Film Tax Credit Process

 

Please note that the NJEDA will not be accepting applications prior to June 19^th. This document is intended to provide guidance to potential applicants. The NJEDA, New Jersey Motion Picture & Television Commission (NJMP&TC) and Taxation’s process for administering tax credits will be substantially as follows:

 

1)      Applications are submitted to NJEDA with copy to NJMP&TC

A)    Applications to include

i)                      Projected budget for project with breakout of post-production costs

ii)                   Projected budget for project with breakout of cost, including post-production, to be spent in NJ

iii)                 If project will span more than one privilege period, costs for i and ii above by privilege period

iv)                 Description of project, including plot, subject matter, principals, and filming locations

v)                    Shooting schedule

vi)                 Anticipated or actual date for commencement of principal photography

vii)               If applicant is a Partnership or LLC, list of members/owners and the % ownership

viii)            Applicant’s NJ tax year

B)     NJMP&TC reviews project

i)                      Adherence to definition of “Film”

ii)                   Determines date of ‘commencement of principal photography’ if already occurred. If not, will determine and provide formal notification to NJEDA

C)     NJEDA reviews financials

i)                      Checks for 60% test (NJ expenses/total production expenses, excluding post-production > 60%)

ii)                   Determines 20% tax credit (tentative approval) (.2 x (NJ total production costs – marking & advertising)

 

2)      Applications are declined, granted tentative approvals or deferred for the next year

A)    NJEDA accepts/rejects applications on a 1^st come, 1^st serve basis by date stamp of NJEDA

B)     Tentative Approval applicants:

i)                      Applications are approved up to the $10 million annual cap.

ii)                   Approval date is date of NJEDA Board approval

iii)                 Receive an internal ‘rank’ placemarker based on order application was received, first application in being #1, etc.

iv)                 Accepted applications up to the first $10 million receive tentative approvals based on their projected financials. This letter will also state that award of tax credits is dependent upon confirmation that principal photography has commenced within 150 days and actuals meeting the 60% test.

v)                    Applications receiving tentative approval are sent to Taxation.

 

 

C)     Tentative Approvals / Deferred applications

i)                      Accepted applications that exceed the $10 million annual cap.

ii)                   Approval date is date of NJEDA Board approval

iii)                 Receive an internal ‘rank’ placemarker based on order application was received, first application in is #1, second application in is #2, etc.

iv)                 Receive notice stating that they have been tentatively approved, but deferred to a following year. The applicant will be given the year in which they are expected to receive their credit. This letter will also state that award of tax credits is dependent upon confirmation that principal photography has commenced within 150 days and actuals meeting the 60% test.

v)                    Deferred applications are sent to Taxation with notice of rank.

D)    Declined applications

i)                      Application does not meet 60% test

ii)                   Application does not meet definition of “Film”

iii)                 NJEDA sends letter

 

3)      Tax credits are awarded

A)    NJEDA receives confirmation from NJMP&TC that principal photography commenced within 150 of approval

B)     NJEDA receives actual budgets and proof of NJ expenses & overall expenses

C)     NJEDA confers with Taxation on final approval

D)    Taxation verifies partners in Partnerships and LLCs

E)     NJEDA notifies applicants of final approval

F)      Taxation issues tax credit certificates

 

4)      Sale of tax certificates

A)    Template of buy/sell agreement included with tax credit certificates

B)     In order to ensure that the tax credit is not sold for less than 75% of credit amount, NJEDA must sign off on all transfers

C)     Signed agreements to NJEDA

D)    Copy of signed agreement sent to Taxation

E)     Taxation issues transfer certificate

 

 

 

Additional Allocation Management

 

1)      NJEDA will date stamp applications as they are received. There is a great probability that several applications will be received on the same day resulting in ‘ties.’ Accepted applicants will receive tentative approval for a pro rata share of the total remaining allocation for that year (see example 5). They will receive their remaining approved amount over subsequent years until their approved amount is fulfilled.

 

2)      Applicants will receive a maximum credit equal to the amount indicated in their projected budgets. If actuals come in less than the projected amount, the applicant will receive credits based on the actual number (see example 3). If actuals come in greater than the projected amount, the applicant will receive credits based on the projected number (see example 4). They may apply the following year for the difference.

