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Just when we all thought it was completely dead, Congress passed extender legislation to bring the “181 deduction” back to life. The legislation was a part of HR 1865 and was signed into law by the President just before year-end and is great news for film and television studios as well as independent producers who previously relied upon this benefit to help allure investment in their projects. Here is what it means for your production:
For tax years 2018 through 2020, you can immediately deduct the expended costs to create qualified film or television production, as well as any qualified live theatrical productions.
Your production company’s 2018 tax returns can be amended to include this deduction retroactively.
The legislation is effective for tax year 2020, so producers have an opportunity to plan for projects currently in development.
This is different than the deduction introduced within the Tax Cuts and Jobs Act of 2017 (TCJA). That deduction was designed to replace the Section 181 deduction. TCJA allowed qualified productions to deduct 100% of production costs, however, the production had to be ‘placed in service’ before the production company could deduct the production costs. The term ‘placed in service’ means a commercial release. Under the extended Section 181 rules, this requirement is eliminated. There is, however, a cap of $15,000,000 in aggregate production costs. With very few exceptions, costs in excess of this limit do not qualify.
Contact the Film and Television experts at Element CPAs to determine if your project can benefit from Section 181 deductions!
Source materials (US Tax Code):
