Production Tax Credits Don't Just Affect Motion Pictures

By Daren Pesick


Usually, when one hears the term production tax credits, the first thing which comes to mind will be the entertainment industry. In that respect, if one is shooting a movie in New York, the incentive pertains to production costs incurred in New York State. Qualified productions include: Films, Episodic TV series, television pilots and shows, TV movies and miniseries. Particular groups of productions are excluded from the program, including, although not restricted to, documentaries, news or current affairs programs, interview or talk shows, video lessons, sport shows or events, daytime soap operas, reality programs, ads, music videos.

Nevertheless, this kind of credit goes past the entertainment realm. Under federal law, the production tax credit, or PTC, offers an income tax credit of 2.2 cents per kilowatt-hour for the production of electrical energy from utility-scale turbines. This incentive was created under the Energy Policy Act of 1992. The PTC applies for the first decade of electricity production. It's set to expire on December 31, 2012. Similarly, through Section 1603 of the American Recovery and Reinvestment Act of 2009, wind project developers can select to obtain a 30 percent investment tax credit, or ITC, instead of the PTC. For jobs placed in service before 2013, at which construction begins before the end of 2011, developers can choose to receive an equivalent cash payment from the Department of Treasury for the worth of the 30 percent ITC.

Connecticut is holding on with Democratic Governor Daniel Malloy, but Malloy wants a change. He really wants to reduce the amount to 25 % from the existing 30% and to only 50 percent of the credits could be transferred. This signifies that to finance a film the companies could only sell fifty percent to get income to their budgets. Of the 50 percent, by the time it's lowered in funding you might be talking 40 percent for the producers. A new report claimed that only 7 cents on the dollar was returned to the economy, but majors like NBC who recently place three shows in Connecticut doubt that fact and question the accounting methods. 80 productions received the credit last year. Connecticut being a neighbor of New York will work well to keep the incentive while some are cancelling.

Towards the end of 2006, state administrators approximated the Act had drawn 750 million dollars in production costs, a 6000 percent boost over 2002's before-tax credit expenditures. During these processes, their state has worked to rebrand itself as "Hollywood South" to suggest a financial infrastructure hospitable to a number of industries associated with the major movie studios. Further than the conjecture of economic windfalls, former Governor Mike Foster applauded the need for the new incentive strategy culturally to place ourselves into the spotlight for significant motion picture productions. Just what this suggested was that Louisiana could delight itself on the ways it represented the Hollywood majors' pursuits and, conversely, the ways Hollywood represented Louisiana through big productions.

The production tax credits are on the books all through this year. For plans put into service last year and the year before that, developers have the choice of using the credit as a Treasury grant. That option "saved the industry" when the recession dried up the market for tax-equity financing of renewables.




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