots scheduled for the early Spring, many written for New York because of the draw of the Tax Incentive, were carted to Toronto, Vancouver, Providence, Boston, Michigan and other States that could still offer financial incentives, leaving New York production people high and dry. We all look forward to the Spring, where the promise of warming weather brings hope for a resolve to the potential SAG strike, a renewing of the Tax Incentive funding, and an end to the downward slide of our general economy.

Greener Production

I attended the DGA "Shoot it Green" meeting on Saturday and learned a lot about how we can make our productions "Greener",
which means basically, finding ways to reduce our carbon footprint in the act of making movies and tv shows.

There will soon be a web-site dedicated to all the on-going efforts that are being made by productions who have implemented greener production techniques and I plan to work with that list to produce a memo at the start of each production, outlining how we will be implementing these new practices. In many cases the greener production practices will reduce the overall cost of production.

Some of the green practices that have already begun include using water canteens instead of buying water bottles, using bio-diesel fuel, reducing trucking, re-using lumber from set construction, using glasses and real plates, separating and recycling garbage, economizing office supplies, recycling unit supplies, and using less paper.

Why Twitter?

Briefly, I'm really just beginning to start using Twitter, but I can see that it is part of the way that I can keep informed and keep others informed about what is going on right now in our changing business and world. Twitter is a way that I can follow what the people I share interests with are doing, reading, seeing, hearing, feeling, on a moment by moment basis. As well, it's a way for me to communicate with people who share my interests, and inform them of what's happening. I can search for information that interests me that are out there, but Twitter brings me information that other people, with like-interests, are discovering.

Screenplays and Rewrites

I have talked a little about writing under the Directing Blog, but if you are in need of script consulting, I have been working with writers for a long time, helping them to develop their story to its fullest potential.

Rewriting can be much harder than the first draft and you want to make sure that the second draft is the presentation draft. So before embarking on the next draft, you want to know everything needed to make it the final draft- a compelling and complete and marketable screenplay. Everyone who reads the next draft should say: I want to see this movie.

At this stage, I cannot do this for people without financial compensation, but I can do it for a reasonable fee, since I do enjoy it.

NY Unions

TEAMSTERS: Local 817: Teamsters, Casting Directors

DGA: Directors, Production Managers, Assistant Directors, Location Managers

WGA: Writers

SAG: Actors

I.A.T.S.E.: Crew
Local 52: Studio Mechanics
Local 161: Script Supervisors, Production Coordinators, Accountants
Local 600: Camera
Local 764: Wardrobe
Local 829: Costumes, Art Department
Local 798: Make Up, Hair
Local 700: Editors

10 Questions My H.S. Intern Asked Me

Hey Ged,

I have a homework assignment for my internship class and I need to ask ten questions to somebody who is in the business that I am interested in pursuing.

1. Are you satisfied with your job in film industry today?

Ged: I like the job, when I get to work, but I get frustrated when there are no productions to work on.

2. If you had a chance to, would you go back and pursue a different career?

Ged: No. This is the right business for me, and Line Producing is the best job for me in the business.

3. What is your favorite part of the film business?

Ged: Working with people on a common project, specifically a movie, which will affect the souls of millions of people for years to come.

4. Does the film business offer good pay?

Ged: Depends what you consider good pay. I would say it is average, unless you really make it and are a big success. For most people you can live well, maybe have a boat or a second home, but it's really hard to bank money and save. The weekly salary can be good, but the weeks without work, make your yearly income modest.

5. Is sixteen a good age to start getting into the film business?

Ged: Never too young and the younger the better. True of any field. The knowledge you need to start out is pretty minimal, and then the knowledge you need to move up, is learned through experience working on productions. All the knowledge you have is helpful to reaching your fullest potential, as with every field. It's good I am quick with math, but I don't really need math beyond algebra and geometry. You need to be able to read. Science is unnecessary. If you want to write and direct, you need to observe life and comprehend what is going on, and build your understanding of people human nature. I'm into self-education. Pursue your interests and educate yourself in the process.

6. Is the film industry based mostly on luck or skill?

Ged: Success in the business is based on skill, luck, networking, talent, attitude and knowledge, among other things.

7. How many degrees are preferable to gain in college in order to be most likely successful in the industry?

Ged: The more you are educated, the broader your base to start out with, but you don't want to spend all of your 20's in school, because you will be starting out too late in the field. If you do grad school, you need to work full-time in the summers. You should go to college.

8. What is the best job for a person to start with if he/she would like to get into the film business?

Ged: Intern and Production Assistant.

9. What inspired you to get into the film industry?

Ged: I have always liked watching movies and in college I made little movies. There was nothing else I really liked doing. I liked working on a common project with my friends, and then kicking back to look at what we had created.

10. If you had a chance to work with any current movie director, who would it be?

Ged: Edward Zwick, Sidney Lumet, John Sayles, Ben Stiller, and many others.