Focusing the lens on film credits

Credits & Incentives talk with Deloitte

"Credits & Incentives talk with Deloitte" is a monthly column featured in the 'Journal of Multistate Taxation and Incentives,' a Thomson Reuters publication. The June edition, co-authored by Brett Johnson and Bruce Kessler offers a brief summary of film credits in four states with broad-based film incentives programs, focusing on differing eligibility requirements and benefit amounts, credit monetization, and current state oversight.

Film credits in states with film incentives programs

Hollywood has been considered the center of the motion picture industry for more than a century with the vast majority of film and television production occurring in Southern California. Starting in the 1990s, various states began to offer incentives to attract film and television production.

Despite changing priorities at the state level which has led recently to some film incentives being scaled back or repealed (as well as becoming the subject of more state audit scrutiny), state tax film incentives continue to provide significant value to qualified productions.

This article offers a brief summary of film credits in four states with broad-based film incentives programs, focusing on differing eligibility requirements and benefit amounts, credit monetization, and current state oversight.1

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In 1992, Louisiana became one of the first states to offer incentives aimed at recruiting film and television productions to the state.2 However, the program had limited initial success in attracting productions to the state because Louisiana only extended tax credits to investors to the extent of their losses incurred on the production.3

In 2002, Louisiana initiated a series of legislative modifications to its film incentive program by initially offering a tax credit of up to 15 percent on the investment (not just losses) in a certified film production within the state.4 In 2003, the film credit became transferable.5 Further changes became effective in 2006, including a 25 percent transferable tax credit on qualified motion picture expenditures with no project or program cap and a labor tax credit which provided a 10 percent credit for payroll expenditures associated with Louisiana residents hired to work on the qualified project.6 In order to qualify for these credits, filmmakers needed to spend at least $300,000 on a qualified production in Louisiana.7 In 2013, Louisiana was the location for 190 film productions with certified spending of over $1 billion.8

Partially in response to budget deficits, Louisiana amended its film credit regime in 2015, most notably through a total program cap of $180 million in tax credits issued each year.9 The legislation also introduced a cap on individual productions of $30 million in qualified expenditures.10 In 2016, certified spending on film projects in Louisiana was $893 million.11

In 2017, Louisiana further modified its film production tax credits. The program cap was lowered to $150 million in tax credits issued per year.12 Of the total, 20 percent, or $30 million each year, is reserved with allocations for independent films, certified productions with a screenplay by a Louisiana writer, and qualified entertainment companies.13 The remaining 80 percent of the annual total, or $120 million, is unreserved and available for any size production. Additionally, the per-project cap was lowered to $20 million in credits for a single production.14 To provide some degree of flexibility, the tax credit awards may be structured over two or more years in the initial certification letter.15

Additionally, Louisiana restricted the transferability of the film credits issued.16 Rather than being able to sell a film credit, qualified investors who earn a credit may only transfer it back to the state for 90 percent of face value, along with a two percent transfer value fee (for a net of 88 percent of the credit), if they do not have the ability to utilize it against Louisiana tax.17 In addition, beginning July 1, 2017, any film credits transferred back to the state are limited to an aggregate total of $180 million per year.18

Prior to the issuance of any film credits, Louisiana requires a production expenditures verification report,19 in which an independent CPA certifies that costs included in the calculation of the credit meet the requirements of Louisiana law.20

New York

The Empire State first offered film credits in 2004 with legislation establishing a 10 percent credit on qualified production expenditures within New York.21 To qualify for the tax credit, the statute required that at least 75 percent of the qualified production costs (excluding post-production costs) of the film or television project must be attributable to the use of tangible property or the performance of services at a qualified film production facility in New York, a requirement retained by the current credit.22 Effective January 2008, New York increased the state's tax credit from a 10 percent to a 30 percent non-transferable credit.23 In 2010, a postproduction credit was enacted24 and the state budget began allotting $420 million annually for production credits for qualifying projects.25

Through the year 2022, New York's annual budget for production credits remains capped at $420 million, with $25 million of that amount set aside for the state's post-production credit. Production companies may be eligible to receive a credit26 of 30 percent of qualified production costs and post-production costs incurred in New York27 with extra credits available for qualified labor expenses incurred outside the New York City metro area.28

Eligibility requirements vary based on the type of film, production company (independent versus nonindependent), and the production's budget. If the film has a production budget over $15 million, or is being produced by a company in which more than five percent of the beneficial ownership is owned directly or indirectly by a publicly traded entity,29 at least 10 percent of the total principal photography shooting days must be at a qualified production facility in New York State.30

An important requirement of the New York production credit is that qualified costs may only include so-called "below the line" costs, which are the costs associated with the work of costume makers, set builders, location scouts, production assistants, camera and sound technicians, caterers, background actors, and other behind-the-scenes industry jobs.31 This prohibits production companies from claiming a credit on money paid to higher-priced talent (lead actors, directors, etc.) whose names appear "above the line" or above the title in opening credits.

