American Film Market Reveals how to get Your Budget with Tax Incentives – Will French, Patrick Rizzotti, Ryan Broussard, Jeaneane Davey<\/p>\n
Will French is one of the most prominent tax credit finance specialists in the film industry and today he is moderating AFM\u2019s Tax Incentives panel as part of the Finance Conference.<\/span><\/p>\n French was among the first brokers and financiers of film finance credits in the nation, beginning in 2003 with the first of his kind, Louisiana Transferable Tax Credit Program.<\/span><\/p>\n Through his network of operating companies, Will has personally traded or financed more than $500 million of state film credits for more than 250 projects. From 2014 to 2017, he served as Managing Director of State Tax Credits for Enhanced Capital, a diversified national asset management specializing in complex credits.<\/span><\/p>\n In 2018, he joined a small startup called the Forest Road Company, which he helped grow into the largest non bank financier of tax credits in the United States, which ultimately purchased the market leading three Point Capital in 2021.\u00a0<\/span><\/p>\n Will left Forest Road and joined Brook Financial Services, the largest trader of tax, state tax credits in the country where he leads the company’s film finance, tax credit administration and tax credit consulting<\/span><\/p>\n Today\u2019s conversation shares great information about how to navigate tax incentives all over the world, both U. S. and international.\u00a0<\/span><\/p>\n We’re going to do a little bit of a primer on tax credits, tax incentives, how they work. Will and his panelists give a background on some terminology to help follow along.<\/span><\/p>\n Janine is the second most senior person at Netflix. She oversees a team of 28 people in three offices around the world, making it the largest tax incentive office for any studio or streaming, company.\u00a0<\/span><\/p>\n Janine knows everything there is to know about all of these incentive programs and will lead the conversation when talking about overseas: France, Italy and more.<\/span><\/p>\n Ryan Broussard, with Wrapbook, has 16 years of incentives experience. Wrapbook is bringing production, accounting and payroll services, all together in one good technological platform. Payroll and accounting is the basis of tax incentives. If you don’t do your payroll right and your accounting you get no incentive.\u00a0<\/span><\/p>\n Patrick Rizzotti is with Blue Fox Financing. Patrick take projects for independent producers, packages them all together, and brings them to the various lenders and equity investors\u00a0<\/span><\/p>\n Patrick brings knowledge of the incentive side and production reality.\u00a0 State with great tax rebate great programs, transferable tax credit, what\u2019s the actual filing experiences, production crews.<\/span><\/p>\n We’ll start with the introduction to tax credits, then deep dive into 8 U.S. jurisdictions, then shift over to international jurisdictions.\u00a0<\/span><\/p>\n Guest presenter Danielle Jackson from Above Line Media Services in Canada will tell us about how the Canadian system works, because it really is very fundamentally different than the U.S.<\/span><\/p>\n Soft money is an incentive that a government gives to encourage film production in the given jurisdiction.\u00a0<\/span><\/p>\n All of the tax incentives that we’ll be talking about are a form of soft money.\u00a0<\/span><\/p>\n If you’re in the tax incentive business, you’re in the problem solving business because these things are complex in each jurisdiction, each state, each country. They have their own rules.\u00a0 Sometimes they have their own languages.\u00a0<\/span><\/p>\n You have to decipher how this program is going to work when you’ve never gone in and worked in it before. Then your production and your company have different tax circumstances.\u00a0 It gets very challenging with all those laws, rules, regulations, policies.\u00a0 All constantly changing.\u00a0<\/span><\/p>\n Rebates and grants<\/strong><\/p>\n We’ve got several different types of tax credits. The first is rebates and grants. This is basically as close as it gets to cash. You spend money in a jurisdiction, the state will give you a cash grant or a cash rebate. You’ll know exactly how much you’re going to get.<\/span><\/p>\n Refundable tax credits<\/strong><\/p>\n This is a tax credit where you get back the difference in the value of the tax credit versus whatever taxes you paid over the state.