You probably already know that there are many types of state film & media incentives. Some are cash rebates or grants. Some are credits that are applicable against your in-state tax liability. Some are “refundable credits.” Some take years to complete their payment or certification process, some only take a few weeks.
Cash rebates are probably the easiest to understand. You spend money in a state, that money is verified via an audit, and a rebate check is cut and sent to your production company for you to use however you desire.
It’s a bit different in states that offer tax credits. If you don’t have an in-state tax liability, which is likely, what will you do with a tax credit for that state? You will need to sell that credit on to someone or something that does have that liability. Generally, that sale will include a discount of some level and possibly even a broker’s fee.
So, for example, if you have a $1M tax credit from a state and you don’t have that level of in-state tax liability you will need to sell that $1M tax credit to a person or corporation that does. But that person or corporation won’t want to buy that credit from you unless it is given at a discount. Also, you may not know who the potential buyers of your credit may be in that state so you may have to utilize a broker to find a buyer for you. This means your $1M “credit” could become an $850,000 cash payment to you.
Well, your buyer will want a 10-15% discount and your broker could charge 3-5% to find your buyer in the first place.
This means a 30% “credit” could easily be worth less than a 25% “rebate.”
And the process to get and then sell your credit could take weeks or even months (and in some cases years).
So you should make sure you ask how long the issuance of credit certificates or rebate payments or refundable credits will take. In some states, that can be a three to five year process. In others, you may be able to get a payment wired directly into your bank account in just a few weeks.
Thankfully, for you, Oregon is a cash rebate. It is also an easy to use and responsive system. Our audits generally take only a few weeks and the payout of our rebate follows very soon thereafter. Often that entire process can be done within 4 weeks. On top of that, you really only deal with us, Oregon Film. Most questions, problems & solutions and processes happen through our office. And if we don’t know the answer, we can find it out for you. That means you are, more often than not, just dealing with one or two people rather than an anonymous group at a larger and less responsive office like a department of taxation or revenue.
In addition, you should also consider what qualifies for these rebates. Do all employees working in the state qualify or just residents? Is there a cap for above-the-line payments if they even qualify at all? Is there a different incentive rate applied for residents and non-residents? Is there an additional rebate for bringing production work to different parts of the state? Are there additional taxes or filing requirements needed for loanouts to qualify?
One of the unique services that we here at Oregon Film offer is: we will take your budget and do a line-by-line review of it and let you know exactly what qualifies and what the requirements for that qualification may be. And if you need us to do that several times because your budget changes, that’s fine. Even better, if you are working in Movie Magic or Showbiz, we will physically “tag” your budget so that you can use it going forward to track changes and rebate estimates going forward as you revise your production plan.
Your time is valuable, as is your production cash flow. You should make sure those are adequately considered when you research state tax incentives.