If a film project does not meet the requirements for the state's production credit, it can still receive a 30 percent credit on eligible post-production expenditures in the state.32 As with the production credit, additional credit can be earned (up to 40 percent) for certain labor expenditures outside the New York City metro area.33 Post-production activities qualify for this credit if either (1) at least 75 percent of qualified post-production expenditures occur within New York State;34 or (2) qualified spending on visual special effects or animation at a qualified facility in New York is either at least $3 million or 20 percent of the total special effects or animation spending, whichever is less.35

The refundability of New York's credit is significant because it allows producers to receive the credit even if the credit is greater than their New York State tax liability. While the post-production tax credit's refundability is limited to 50 percent of the excess over New York's fixed minimum tax,36 the film production credit does not have the same limitation and 100 percent of the credits in excess of the fixed dollar minimum are refundable.37

New York also requires an audit of in-state production activities before credits are awarded. An applicant's final application for the film credit will either be examined by the film commission or taxpayers may choose to have a pre-approved CPA firm verify their final applications prior to submission.38


After years of film and television productions migrating to other states (or countries),39 the Golden State revamped its film credit program for the 2015/2016 fiscal year to triple the overall annual program cap from $100 million40 to $330 million. Prior to the 2015/2016 changes, the California film credit operated through a lottery system in which projects were chosen at random. The changes, dubbed "The California Film Credit 2.0," instituted a competitive application process.

Under the current competitive program, the base credit for most productions is a 20 percent non-transferable credit.41 This includes feature films (the credit only applies to the first $100 million of qualified expenditures), movies-of-the-week, miniseries, new television series, and pilots. Television series that relocate to California are eligible to apply for a 25 percent non-transferable credit,42 while independent films are eligible for a 25 percent transferable credit, up to $10 million of their qualified costs.43 California generally requires a minimum $1 million budget per feature or television episode,44 with a $500,000 minimum for movies-of-the-week or miniseries.45

The application process is unique among state film credit programs. Eligible productions may only apply during certain application periods during the year46 and they initially compete for the available pool of funds by calculating a cost-benefit ratio,47 with credit awards being determined after the state considers the jobs ratio of applicants in order of competitiveness.48

The jobs ratio uses 100 percent of qualified wages and 35 percent of non-wage expenses.49 "Qualified wages" does not include any amounts spent for writers, directors, music composers, and actors.50 The inclusion of 100 percent of qualified wage expense, but only 35 percent of non-wage expenses, is intended to show that California's credit is focused on rewarding employment of tradespeople who comprise film crews within the state. A production can enhance its ratio, and potentially improve its chances of being selected, by shooting at approved production facilities within California,51 by filming at in-state locations outside of a 30-mile radius from Los Angeles,52 and for in-state visual effects spend.53

California allows only producers of independent films to generate a transferable credit.54 For producers of non-independent films (and television programs) for whom this transferability option is not available, the credit may be applied as an offset against sales/use tax liability in addition to income tax liability. California does require an audit of a production's expenditures prior to the issuance of credit awards.55


Claiming more than $6 billion in economic impact to the state in FY2015 alone from film projects in Georgia, the state offers generous incentives for productions.56

Georgia offers a 20 percent base credit,57 with an extra 10 percent uplift credit available for including a Georgia promotion logo in the ending credits.58 The minimum base investment required is $500,000 of qualified expenditures for all project types,59 but projects may be combined to reach the minimum within a single year. Qualified expenses are not limited to "below-the-line" employees, but there is a limit of $500,000 in wages paid directly or indirectly to an individual employee.60 Payments to above-the-line talent via loan-out companies may also be included as qualified expenses.61 Unlike the other states noted, Georgia's film credit program has no annual program cap or per project caps for television and film production.62

Georgia also allows its film credit to be available to types of productions not subsidized by a number of other states, including non-scripted (reality) television, music videos, and commercials, as long as they meet the state's minimum budget requirement.63

In Georgia, film credits may be sold or transferred one time to an unrelated party64 and can be applied to offset state payroll tax withholding liabilities to the extent that credits exceed income tax liability.65

No pre-award audit is required, but taxpayers may choose to participate in a voluntary pre-audit program offered by the Georgia Department of Revenue for a fee.66 The voluntary pre-audit certifies the amount of the film credit generated and, although a subsequent tax return may be audited, a pre-audited film credit would not be. Certified productions are also required to file electronically with the Georgia Department of Revenue within 90 days of completing their in-state spend, or qualified base investment, on a film project.67


The film credit programs outlined above represent efforts by four states to encourage the development and growth of the film and television industry in their states. Given concerns, however, as to whether such credits actually result in a permanent benefit (once the in-state production is complete) one recent trend has been the addition of annual program caps (and/or per project caps) on the amount of available film credits, as well as greater oversight of film credit programs, such as by requiring audits before credits are awarded. Other states (e.g., North Carolina and Texas) have opted for a grant program where the state has discretion over which types of projects it wishes to fund,68 while a few states (e.g., Alaska) have repealed their film credit entirely.69

State film credits can be a significant consideration in film and television production decisions. A potential 20 percent to 30 percent reduction in costs through tax credits is a valuable incentive that merits the consideration of producers of film and television content. Refundability and transferability (or the lack thereof) are also important considerations. Film and television producers should consult with a professional in the area of film tax credits when attempting to compare the various state film credit programs.

