Incentives Watch: State Film Tax Credit Programs Give Starring Role to ‘Loan-Out Companies’

While much of world was transfixed on the annual Oscar Awards last Sunday and reacting to wins by stars, such as Daniel Day-Lewis and Anne Hathaway, the states have been busily refining their film tax credit programs.

The Georgia Department of Revenue recently amended its film tax credit in order to clarify certain loan-out company provisions, reports a Bloomberg BNA Weekly State Tax Reportarticle. A “loan-out company” is defined as any personal services company contracted with, and retained by, the production company or qualified interactive entertainment production company to provide individual personnel, such as actors or directors, for the performance of services used directly in a qualified production activity.

A tax credit is available to production companies and qualified interactive entertainment production companies that produce new film, video, or digital projects in Georgia. These companies must withhold income taxes at six percent on all payments to loan-out companies for services performed in Georgia.

Many state film tax credits contain provisions for loan-out companies. Specifically, the credits tend to require that the employee be employed by a production company or loan-out company to be eligible to meet the credit’s requirements.

For actors and others in the entertainment industry, a loan-out company can be financially advantageous because the company can deduct certain business expenses and, based on the type of entity formed, the employees’ liability can be limited, notes a Film Independentarticle.

Mississippi, Oklahoma, South Carolina, and Utah, for example, all include loan-out company provisions in their film credits.

All of this raises an important question: how much to loan out George Clooney?

For more information about various film tax credits, check out Bloomberg BNA’s Business Credits and Incentives Portfolio Series.

In other developments . . .

The New Mexico Taxation and Revenue Department recently ruled that a vendor’s expenditures qualify for the taxpayer’s film production credit, according to a Bloomberg BNA Weekly State Tax Reportarticle by State Tax Law Editor Rebecca Helmes.

By: Kathleen Caggiano

Follow us on Twitter at: @SALTax
Join Bloomberg BNA's State Tax Group on