 

3)      In a situation where actual eligible expenses come in lower than the projected expenses, approved applicants will receive tax credits based upon their actual expenditures. When several approved applications are received on the same day, the percentages will be reworked to reflect the actual amount each applicant is eligible for (see example 5). If there is a remainder from the $10 million, accepted applicants who have been deferred to the next year, will receive tax credits for the current year (see example 3).

Responsibilities

 

1)      NJMP&TC

A)    Outreach & Marketing

B)     Project review for ‘Film’ definition

C)     Project review for feasibility

D)    Determination that principal photography has begun (Sends confirmation letter to NJEDA)

 

2)      NJEDA                

A)    Accept applications

B)     Determine tentative approval

C)     Accept final budget and supporting documents

D)    Determine final approvals

E)     Manage tax transfer process

 

3)      Taxation              

A)    Maintain tally of tax credits approved

B)     Issue tax transfer certificates

 

 

 

 

 

 

Examples

 

1)      ‘Vanilla’ scenario - Total requests of $10 million

A)    5 application received and are ‘accepted’

i)                      App 1 – $2 million eligible

ii)                   App 2 – $2 million eligible

iii)                 App 3 – $2 million eligible

iv)                 App 4 – $2 million eligible

v)                    App 5 – $2 million eligible

B)     All begin principal photography within 150 days of acceptance and actual budgets and documentation pass 60% test

C)     Each applicant awarded tax credits of $2 million

 

2)      One large applicant, several smaller scenario - Total requests of $13 million

A)    4 applications are received in order listed and all are ‘accepted’

i)                      App 1 – $7 million eligible

ii)                   App 2 – $2 million eligible

iii)                 App 3 – $2 million eligible

iv)                 App 4 – $2 million eligible

 

B)     Applications 1 and 2 are granted tentative approval for total eligible amount

C)     Application 3 is granted tentative approval for $1 million and is deferred (first in line) until the following year for $1 million

D)    Application 4 is deferred for the following year for total amount (second in line) until the following year.

E)     All begin principal photography within 150 days of acceptance and actual budgets and documentation pass 60% test

F)      Applicants receive tax credits as indicated in tentative approvals or deferrals.

 

3)      Actuals differ from projected scenario I - Total requests of $13 million

A)    Same as steps A- E of previous scenario

B)     Applicant 1, after review of actual budget and documentation, is only eligible for $6 million

C)     Applicant 2 receives tax credits for $2 million

D)    Applicant 3 receives tax credits for $2 million, despite being deferred for following year in tentative approval.

E)     Applicant 4 is still deferred for following year

 

 

4)      Actuals differ from projected scenario II – Total requests of $10 million

A)    Same as steps A&B of scenario 1, except

B)     Applicant 1, actuals come in with $4 million eligible

C)     Applicant 1 receives credits based on projected amount and receives $2 million in tax credits.

D)    Applicants 2-5 each receive $2 million in tax credits based on their actual budgets.

E)     Applicant may apply for remaining $2 million in the next year

 

5)      Several applications received the same day scenario - Total requests of $20 million

A)    4 applications are received on the same day and all are ‘accepted’

i)                      App A -- $8 million eligible

ii)                   App B -- $2 million eligible

iii)                 App C -- $8 million eligible

iv)                 App D -- $2 million eligible

B)     Each applicant will receive tentative approval for prorated amount based on percentage requested of total allocation available.

i)                      App A – Applied for 40% of total – Receives tentative approval for $4 million ($4 million carries over to next year)

ii)                   App B – Applied for 10% of total – Receives tentative approval for $1 million ($1 million carries over to next year)

iii)                 App C – Applied for 40% of total – Receives tentative approval for $4 million ($4 million carries over to next year)

iv)                 App D – Applied for 10% of total – Receives tentative approval for $1 million ($1 million carries over to next year)

C)     All begin principal photography within 150 days of acceptance and actual budgets and documentation pass 60% test

D)    Applicants receive tax credits as indicated in tentative approvals.

E)     Remainder is deferred for the next year and are first in queue

F)      In the next year (2^nd year), App A-D receive the remainder of their allocations totaling $10 million. New 2^nd year applicants are deferred and placed in queue (in the order they were received) for 3^rd year.