Producing Business
New Tax Incentives Bring Filming to New York

By Stephanie R. Myers

Several new recent tax incentive developments are making filming in New York state and New York City an even more attractive prospect for some productions.

Last September, New York Gov. George Pataki signed into law the Empire State Film Production Credit Program. The program, overseen by the New York State Governor’s Office for Motion Picture and Television Development, provides a 10 percent tax credit for qualified production costs of movies and television shows that film in an eligible New York state production facility. (A qualified production facility, according to the official New York City Web site, is a “facility containing a soundstage 7,000 square feet or larger.” Also, the site notes, if production costs connected with the facility are under $3 million, at least 75 percent of the film’s location days must be in New York state to receive production cost credit.)

Additionally, New York City Mayor Michael Bloomberg in January began offering the Made in New York Incentive Program, which gives benefits to those who film their movie or television show in one of the five New York City boroughs.

The Made in New York Incentive Program includes The Film Production Tax Credit Program. This program gives qualifying films and television programs a 10 percent state tax credit for certain expenses, in addition to a New York City tax credit of 5 percent. (It is also possible to receive a partial tax credit benefit if the production spends under $3 million and less than 75 percent of location days in New York.)

Barry Horowitz, of Eisner and Lubin LLP, a member of the Society’s New York, Multistate and Local Taxation Committee, said that the incentive program will be a boon to the business. “It definitely is a positive for the industry,” Horowitz said. “The film industry is one of the most vibrant industries in New York—it should get special credit to make films and productions in New York. The city is piggybacked along, so both jurisdictions are giving incentives to do this.”

Some CPAs say the tax credits will also encourage more production in the area. Jon Fish, a CPA who teaches Finance Management for Film and Television at NYU’s School of Continuing Professional Studies, said that New York is ideal for filming.

“New York is a great location to shoot and has high quality and depth in its production crews,” Fish said. “People want to shoot in New York. If the incentives application proves to be straightforward and fair, and producers and studios are able to reduce production costs via the tax credits in a way they feel is predictable and easy to plan for, then the program will lead to incremental production in New York.”

Fish added that it’s important for those involved in filming to keep careful records in order to meet the credit requirements.

“Producers and production accountants must be mindful of keeping properly classified production-cost reports and accounting records so that they can clearly and easily identify ‘qualified production costs’ and costs incurred in ‘qualified film production facilities’ as defined in the credit requirements,” he said, adding that production accounting software allows for this.

The state also provides sales tax exemptions for film and video production.

According to the Web site for the Governor’s Office of Motion Picture and Television Development, the exemption covers “purchases of machinery, equipment, parts, tools and supplies used in production.” Additionally, services ranging from maintaining production equipment and installing are also exempt.

To take advantage of the credit, the producer must fill out the DTF-17 application for registration as a sales tax vendor at least 20 business days before it is needed. After acceptance, the producer will receive a Certificate of Authority that will have a vendor identification number to be used.

Robert A. Nanfro, tax manager for Lazar Levine & Felix LLP and a member of the New York, Multistate and Local Taxation Committee, said that the qualifications that productions have to meet make it a good incentive for larger companies, but smaller productions, such as documentaries, commercials and music videos, might be left in the dark.

“While it’s well intended, it falls short of the incentives the state could have given for the smaller film producers,” Nanfro said. “It’s going to be used for a handful of companies. The NYU (film) students and the young directors won’t be able to afford the facilities that they are talking about.”

The percentages offered for the tax credits don’t make sense, Nanfro added. “If they’re going to do a credit that’s 10 percent on the state, why is it 5 percent on the city?” Nanfro said.

He suggests that the regulation requiring a production to film on a soundstage of 7,000 square feet or larger be taken out.

“They want more Hollywood coming in,” he said. “The application process isn’t easy either. You have to obtain a certificate from the Governor’s Office for Motion Picture and Television Development. They make you jump through hoops.”