In a "generous" holiday gift-giving mood, Congress just passed, and the President is expected to sign, a bill that extends Section 181 of the Internal Revenue Code. This Section (subject to its applicable limitations) permits the immediate deduction of the costs of producing a film or television production in the US. It had expired at the end of 2013. It has now been extended retroactively from January 1, 2014 through December 31, 2014, and covers qualifying films where principal photography commences at any time in 2014.
Pursuant to the new extension of 181, producers of qualifying films during 2014 should be aware:
1. The new extension will apply to a producer who started filming a television production or feature film in 2014, and who (or whose investors) will now be in a position to take advantage of the benefits of Section 181. This is true even though a producer of a qualifying film commenced (and may have completed) the film in 2014, with no expectation of being able to claim the federal tax benefits of Section 181. This possibility arises because of the retroactive nature of the new extension back to January 1, 2014. It is essential for a producer to be aware that, to claim the benefits of Section 181 for a 2014 film, the producer must attach to the production company's 2014 tax return, an election to claim the benefits pf Section 181.
2. The extension of Section 181 applies to a film whose principal photography commences on or before December 31, 2014. If a producer is in a position where he/she can accelerate the principal photography of a film so that it starts by December 31, 2004, Section 181 and its benefits should be available to all the qualifying production costs of the film, even though most of the costs occur in 2015, provided that the principal photography continues unabated after its start in 2014, as would normally be done in shooting a film.
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