\u00a0 Assuming that you don’t have any tax liability, as most production companies are set up not to have tax liability. They spend money. They don’t earn money and pay taxes, at the production level. In most cases, then you get back the difference in the value of the tax credit versus whatever taxes you did over the state.<\/span><\/p>\n Transferable tax credits<\/strong><\/p>\n Where the state gives you tax credit. If you can’t use it, you can sell it to somebody else who can use it. So there is an active market around the U. S. for transferable tax credits.<\/span><\/p>\n Taxpayers in states like Georgia find film producers who’ve shot a film, earned a tax credit, that they can buy. You’re going to have to sell it for less than the face value of the tax credit. Close to 80-85 cents on the dollar.<\/span><\/p>\n You have to factor sales and discounts into your equation for what the net benefit of the tax incentive is to you.\u00a0<\/span><\/p>\n Redeemable tax credits<\/strong><\/p>\n Redeemable tax credits are redeemed by the actual state. Louisiana is a good example of this. If you get a million dollars worth of tax credits in Louisiana, the state buys the credits back for 90 cents on the dollar.\u00a0 You pay the state a 2% fee, you end up with 88 cents on the dollar.\u00a0<\/span><\/p>\n Non-Refundable, Non-Transferable tax credits<\/strong><\/p>\n You have to have a tax liability if you’re going to use this tax credit.\u00a0 If you owe no taxes to the state, this is worth nothing to you. If you owe a million dollars to the state and you get a million dollar tax credit, you can self utilize that.\u00a0<\/span><\/p>\n Audits and AUPs (Agreed Upon Procedures)<\/strong><\/p>\n If you want a tax credit in most jurisdictions, you have to have an audit done to prove that you spent the money in the jurisdiction. Show that it cleared your bank, that you had a receipt for it.\u00a0\u00a0<\/span><\/p>\n An audit can be a very long process and is a term of art within the accounting industry.\u00a0<\/span><\/p>\n AUP or the \u201cagreed upon procedures\u201d process where a state will say they’re not going to require a full audit<\/span> by a CPA.\u00a0 Instead of reviewing the full account, maybe they review the top 50 transactions to make sure they all were valid and cleared the bank. Then maybe the top 10 payroll transactions and go through all the bank reconciliations.\u00a0<\/span><\/p>\n The term AUP. or spotting be an audit a lot of times interchangeably, but they do have slightly different meetings.<\/span><\/p>\n Every jurisdiction has a different definition of qualified spend. Some jurisdictions, if you bring in somebody from out of the state, like an actor, that’s not \u201cqualified\u201d. So they\u2019re not going to give you any tax credits for that.<\/span><\/p>\n A lot of the art and the science in tax incentives is knowing exactly what qualifies. When you’re putting your budget together \u2013 100 – 2000 pages long \u2013 you have to tag each account item as to whether or not, in this state, in this jurisdiction where the qualified spend or not.<\/span><\/p>\n The base rate is the rate at which the jurisdiction offers a tax credit for just the standard production coming in.\u00a0\u00a0<\/span><\/p>\n But most jurisdictions encourage you to do other things.\u00a0<\/span><\/p>\n Maybe they want you to film outside of the major metropolitan areas. Maybe they want you to film in the rural jurisdictions.\u00a0 Maybe they want you to do VFX in their state and support their local VFX facilities.\u00a0<\/span><\/p>\n There\u2019s lots of different breakdowns of \u201cuplifts\u201d. The rate may start at 20%, but you can get it up to 40 percent back with all the various uplifts.<\/span><\/p>\n Caps<\/strong><\/p>\n There are a couple of different types of caps that are important. Per project cap. What’s the max that you can get for your project?How much does the state have to deal with throughout that particular year? How much can they spend on this program?<\/span><\/p>\n That’s meaningful because if you want to go and shoot there, we know how much you’re gonna get?\u00a0 You need to know if the state is out of money.\u00a0<\/span><\/p>\n Georgia offers a 30% transferable tax credit. 20% of that credit is called the production credit. You get it just for filming in the state. 10% uplift if you actually distribute that film.