Writeoff? I'll Give You a Writeoff!

After years of lobbying the government to make filming in the US as attractive (or at least more than it had been) as in such exotic locales as Canada, the UK, Romania and Hungary, President Bush signed a bill last Friday designed to provide significant tax breaks to domestic films (see Variety).

Independent producers now may write off a movie in a single year if it has a budget of $1 million-$15 million and 75% of that budget is spent in the U.S. The expensing limit increases to $20 million if the movie is made in a low-income area of the U.S.

The significance of this allowance is that it accelerates the recognition of a loss for investors and deferral of any gain. Similar to the tax breaks found for UK-qualifying films, there is a time value of money mechanism at play. Industry insiders will now just wait for financial firms to design the appropriate instruments that will provide immediate access to these breaks, reducing hard budget dollars required.