Words: Chiquita Woolfolk Banks, Esq.
As producers well know, the amount of any production incentive varies according to how much money the production company spends on qualified activities in the relevant jurisdiction. In the instance of a production hiatus or stoppage, such as the current joint Writers Guild of America (WGA) and Screen Actors Guild (SAG-AFTRA) strike, the question then becomes whether or not the hiatus’ holding costs will qualify for the jurisdiction’s production incentive.
Hiatus Costs
Hiatus and/or holding costs are expenditures incurred by a production company while the project is not physically producing. Typically, these costs include items such as (i) rental fees to hold sound stages, (ii) storage space for production sets, wardrobe and/or other production assets, (iii) insurance for those assets being stored and (iv) other pertinent expenses.
Under each incentive program’s rules, one can identify the categories of expenses that are deemed qualified and therefore eligible as the base for the production incentive. For example, Georgia list’s of qualified production expenditures can be found here while California’s qualified expenditures chart can be found here. By and large, qualified costs are defined as direct costs incurred in that jurisdiction and associated with the physical production of the film or television project. But if the project is on hiatus and isn’t in physical production when the costs are incurred, there is a serious possibility that those costs may not be considered incurred in association with the physical production of the project.
For those projects currently on strike and not fortunate enough to be the recipient of a SAG-AFTRA interim agreement, it is in each producer’s best interest to thoroughly research whether holding costs in the state will be deemed qualified for that state’s incentive program. Furthermore, producers and their finance teams should look beyond information that’s publicly available and reach out to state film commissions and/or departments of revenue to confirm the treatment of these costs. This is research that can take place now while the industry is waiting on negotiations between the AMPTP and the guilds. For some projects, the qualified nature of these costs and the resulting amount of incentive could be a determining factor on whether the project is greenlit post-strike or not.
As the backbone of the industry, financial producers, production controllers and accountants and incentive consultants such as BANKABLE must remain vigilant on the state’s ever-changing financial policies and up-to-date on these matters!
As CEO/Owner of BANKABLE CONSULTING, INC., Chiquita Woolfolk Banks, Esq. supports content creators, with a focus on filmmakers of color, and advises on options to finance the creator’s projects. Specifically, she consults on project’s global incentive alternatives and is “the plug” connecting filmmakers to companies that lend against production incentives, distribution agreements and other production collateral.
BANKABLE CONSULTING, INC. is a boutique tax and legal consulting firm that understands the uniqueness of its clients and client base. We specialize in the creative industries- film, television, music and digital media- and tailor our approach to meet the client’s specific needs. Whether you’re a corporation, limited liability company or an individual, our focus is on customizing each project and delivering an end-result that is reflective of your industry and differentiating circumstances.
