Filmmaking is a craft that demands creators use all the resources they have at their disposal. And when it comes to building a budget, tax incentives could be the difference between shooting in your hometown or a production hotspot like Atlanta.\u00a0<\/p>\n\n\n\n
In conversation with Cast & Crew vice president of sales John Cooke, Adrian Ward, president of Cast & Crew Financial Services, shares insights on how filmmakers can best leverage tax incentives and make sure investors are interested in their project.\u00a0<\/p>\n\n\n\n
Investors are looking for a return on their investment. One of the key strategies for that is to mitigate risk. [Producers should] start by looking for getting bang for their buck when it comes to paying for talent and all the other elements. A lot of that strategy is also through the financing model that they\u2019re going to use.<\/p>\n\n\n\n
[Producers will] utilize pre-sales of distribution rights to validate the film in the marketplace, and they\u2019ll also use tax incentives, which is basically money to the bottom line of the movie that\u2019s non-recoupable. It\u2019s a great way to have 20\u201330% of your budget already taken care of before you\u2019ve even gone into production.<\/p>\n\n\n\n
I think the first-and-foremost [consideration] is having the right location for the film creatively. Assuming that\u2019s taken care of, then it\u2019s: What are the demands of the financing, and what can the tax credit location provide?<\/p>\n\n\n\n
If you have a larger above-the-line expenditure, then there are tax credits that can accommodate some of that. Otherwise, it could be a film that needs more in postproduction or special effects, and there are definitely programs that lean into that a little bit more as well.<\/p>\n\n\n\n
Exactly.<\/p>\n\n\n\n
These days, most producers will have a relationship with a lender who will monetize that tax incentive upfront in a project. So it\u2019s part of the initial financing. The factors that go into that are based on the type of credit\u2014whether it\u2019s a rebate or a transferable credit\u2014and the requirements of the lender.<\/p>\n\n\n\n
It\u2019s really something that should be a conversation early on in the process, to make sure the lender is OK with that jurisdiction. There have been legislative changes over the years, and lenders may know of better jurisdictions. There are always new [programs emerging] from different countries or states.<\/p>\n\n\n\n
The other consideration that producers need to take into account is that lenders are looking at it from not only the size of the tax credit, but the timeline for repayment. Some tax credits take longer than others, and you have to allow for that in the financing costs.<\/p>\n\n\n\n
Yes, absolutely. A lot of producers will mix and match different credits. Then you get into the world of co-productions where several countries are involved. It can get quite complicated.<\/p>\n\n\n\n
Rarely will they offer the full value. They will discount based on a few factors, starting with the track record of that jurisdiction, in terms of what it\u2019s done historically. Has it paid mostly according to the estimate? Has it paid mostly according to the timeline?\u00a0<\/p>\n\n\n\n
Most lenders will loan 90\u201395% of the gross tax credit amount, and there\u2019s usually an opinion letter from a neutral third party that validates that amount. [Regarding repayment timelines,] if there\u2019s strong documentation or a guarantee, they may lend more against the tax credit.<\/p>\n\n\n\n
It really varies by jurisdiction, especially between different countries. But from the time you submit your audit work or files to the jurisdiction, it\u2019s usually somewhere between six and 18 months.<\/p>\n\n\n\n
This interview has been edited for clarity and length. Watch the full conversation here:<\/strong><\/p>\n\n\n\n