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New Federal Tax Act Gives New Life, and Twists, to Treatment of Film, TV and Stage Productions
Section 181 of the Internal Revenue Code (IRC) was first introduced in 2004 and, with some gaps in time, lasted through its expiration at the end of 2016. It has provided benefits to both producers of movies and television programs (and, for a shorter period of time, to producers of live stage productions) and — under pass-through legal structures such as limited liability companies — to their investors. Now, with the enactment at the end of 2017 of the sweeping new federal tax law, commonly referred to as the Tax Cuts and Jobs Act (the Jobs Act), §181 has been given new life, with a couple of additional benefits and a couple of additional twists.
First: When can the deduction for production costs be taken? Under §181, prior to the Jobs Act, production costs incurred during a year could be deducted for such year if the costs were incurred with a reasonable certainty that the production would be completed (as a practical matter, the year in which funds for the budgeted costs had been fully raised and were beginning to be spent on production costs). That meant that unlike income forecast depreciation (the alternative in effect prior to §181's enactment), costs could be deducted even before a film was released, a television show broadcast or a live stage production had it first paid public performance.
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