\u00a0<\/span><\/p>\n So if you just make the film and it never gets sold, it never gets distributed 20%. If it streams or appears in theaters in more than one market, multi market distribution, you get an extra 10%.\u00a0<\/span><\/p>\n Georgia really wants your project to get distribution. They want their magic peach in the end credits to be seen by as many people as possible.\u00a0<\/span><\/p>\n Of course they’re encouraging people to come and tour Georgia.<\/span><\/p>\n It’s the largest program in the country right now, issuing probably more than a billion dollars worth of tax credits every year.<\/span><\/p>\n Georgia used to be all about the honor system.\u00a0 You went in, you shot, you filed a tax return, you claimed a credit, you sold the credit, and that was it.\u00a0 Now,\u00a0 it’s one of the most regulated programs and has one of the most challenging audit processes where everything has to be done just perfectly<\/span><\/p>\n Ryan Broussard explains Georgia\u2019s Tax incentive<\/strong><\/p>\n What is the best tax credit to go after? You might say it’s Georgia. 30% rebate on here. No project cap, no annual cap. I always tell people it really matters on the type of project.\u00a0 This is really a great appetite for a Marvel or giant studios. They can make big movies.\u00a0\u00a0<\/span><\/p>\n But, is it the best place for your six million dollar movie?\u00a0 Is there a crew base for smaller movies when you\u2019re surrounded by much bigger productions?\u00a0 As a result, it may not be a true 30%\u00a0 It\u2019s based on what you spend in the state, so if you need to bring in crew from another state, that spend doesn\u2019t count.<\/span><\/p>\n Then you have to discount it for the fact that you have to sell it in the open market.\u00a0<\/span><\/p>\n Netflix’s experience in Georgia<\/strong><\/p>\n Jeaneane Davey<\/span>: <\/b>In general, it’s a great program. Very robust. With Netflix specifically or any streamer, something to keep in mind if you’re making a project that’s destined for one of these streamers.\u00a0\u00a0<\/span><\/p>\n Some of these 10% uplift options are not going to be viable.\u00a0<\/span><\/p>\n Part of this \u201cG.E.P.\u201d The P stands for promotion. There’s different logo placements that you can select for the Georgia peach [in the end credits]. If some of them come too late in the end credit rule, they likely will be auto skipped over.<\/span><\/p>\n When you’re watching any streaming service, you get maybe four seconds of the end credits before the next episode begins. Just be aware that logo placement may loose you credits.<\/span><\/p>\n Patrick Rizzotti\u2019s experience in Georgia<\/strong><\/p>\n I reached to a bunch of producers that have shot there in the last year, including we shot in Atlanta.\u00a0<\/span><\/p>\n It is extremely helpful to have a local UPM or line producer that has their own crew relationships. A number of productions in the lower tier, $3 – 5 million range, it was very common to be in prep and or production and have crew leave consistently in Atlanta for bigger shows that were coming through.<\/span><\/p>\n So what started off as a great tax incentive started to get dwindled down because they had to bring in non local crew and it just became difficult and challenging in order to get through production.\u00a0<\/span><\/p>\n If you bring in key crew members locally, as many as you can and a UPM, they’re more apt to stay on the show because they want to get that call from that person on the next job.\u00a0<\/span><\/p>\n We had a show with [a dedicated] crew and we brought in the EP of that show and not one person left.\u00a0 It was a smaller budgeted film. But everyone stayed because they, the relationships, were there to allow it.\u00a0<\/span><\/p>\n Another city that’s very popular in shooting is Savannah. They have typically 3-4 crews deep. They have a lot of fantastic locations down there. it’s cheaper across the board.\u00a0<\/span><\/p>\n So if you’re going into Atlanta and or Savannah, talk with the film commission,\u00a0 specifically what (other shows) are gearing up or what’s in production. I think it’s extremely important to look ahead to make sure that there’s [resources available.]<\/span><\/p>\n Do jurisdictions look for proof of financing?<\/span><\/p>\n Georgia is they’re shifting the way that the applications are approved now to require you to prove that you have your financing.