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Section 181 Tax rebate.. Touche International Films

 

TOUCHE INTERNATIONAL FILMS

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Domestic Film Production Incentive Program

(Revised Section 181 of the Internal Revenue Code)

 

contact: Benhard Harvey (202)622-4930

 

MINIMIZING INVESTOR RISK
The American Jobs Creation Act Of 2004 and the 2004 enactment of Section 181 marked an unprecedented change in U.S. policy toward the phenomenon known as “Runaway Production” for the film industry. Hollywood, like many American industries, had grown tired of the high cost of labor and taxes in the United States. Canada and other countries identified the potential financial benefit and took advantage by successfully luring American film and television production onto their soil, taking enormous amounts of production dollars with them. The government’s reaction was to include Section 181 within the American Jobs Creation Act of 2004. Section 181 offers tax incentives for investors in independent film and television productions produced within the United States.

10517594_553411524770958_5759326330133263755_nSECTION 181
You’ve heard of farming subsidies. A few years back savvy film lobbyists created subsidies for the film industry. As they outlined the dangers of runaway film production to Canada, Eastern Europe and Australia, Congress passed legislation that resulted in Section 181 of the IRS Tax Code. Put simply, Section 181 states that investment in a motion picture shot in the US is 100% tax deductible for the investor in the same year invested. Under Section 181 an investor may deduct the money, which is invested in a film or television production from his or her passive income, earned in the same year. If the investor is actively involved in the operation of the production, he or she may deduct the amount of investment from all active income earned in the same year. Productions with budgets below $15,000,000 (up to $20,000,000), which have, at least seventy-five percent 75% of its production completed within the United States qualify under Section 181. Investors can be either individuals or businesses.
HERE ARE SOME INVESTOR BROAD STROKES FOR THE SECTION 181 TAX DEDUCTION
100% of the motion picture costs is deductible in the same year of investment. – 75% of the motion picture must be shot in the US to qualify for Section 181. – There is a 15 to 20 million dollar budget cap. – There is no minimum film production budget cost. – TV pilots, TV episodes (up to 44), short films, music videos and feature films all qualify for Section 181. – Section 181 can be applied to active income or passive income. – Touché International Films 15
Investors can be either individuals or businesses. – Section 181 is retroactive. – There is no expectation for film distribution or film completion. The motion picture’s corporation issues Schedule K-1’s to the investors so they can take advantage of Section 181.

WHAT IT MEANS FOR INVESTORS Touche International Films
Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers) to greatly minimize his or her risk on what would ordinarily be considered a risky investment. For example, if a taxpayer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Michigan that has a tax credit up to forty percent (40%), an investor will be eligible to recapture seventy five percent (75%) of their investment in a qualifying production. These recaptures can be realized before the film is released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.

GOVERNMENT SPONSORSHIP: STATE FILM INCENTIVES PASSED ONTO INVESTOR
In addition to the Section 181 tax deduction, the motion picture can be filmed in a state with rebates or transferable tax credits. If the film Producers elect to do so, they can pass this subsidy onto our investors upon release of the rebate. As an example, if a $1,000,00.00 movie shoots in New Mexico and spends every penny in the state (or, through a pass through corporation that pays state taxes) the state of New Mexico will issue a 30% tax rebate, worth approximately $250,000.00, that can be sold for a little less than face value. That check can then passed onto to the investors. This is a considerable risk minimization for the Investor. With state film incentives alone, the investor is only risking 75 cents (average) on the dollar if the project is produced in New Mexico…or 60 cents on the dollar if produced in Michigan. In essence, the investor risks 50 to 75 cents on the dollar and the government is picking up the balance on a delayed timetable. There are currently 38 states in the United States that have some type of tax credit or rebate plan. Here is a current List of State Film Incentives with updated information provided by Entertainment Partners.

