September 12, 2023

Tax Credits & Incentives for Commercial Productions

Courtesy of Freepik.com

The development phase for commercial productions goes beyond determining the creative concept for the project, creating the project’s treatment and writing a corresponding script.

The size of the budget, the length of the commercial, and the specifics of the product being advertised all play a role in determining how much money will be spent on the project. Similar to motion pictures and television productions, incentives also play an important role in the budgetary process and deciding the location of commercial productions.

As production incentives are quickly becoming common knowledge among business leaders, advertisers increasingly require commercial producers to factor in tax credits and incentives into bids for their spots. Accordingly, commercial producers should familiarize themselves and their teams with locations offering incentives for commercial projects.

Before including an incentive in the bid for your next project or entering into an agreement with an advertiser to deliver an incentive, producers should understand the following at a bare minimum:

1. The Basis of the Incentive- is the incentive based on labor and local spend? Will non-residents’ wages be considered qualifying expenditures? Will the producer be required to withhold from payments to loan-outs, non-residents’ wages or both?

2. Minimum Spend- What is the amount that the producer has to spend in each jurisdiction to avail itself of the incentive? Are there other non-monetary requirements at play?

3. Type of Incentive- Does the incentive require that a tax return be filed before the incentive can be monetized/realized?

4. Incentive Proceeds Split- As the incentive’s ultimate responsibility (and oftentimes cost to realize/finalize the incentive) lies with the producer/production company, producers should ensure that they discuss the split of the incentive’s proceeds with the advertiser prior to closing out deal negotiations.

To help in starting the research for your next project, below is a chart identifying states that offer incentives for the production of commercial spots in their jurisdictions. The chart also identifies the approximate amount of the incentive, the type of incentive and ascertains whether the jurisdiction requires a minimum amount of funds to be spent before a producer can avail themselves of a commercial incentive.

Take a look at the below chart and let’s chat if you have questions about a particular destination!