Status of Federal Incentives under Section 181 of the American Jobs Creation Act, 2004

Section 181 permits deductions for qualified production expenses up to $15 Million (or potentially $20 Million) in the year paid rather than potentially amortizing those amounts over several years. The benefits under Section 181 sunset and terminate, unless extended, at the end of 2008. There are currently pending U.S. Senate and House Bills to extend and amend Section 181 and increase certain benefits to the taxpayer. For example: Senate Bill (SB) 2375 and House Bill (H.R.) 6049, which have been read into record and referred to committee.

The Ways and Means division of the House passed the extender bill which included a modification to and on extension of Section 181. The extender package went to the House of Representatives for a vote and was passed by the House in May 2008. It will now go before the Senate in June 2008 for a vote. If passed by the Senate and signed into law by the President, Section 181 would be extended for one year and, in addition, the expenditures on a film or television project would no longer be disqualified from Section 181 if expenditures exceeded the qualifying amounts of up to $15 million (or $20 million), and the first $15 million (or potentially $20 million) of qualified expenses would be allowed as a deduction.

There is a question whether or not the Senate will pass the extender bill. The Section 181 extender is part of a package extending other legislation. Extension of Section 181 will succeed or fail depending on the passing of the extender bill as a whole. For more information on the extension and amendments please contact us.

If Section 181 is not extended, and to assure that taxpayers still qualify for Section 181 benefits, the film or television project must be in meaningful pre-production before the end of the day on December 31, 2008. If this test is satisfied, the project will be "grandfathered" and can be completed under 181 guidelines in the subsequent year. For more information on what constitutes a "meaningful pre-production" or for any other information on Section 181, feel free to contact us.