Incentives & Financing

Often when you receive a call about a potential feature film production that is interested in filming in your area, the first question they may ask is, “ What are your incentives?” This can be frustrating, if you don’t offer a financial incentive in your state, region or country. Always be prepared and know what soft incentives are available in your jurisdiction and if you are not the key person, know who is.
It is also helpful to know what the incentives are in locations that are similar to yours. Case in point, one state in the U.S. had a pretty nice financial incentive offer and received numerous feature films eager to shoot there. However, before shooting began, some issues arose around the incentive program. Thus, the incentive program was pulled, dozens of feature films were ready, or near ready, to begin filming, and now they were going to have to start over on their location search.

It so happened that savvy film commissioners in a neighboring state kept up with the story and contacted most of the productions that had planned to shoot in the original state. Because they knew what they were offered and what the locations looked like, they could confidently find similar locations. They saved them time, a nightmare logistics situation and money. The state ended up with more than a dozen film productions that switched locations.

Know your selling points when it comes to incentives, including soft incentives. Remember, you have unique and/or special locations, features or services.

The following is a revised report by Simon Hudson, a Professor in Tourism and Marketing at the University of South Carolina – for more information on Professor Hudson and Marketing, go to Chapter Three.

Factoring Incentive Programs into the Market Mix

Production companies need certainty in order to plan on an incentive if they are calculating the bottom line cost for producing in your jurisdiction. If you have an incentive program, it is important to use it for marketing purposes. If you do not have an established incentive program, it is important to communicate any other types of incentives that are not based in a formal program. Because AFCI receives many questions about the various types of incentive programs available, below is a list of the basic types of incentives you should be familiar with in order to answer questions from visiting production.

There are a few different types of tax credits discussed: refundable, non-refundable and transferable. Additionally, production incentives come in the form of co-production agreements, rebates/grants, loans, discount programs, etc. Below is a list of some of the kinds of tax incentive programs being used worldwide.

Tax Credits:

The production company receives a percentage of its production budget back in tax relief. This means that the production company or sometimes individual investors can use the credits as “payment” for some of their tax liabilities. Usually tax credits are based on the number of local workers hired and/or the amount of money spent locally on goods and services. Below are descriptions of three common types of tax credits plans.

• Refundable Tax Credits: These credits are very desirable for film/TV productions in any jurisdiction. If the amount of credit based on production’s allowable expenditures, is greater than the production company’s tax liability in that jurisdiction, the excess amount is refunded directly to the production company

• Non-refundable Tax CreditsThese types of credits allow a percentage of the production costs to be taken as a credit against corporate/franchise or individual taxes owed in that jurisdiction. These credits usually include provisions that allow taxpayers use the credits over a period of several years. Most out-of-state production company taxpayers will not be able to utilize these credits because they have little or no state tax liability.

• Transferable Tax Credits In this type of tax credit, if the amount of credit based on allowable production expenditures is in excess of the production company’s tax liability in that jurisdiction, the production company can sell the credits to a local taxpayer. In this way, they will get the benefit of the production incentive, even though the production company itself may have no tax liability. This method usually results in a slightly lower credit to the producer, because these types of credits are usually sold at slightly less than their face value, and also a percentage of the revenue from the credit will be paid to the intermediary or broker who made the deal.

Film Funds

Countries worldwide (except the U.S.) often have national or regional film funds that invest across the development, production and completion of a variety of films or other media projects. Most require a national or local co-producer be on the production team. Funds usually are a strategic minority co-financier to a range of films. Sometimes this is referred to as a film lottery, as with the co-production “Salmon Fishing in Yemen,” filmed in London and Morocco, financed by the UK Film Lottery.

Incentives for TV, Commercials and Games

Some jurisdictions have incentives for projects beyond traditional film. Most often, refundable tax credits are available for qualifying projected for companies that increase the volume of work in that jurisdiction.


This is a direct program in which the production company receives money in the amount of a percentage of either wages paid to local workers, cost of local goods and services or both. These grants are awarded directly to the company upon completion of filming, and submission of paperwork demonstrating that the company complied with the requirements of the program. Because they are limited funds, rebates are often awarded at one time for the entire year. However, some areas have adopted roll-over provisions in which those productions that did not receive production rebate funds in one year are placed first in line to receive a rebate in the following year. Whether expressed as a rebate or a grant, this method does not require filing a tax return, or selling tax credits, in order to receive funds.

Loan Programs

Many international jurisdictions offer financing for production companies using either a loan guarantee program (often interest-free) or direct loans for film production. Often these loans require stringent qualifications to guarantee repayment to the issuing government agency.

Sales and Use Tax Exemption

This incentive exempts the production company from paying sales tax on purchases of products or goods and services relating to the production. There are usually two ways this occurs. Either the production company does not pay sales and use tax at the time of purchase or the company receives a rebate on sales and use tax it has already paid upon filing the evidence of the purchases. The up-front, point of sale exemption is preferred by production companies, as it requires less paperwork for the companies and for the local tax department or film commission. The rebate, however, does produce quantifiable evidence of the jurisdiction as to the efficacy of the program while the point-of-sale method does not.

Investor/Investment Tax Credits

This incentive benefits both production companies and investors. Individuals or companies receive tax credits when they invest in filmmaking ventures, which can include the production itself or may also include buildings such as soundstages or new businesses relating to production. This kind of incentive program will help to build a healthy production industry because of the investment in the infrastructure, business and the local economy.

Free or Discounted Goods or Services (“Soft” Incentives)

There are many other ways in which you can offer financial benefits to production. Examples include free use of government buildings, free or discounted fees for police, military or transportation staff, discounts on purchases offered by participating merchants, and/or free office space. While film commissions can only offer free use of land and buildings over which they have some control, they can also urge businesses in the private sector to participate in offering discounts on such expenses as lodging, food, building materials, transportation and more. In addition, a film commission can save production companies money by assisting them in negotiating favorable contracts with locations and entities that are integral to the success of the production.
– Simon Hudson

Get Your Production Community Involved

Your best advocates are established people in the film community who live or have worked in your area. Those people, particularly the ones involved with budgeting a production, provide the first-hand experience that can help convince a careful financier.