What’s Included in the New Tax Code Section 168(k) Film Regulations?

If you’re an independent production company or filmmaker, you’ve almost certainly heard about the new tax code section 168(k) film regulations. Whether you’ve read about the new tax code section 168(k) film deductions that are replacing Section 181.

Or you’ve simply heard about the new code and wondered. What exactly it is? And what it means for you or your production company? You might be surprised at what’s included.

What is the New Tax Code Section 168(k) Film Deduction?

Section 168(k) was introduced under the recent Tax Cuts and Jobs Act which was passed and signed into law in 2017. 

The new tax code Section 168(k) film deduction replaces Section 181. Although many of the provisions between the two are the same.

The primary difference? 

This New Tax Code Section 168(k) provides a 100% tax deduction for a feature film or television series during the first year of distribution. 

The new code is certainly more complex than its predecessor. And might not be easy to follow or understand by the average individual.

As such, it is recommended that any filmmaker interested in benefiting from this new tax code consult with an entertainment attorney about the way it works and the paperwork that is involved.

How is New Tax Code Section 168(k) Film Deduction Different from 181?

While the two are very similar, there are some key elements of the two tax codes that differ.

For example:

• There is no longer a $15M limit on the deduction.
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• The deduction applies to the first commercial exhibition of the film or television program. And does not apply as production expenses are incurred.
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• Films or programs that are acquired may qualify if they were acquired after September 27, 2017. When the new law was signed into effect.
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• The 100% phases out at a rate of 20% per calendar year for property that has been placed in service in taxable years starting in 2023 and will completely phase out by 2027.

Who Qualifies or What Qualifies for the Deduction?

Since the New Tax Code Section 168(k) film deduction represents a tax deduction that results when tax filings are sent to the IRS.

It’s important to first work with a qualified entertainment attorney. As well as a qualified tax attorney or CPA to determine whether you’ve invested into a qualifying film.

Qualifications

Under the new tax code, in order to qualify for the deduction you must have invested into a qualifying film, television, or theater production investment which is distributed by 2023 and for which the producers file a proper tax statement with the IRS. 

Only new feature films or television series that have not been shot can be qualified for the new tax code Section 168(k) film deduction.

To see if you qualify, or if your project might qualify for the New Tax Code Section 168(k) film deduction. Contact a tax accountant or an entertainment attorney!