Things To Know That Will Make You Access Soft Money Through Talent Attachments

Sep 13, 2017|Entertainment finance
Rodriques Law

Actors get movies made. Having the right actor attached can make or break a film or television show, in terms of financing, ability to pre-sell foreign markets, and box office and/or VOD performance. Often, locations are chosen to qualify for government subsidies. In order to qualify for the subsidies, most states (and countries) will require a film production to spend a minimum amount of its production budget within the state (or country). Several others will require that a minimum percentage of the production’s above and below-the-line labor must be chosen from that county’s workforce, while a few other states require that at least one of the principal cast is a full-time resident or citizen of the state (or another European Economic Area (EEA) Member State, in the case of certain European countries).

Depending on the project, producers can raise up to 80% of the budget in government subsidies, including tax credits, rebates, grants and tax shelters. Some countries also provide soft loans or equity through regional funds financed with taxpayer money. Talent are chosen for the production to qualify for such soft money.

While some countries (and states) will subsidize eligible expenditure for talent labor simply by reference to nationality and/or residence, others will only subsidize productions that hire a minimum number of local talent. This ensures that a country’s taxpayers’ money is only used to incentivize use of local workforce, and ensures that public funding is only given to productions for services rendered by that country’s cast and technicians.

Since the choice of location is tied to funding, producers want to ensure they are getting as much film incentives as are reasonably possible. Thus, producers will be tempted to shoot in locations that will give back a portion of their spend for above-the-line talent.

Of course, since filmmaking does not only involve money, no matter the film incentives or exchange rates, ultimately for the producer, it comes down to the quality of the services available in these states. Film and TV productions only go to the locations where producers are confident about the talent they can pick up and get their projects made. That is why some of these production locations have built up excellent infrastructure, state-of-the-art soundstages, quality vendors, proper police assistance, and very experienced cast and crew that know what they are doing.

The United States

Our review of the film incentives that are available in the United States found that only Colorado, Texas and Utah require, to varying degrees, the production to hire local talent in order to qualify for any public funding. In Texas, at least 70% of the cast, including extras, must be Texas residents. In Colorado, a production’s cast and crew must comprise of at least 50% Colorado residents. In Utah, while extras and five principal cast members are excluded from hiring requirement, under the Community Film Incentive Program (CFIP), designed for up-and-coming local filmmakers and productions with budgets of $500,000 or less, 85% of cast & crew must be Utah residents.

Of the 35 states in the United States which provide film incentives, nearly half of them provide incentives only for wages and salaries paid to actors who are residents of the state. While almost all of the remaining states subsidize wages paid to out-of-state talent, New York does not. The New York State Film Tax Credit Program does not give tax credit for salaries of highly-paid above-the-line talent, whether they are local or imported.

States that impose local residency of one or more principal cast members as a requirement for productions to qualify for any soft money, and the amount of the incentives, are as follows:

  • Colorado: 20% cash rebate
  • Texas: Up to 22.5% cash grant
  • Utah: 20% cash rebate (for budget of $500,000 or less)

States that define qualified production expenditure simply by reference to residency of the cast, and the amount of the incentives, are as follows:

  • Arkansas: 30% rebate
  • Connecticut: 30% tax credit
  • District of Columbia: 35% cash rebate
  • Hawaii: 20% tax credit (Oahu), 25% (neighbor islands).
  • Illinois: 30% transferable tax credit on resident labor, 45% tax credit on resident labor from economically disadvantaged areas
  • Kentucky: 35% tax credit
  • Louisiana: 40-50% tax credit (except to a loan-out company)
  • Maine: 17% cash rebate
  • Mississippi: 30% cash rebate
  • Nevada: 15-20% tax credit
  • Oklahoma: 35% rebate
  • Puerto Rico: 40% tax credit
  • South Carolina: 25% cash rebate
  • Tennessee: 25% cash rebate
  • Virginia: 25-45% tax credit and discretionary grant.
  • Washington: 30% tax credit for film, 35% tax credit for television series with six (6) or more episodes

Around the World

Of the 32 countries around the world (outside the United States), which we believe provide the best film incentives, only a handful of them, including Colombia and Canada, have a general policy of tying their film incentives to projects hiring local talent, such as the director, screenwriter, composer, director of photography and the actors playing the main roles. These governments allocate money to domestic and international productions as incentives to creating jobs and giving income to people who are nationals and/or citizens of their respective countries.

These subsidies are often granted on a “points system,” where the production must have a certain number of points to qualify for any incentives. The following are examples of such schemes:

Colombia: The director and one (1) principal actor, or one (1) principal actor and two (2) department heads, must be Colombian.

Canada: The Production Services Tax Credit program offers 16% federal tax credit for hiring residents, where hiring a Canadian director is worth X points, Y points if one of the two highest paid actors is Canadian, and so on. Under such a scheme, it becomes difficult to secure enough qualifying points without the majority of key talent being local. In the case of a documentary, all of the creative positions applicable to the production must be occupied by Canadians.

Eurimages: This is a European Cinema Support Fund which is run by the Council of Europe. Eurimages provides financial support to independent filmmakers. It primarily subsidizes co-production for the production of full-length features, animations and documentaries. Eurimages is made up of 38-member states of Europe and Canada, as associate member. This scheme requires fiction projects to achieve at least 15 out of 19 points, according to a points system, which means a production must hire at least one main actor, as determined by the number of days worked.

Estonia: Requires the film production to use Estonian-based filmmakers, actors and other production crew, Estonian story and/or Estonian-set storyline.

For most other European countries, such as France and Germany, a production can gain enough qualifying points without hiring a single main actor, or even the director or screenwriter, who is a national or citizen of the country (or another EEA Member State).

Countries that require productions to hire key above-the-line talent, including primary cast, who are nationals and/or citizens of the country (or another treaty member state) as a pre-condition to qualifying for any film incentives, and the amount of the incentives, are as follows:

  • Canada: 16% tax credit
  • Colombia: 40% cash rebate
  • Eurimages: Interest-free loan of 17% of the budget or €500,000, whichever is lower.

Countries that define qualified production expenditure by reference to residency or citizenship of the lead actor or actors, and the amount of the incentives, are as follows:

  • Canada: 33% tax credit in British Columbia; 45% tax credit in Manitoba; 40% tax credit in Newfoundland; 40% tax credit in New Brunswick; 25-40% in Northwest Territories
  • China: 40% cash rebate (in Qingdao Region)
  • Croatia: 20% rebate
  • Estonia: 30-50% cash rebate
  • Macedonia: 20% cash rebate
  • Malta: 25-27% cash rebate
  • Trinidad & Tobago: 55% cash rebate