<\/span><\/p>\n For an independent film, that’s tricky. It usually means you need an application approved in Georgia to go to your lending bank to show eligibility to receive tax credits for the bank to give you the loan so that your project can go forward.<\/span><\/p>\n These application approvals in Georgia, where they just want to know that you’re not wasting their time and that you are going to go forward. Showing loan documents, equity documents.<\/span><\/p>\n More and more states ask to see proof of financing, especially for states that do have an annual cap.<\/span><\/p>\n New Jersey will soon have a max 39% rebate. If you are within 30 miles of Metropolitan New York City, it\u2019s a 30% credit.\u00a0 If you’re out beyond 30 miles, you can get a 35% credit that also applies to your payroll. There\u2019s a little uplift for diversity. If you make good faith efforts to hire a diverse group of cast, crew and vendors and keep reliable accounting to prove it, you can get an extra 2%.\u00a0<\/span><\/p>\n There a $100 million annual budget to work with.\u00a0<\/span><\/p>\n It became very popular in 2023 when New York was having problems and everybody wanted to pull their New York projects, send them over to New Jersey.<\/span><\/p>\n New Jersey\u2019s program is still growing and getting stronger.\u00a0 Their policies are being put in place now, and they’re changing a little bit, which is a little disruptive, but that’s part of a normal incentive process.<\/span><\/p>\n Legislation is passed, people start coming in and working within it.<\/span><\/p>\n Ryan Broussard shares on New Jersey\u2019s Tax incentive<\/strong><\/p>\n New Jersey used to have a really good credit over a decade ago. I’m really happy that it came back a couple of years ago.\u00a0<\/span><\/p>\n Some U. S. states like Illinois and California, have a diversity requirement where they want you to put your best foot forward. New Jersey actually goes the extra step and rewards you. Women, minorities, people of color, everybody, as long as you hit a certain percentage, you can get rewarded.<\/span><\/p>\n Do your homework and research these things, because New Jersey, for example, has a transfer fee, issuance fee, certain withholdings on loan outs. Be aware of these things before you go to a state.\u00a0<\/span><\/p>\n Jeaneane Davey on New Jersey<\/b><\/p>\n What’s changed is that there used to be a special rule just around the expenditures, non-labor, but now it’s gonna be 30%.\u00a0 If you’re not a film partner, 30% for everything inside this 30 mile radius, 35% for everything outside of that 30 mile radius.<\/span><\/p>\n So no more differentiation between the labor.<\/span><\/p>\n E<\/b>ssentially you have to make pretty big commitments in the state in terms of building a facility, and that is something that Netflix is doing.\u00a0 We’re converting a decommissioned, military base Into a pretty expansive stage and more.\u00a0 It\u2019s not applicable to an independent production<\/span><\/p>\n Will French asks, \u201cHave you had any problems selling your New Jersey tax credits? Is there a good market for them?\u201d<\/span><\/p>\n Jeaneane Davey \u201c<\/b>There is a good market. Georgia is one of the more variable markets compared to all of the other transferable jurisdictions. New Jersey so far has been pretty consistent and favorable, but I think we’ve seen the most volatility over time in Georgia where, we can have several points swing in the space of a couple of years.\u201d\u00a0<\/span><\/p>\n Patrick Rizzotti\u2019s experience in New Jersey<\/strong><\/p>\n The consensus was all positive. One thing that’s extremely important from an independent film standpoint is pulling crew from New York City, and having them commute back and forth is a massive advantage, versus having to shoot in New York City.\u00a0<\/span><\/p>\n The cost comparison for shooting the same film in New York City versus shooting it in Jersey, There is no comparison, frankly, it’s a lot cheaper across the board. From locations, to crew, housing, all the way down. It’s very effective and I think that’s why it’s frankly taken off.\u00a0 A lot of talent lives in New York City. We just prepped a movie that has a pretty big A list talent and he loves the fact that he can commute from New York to Jersey back every day without us having to put them up in Jersey.\u00a0<\/span><\/p>\n Will French continues<\/span><\/p>\n In Georgia, after showing your proof of funding, you get that approved application within 7 to 14 days.\u00a0 In New Jersey, that process can take 3 to 5 months.