Congressman Introduces Bill to Reform Film Tax Credits

Rep. Collin Peterson, D-Minn., has introduced legislation that would amend the Tax Code to disqualify movie and TV producers from receiving tax credits from the federal government if any of the production is done outside the United States.

The bill, known as the Film Incentive Reform Act, would amend Section 181 of the Tax Code, to modify and extend the election to expense the cost of qualified film, television, and theatrical productions.

In 2004, the American Federation of Musicians, along with other entertainment unions and producers, lobbied Congress to include Section 181 in the American Job Creation Act of 2004, which outlines “Treatment of Certain Qualified Film and Television Production” for the purposes of providing tax subsidies to domestic film production activities produced in the U.S.

Nearly a decade later, according to the AFM, Section 181 tax credits provide more than $400 million each year for U.S. film producers. The Film Incentive Reform Act would close a loophole in current law which qualifies a film for subsidies if only 75 percent of a film’s production is spent in the U.S.

“Current tax loopholes put hard-working musicians, whose names might not be well-known but who work hard for minimum pay because they love music, at a disadvantage,” Petersen said in a statement. “The Film Incentive Reform Act of 2014 would close this loophole, ending the tax break to companies that send American jobs offshore. This legislation will save taxpayer money and keep more jobs in the United States,” he said.

The AFM estimates that musicians lose $30 million in salaries each year through the offshoring of TV and film music soundtrack jobs. The legislation would modify the law to require a subsidized film production to spend 100 percent of its production costs in the U.S., effectively keeping taxpayer money at home.

“There is no justification for Congress to provide corporate welfare to the US film industry when producers take taxpayer money and offshore US jobs,” AFM International president Ray Hair said in a statement. “Film tax incentive provisions were originally intended to encourage domestic motion picture production, but in the case of musicians who record the film and TV scores, the producers are hurting us.”

Film tax credits have also become a controversial issue among states, which have been competing with each other to attract more movie production. In Maryland, the producers of the popular Netflix series “House of Cards” threatened to pull production out of the state of Maryland unless they received more money in tax credits for the third season. The state agreed in April to provide $11.5 million in tax credits in 2014. As Hollywood has steadily lost more and more production to other states, California officials have also made a push to attract more movie and TV show producers. The California State Senate voted late last month to increase the yearly budget of the state’s tax credit program from $100 million to $330 million, and the bill is expected to be signed into law by Governor Jerry Brown this month.