For more information regarding tax credits and incentives, contact: 

Kevin Potter, managing director, Deloitte Tax LLP, New York, +1 212 492 3630

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1 Aspects of the film incentives summarized in this article are also elements of other states' programs, though discussion of specifics in other states is beyond the scope of this article. 36 N.Y. Tax Law §210-B(32)(b).
2 Louisiana Acts 1992, No. 894, §1. 37 N.Y. Tax Law §210-B(20)(b).
3 Id. and 38 N.Y. Comp. Codes R. & Regs. tit. 5, §170.7.
4 Louisiana Acts 2002, No. 6, §1. 39 See Assembly Bill No. 1839, Ch. 413(f).
5 Louisiana Acts 2003, No. 1240, §3. 40 Assembly Bill No, 1839, Legislative Counsel's Digest.
6 Louisiana Acts 2005, No. 456. 41 Cal. Rev. & Tax. Code §23695(a)(4)(A).
7 Id. 42 Cal. Rev. & Tax. Code §23695(a)(4)(B).
8 43 Cal. Rev. & Tax. Code §23695(a)(4)(C).
9 Louisiana Acts 2015, No. 134, §1 (amending La. Rev. Stat. §47:6007(C)(1)(d)(ii)(aa)). 44 Cal. Rev. & Tax. Code §23695(b)(18)(A)(i) and (iii).
10 Louisiana Acts 2015, No. 134, §1 (amending La. Rev. Stat. §47:6007(C)(1)(d)(i)). 45 Cal. Rev. & Tax. Code §23695(b)(18)(A)(ii).
11 46 Cal. Code Regs. tit. 10, §5509(a).
12 La. Rev. Stat. §47:6007(J)(1)(b). 47 Cal. Rev. & Tax. Code §23695(b)(7).
13 Id. 48 Cal. Rev. & Tax. Code §23695(g)(2)(D).
14 La. Rev. Stat. §47:6007(J)(3)(a). 49 Cal. Code Regs. tit. 10, §5515(a)(1) and Cal. Rev. & Tax. Code §23695(b)(7).
15 La. Rev. Stat. §47:6007(J)(5)(a). 50 Cal. Rev. & Tax. Code §23695(b)(21)(B)(iv).
16 La. Rev. Stat. §47:6007(C)(4)(g). 51 Cal. Code Regs. tit. 10, §5515(c)(1).
17 La. Rev. Stat. §47:6007(C)(4)(f)(i)(bb) and La. Rev. Stat. §47.6007(C)(4)(h)(i). 52 Id.
18 La. Rev. Stat. §47:6007(J)(2)(a). 53 Cal. Code Regs. tit. 10, §5515(c)(2).
19 La. Rev. Stat. §47:6007(C)(1)(f). 54 Cal. Rev. & Tax. Code §23695(c)(3)(A).
20 La. Rev. Stat. §47:6007(B)(21). 55 Cal. Rev. & Tax. Code §23695(g)(3)(B).
21 N.Y. S.B. 6060, Laws 2004. 56
22 Id. and N.Y. Tax Law §24(a)(2). 57 Ga. Code Ann.§48-7-40.26(d)(1).
23 New York A.B. 9807C, Laws 2008. 58 Ga. Code Ann.§48-7-40.26(d)(2).
24 N.Y. Tax Law §31. 59 Ga. Code Ann.§48-7-40.26(c).
25 New York A.B. 9710D, Laws 2010. 60 Ga. Code Ann.§48-7-40.26(b)(14)(A).
26 N.Y. Tax Law §210-B(20). 61 Ga. Code Ann.§48-7-40.26(b)(8).
27 N.Y. Tax Law §24(a)(2). 62 Ga. Code Ann.§48-7-40.26.
28 N.Y. Tax Law §24(a)(5). 63 Ga. Code Ann.§48-7-40.26(b)(11).
29 N.Y. Tax Law §24(b)(7). 64 Ga. Code Ann.§48-7-40.26(g)(1).
30 N.Y. Tax Law §24(a)(2). 65 Ga. Comp. R. & Regs. 560-7-8.45(10)(b).
31 N.Y. Tax Law §24(b)(2). 66 Ga. Code Ann.§48-7-40.26(k).
32 N.Y. Tax Law §31(a)(2). 67 Ga. Comp. R. & Regs. 560-7-8.45(16).
33 N.Y. Tax Law §31(a)(6). 68
34 N.Y. Comp. Codes R. & Regs. tit. 5, §230.6(a)(6). 69
35 Id.  

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