<\/span><\/p>\n You’re an independent producer, you’re putting your financing together, you’re going to be way better off if you start that application a long way out, give it time to get processed, get it approved, get your credits reserved from their cap.<\/span><\/p>\n That’s what they do, they reserve it, and then you’re capped at whatever that reservation is.<\/span><\/p>\n Start that process very early.<\/span><\/p>\n New Jersey\u2019s tax treaty with Pennsylvania<\/strong><\/p>\n New Jersey and Pennsylvania have a reciprocity agreement, which basically acknowledges that there are folks that live in New Jersey that work in Pennsylvania and vice versa. These agreements are put into place to acknowledge and recognize that there is going to be cross border movement of their residents. so it’s a very interesting outcome. I don’t think it was intended. Pennsylvania residents will be discriminated against from being hired on productions in New Jersey because they are literally the only type of labor that would not qualify at this point in time.<\/span><\/p>\n Louisiana has a 40% redeemable tax credit. You sell it back to the state, you net 88 cents on the dollar. There are some caps: $150 million issuance cap each year, $180 million claim cap.<\/span><\/p>\n Louisiana first capped their system in 2015. They had so many projects in the pipeline, they had to restrict activity both incoming and outgoing.<\/span><\/p>\n Louisiana was the national leader for almost 12 years before the state started to pull back. When Louisiana pulled back, Georgia doubled down. That\u2019s why Georgia is the national leader these days.\u00a0<\/span><\/p>\n Ryan Broussard on Louisiana<\/strong><\/p>\n They have an above the line cap.\u00a0 If your production is real top heavy.\u00a0 On a $6 million budget, $5 million is on the page, then, Louisiana may not be the best place for you.\u00a0 The state wants you to hire residents for the below the line for your crew. You’re spending all your money on above the line talent. It’s obvious to them.\u00a0<\/span><\/p>\n A $3 million dollar compensation cap for loan outs. You’ll start seeing this more and more.\u00a0 States are recognizing that they want more money to go to those people working day in and day out.\u00a0 They are usually residents and making good and other interesting things in Louisiana.\u00a0 It’s partially refundable.<\/span><\/p>\n There’s a 2% access fee to get that 2%, which is a net 88. But so many Louisiana budgets I get do not put that 2% as a line item. You pay that 2% first. Before you get the whole amount back with the 90.\u00a0<\/span><\/p>\n That means if you’re getting back $5 million and you have to pay 2% on that $5 million, you’ve got to have the cash flow to do that.<\/span><\/p>\n Louisiana gives 15% for residents. They are very deep in Louisiana with crew. There’s a lot of TV there, a lot of great experienced crew.\u00a0<\/span><\/p>\n Jeaneane Davey on Louisiana<\/b><\/p>\n O<\/b>ne other thing I’ll just add, you actually have a pretty generous window in which to qualify spend. If you had to shut down for various reasons, two years plus six month deadline to finalize your audit and get it into the state.\u00a0<\/span><\/p>\n They’re the only state that has that big of a window to apply where you go. That’s something most states do not allow for.<\/span><\/p>\n New Mexico was the very first program, even before Louisiana.\u00a0<\/span><\/p>\n Currently $110 million a year available. That goes up by $10 million a year until fiscal year 2028. Max 40% refundable tax credit. You get your money back directly from the state.\u00a0<\/span><\/p>\n Is there a qualified production facility situation in New Mexico?<\/span><\/p>\n Jeaneane Davey<\/b><\/p>\n Like New Jersey, Netflix also has a facility in New Mexico, ABQ Studios, that is a qualified production facility and there is an uplift that’s available for shooting at a qualified production facility.\u00a0<\/span><\/p>\n <\/p>\n Ryan Broussard:<\/b>\u00a0<\/span><\/p>\nWill French<\/h3>\n
Jeaneane Davey<\/span><\/h3>\n
Ryan Broussard<\/span><\/h3>\n
Patrick Rizzotti<\/span><\/h3>\n
Introduction to tax credits<\/span><\/h3>\n
Different types of tax credits<\/span><\/h3>\n
Qualified spend.<\/span><\/h3>\n
Base rates and uplifts<\/span><\/h3>\n
Georgia\u2019s Tax Rebate Program<\/span><\/h3>\n
New Jersey\u2019s Tax Rebate Program<\/span><\/h3>\n
Louisiana\u2019s Tax Rebate Program<\/h3>\n
New Mexico<\/span><\/h3>\n