Question For FilmTVLaw.com:

We’re shooting a feature in the summer. I got introduced to a possible investor who asked about “tax equity.” I have not heard that term. He said he could get back part of his investment from taxes if we set up the investment right. Please help!

Answer by Brandon Blake, Entertainment Lawyer:

Great question about tax equity and what it means with respect to investing in film and television projects. Film and television producers are potentially looking at the best prospects in years thanks to the often overlooked Tax Cuts and Jobs Act incentives for film and television. Please feel free to check out all of my entertainment industry articles at https://filmtvlaw.com/entertainment-lawyer-qa/.

I’m personally very excited about the incentives that Congress added into the Tax Cuts and Jobs Act of 2018, which provided a number of tax incentives for film and television producers. But first, let’s talk about “tax equity investing” and what it all means.

Tax Equity Investing in film and television is nothing new historically, and if anyone is familiar with the boom in filmmaking that took place in England and Germany in the 1990s, they know it was all based on a type of tax equity investing that the new Tax Cuts and Jobs Act has brought to the United States today.

At its most basic, tax equity investing means providing tax-based incentives for investors to invest money into certain industries that the legislature wants to support. So, for example, the oil industry in the United States has enjoyed various tax equity incentives for decades both Federally and in various states.

Until recently, the biggest tax equity investment in the United States was solar energy. Solar investing involves investing in the solar energy business, and because there are a lot of environmental benefits to solar energy, the United States has been backing solar energy investing with a combination of tax deductions and tax credits.

Now we might be seeing a transition, where some of the value of those solar energy tax credits and deductions have been cut back by the new Tax Cuts and Jobs Act.

In its place, Bonus Depreciation has now been specifically provided to film and television projects. Much like the old Section 181 Film Tax Incentive, Bonus Depreciation provides for a 100% tax deduction for qualifying film and television projects.

However, as good as Bonus Depreciation is for tax equity investors in film and television, it actually gets a lot better when the securities offering can also take into account the various tax incentives and tax credits available through particular states around the country, including especially the state tax incentives in Georgia, Louisiana and New Mexico, although there are lots of other contenders as well.

By structuring a securities offering around federal and state tax incentives, it is possible for film and television producers to create a tax equity structure that is very competitive with what the solar industry is offering today, and with the benefit of being able to participate in the perks of the entertainment industry.

Our firm has been setting up sophisticated securities offerings for film and television producers for 19 years. Please be aware that our firm does not advise on or re-organize third-party securities documentation, but we can prepare a new securities offering and SEC filings for your production to take advantage of Bonus Depreciation rules and state tax incentives.

As with any entertainment matter, please do not make a decision about complex matters without consulting an experienced entertainment lawyer first. I have been representing feature film projects, television series, and recording artists for more than 19 years. Please feel free to contact my office about a quote.

- By Brandon Blake, Entertainment Lawyer