MARRIAGE OF GOVERNMENT SPONSORSHIP AND SECTION 181
Combine Section 181 federal tax break with a state film tax rebate. By coupling the two together you can reduce an investor’s risk by 50-100%. Think about that. It does depend on how much the investor earns annually, how much they’ve invested in the movie and where the movie will be produced but it is possible that an investor could invest in a motion picture and risk nothing. Conservatively, the risk could be 50% of Touché International Films.
your investment. That means for investing $100,000.00 you are assured to recoup $50,000.00 in tax deductions and rebates. Depending on the math and the possible film pre-sales to foreign territories, Investors could recoup 100% of their investment before the film is distributed. Here is an example. The movie needs 2,000,000. Investor X wants to invest 1,000,000 into the film. Their annual income is 5,000,000 and they have 10M in assets. Their annual taxes are approximately 1.75 M (35% tax bracket) and they have absolutely no tax write-offs to take advantage of. If they invest $1,000,000 they’ll be risking $650,000.00 investment in the motion picture, and will have saved themselves approximately $350,000 in federal income taxes. So, that means the investor is risking 65 cents on the dollar. But, wait! The movie is going to shoot in the state of Michigan. Michigan will give you a 40% rebate. They’ll kick in an extra 2% if you shoot it in one of the numerous Special Economic Zones they have throughout the state. So, you shoot in Detroit and spend $1,000,000 in Michigan. That means they’ll grant you a 42% tax rebate on your gross spend in Michigan, minus tax rebate broker fees. That’s around $400,000. This rebate can then go to the investors. Investor X will now be getting approximately $750,000 in tax deductions and rebates from the Federal Government and the State of Michigan for their $1,000,000 investment in the motion picture. Under this scenario, Investor X’s actual risk is less than 30 cents on the dollar. And the upside is the investor will receive revenues from worldwide distribution sales and licenses of the motion picture. Additionally, 9% of the future gross revenues from each Section 181 qualified project are non-taxable under Section 199.

IMG_0121NOTE FOR INVESTORS
The first thing you as an investor want to know is how an entrepreneur will protect your money. Once that issue is addressed then you want to hear about profits and exits. Investors invest for a variety of reasons, but a unifying concept for all investors is simple. Many Investors are fearful of losing their money. Tax rebates and incentives for money spent on film or television production within a particular state combined with the benefits of Section 181 allow an investor (working with cooperative film producers), to greatly minimize his or her risk on what would ordinarily be considered a risky investment. For example, if a taxpayer is in the thirty-five percent (35%) tax bracket and a qualifying film is shot in Michigan, which has a tax credit up to forty percent (40%), an investor will be eligible to recapture seventy five percent (75%) of their investment in a qualifying production. This recapture could be realized before the film is even released and/or makes its first dollar. In today’s economy this type of investment assurance is hard to come by.

PRODUCER’S STATEMENT
“Investing in our motion picture projects includes a level of safety investors haven’t experienced before in the entertainment industry. We’ve taken the time to research the Section 181 tax legislation and we’ve hired a consultant who can explain how your investment is 100% tax deductible. We’ve gone through the steps to make sure the IRS will recognize your deduction. How many investments in this market and in this economy Touché International Films
can promise that a significant portion of your money is completely protected? After reviewing the information on this website, we will be happy to share with you how we’re going to make an exceptionally good movie with attractive profit potential”

WARRANTIES AND DISCLAIMERS
Except as expressly provided otherwise in a written agreement between licensor and you, the licensed works (movie plan) are now provided “as is” without warranty of any kind, either express or implied, including, but not limited to the implied warranties of merchantability or fitness for a particular purpose, or the warranty of non-infringement.
In no event shall licensor or its suppliers be liable to you or any third party for any special, incidental, indirect or consequential damages of any kind, or any damages whatsoever, including, without limitation, those resulting from loss of use, data or profits, whether or not licensor had been advised of the possibility of such damages, and on any theory of liability, arising out of or in connection with the use of the licensed works. Some jurisdictions prohibit the exclusion or limitation of liability for consequential damages, so the above limitations may not apply to you. These limitations shall apply notwithstanding any failure of essential purpose of any limited remedy.
This memorandum describes the creation and operation of a Corporation to engage in the business of motion picture production and financing.
IMG_0123The contents of this memorandum are confidential and are disclosed pursuant to a confidential relationship and may not be reproduced or otherwise used except for the purpose intended herein.
The interests described in this memorandum will not be register under the securities and Exchange Act of 1933 or any local securities law and are described as for investment only and not with a view to resale or distribution.

The purchase of interests described herein entails a high degree of risk and is suitable for purchase only by those who are qualified investors who can afford a total loss of their investment. Further, risk factors as contained in this memorandum (which does not include all possible factors) should be carefully evaluated by each prospective purchaser of the Corporations interest herein.
The contents of this memorandum are not to be construed by any prospective purchaser of the Corporations interest as business, legal, or to advice and each such prospective purchaser will be required to demonstrate that he has the ability to evaluate the purchase of the Corporations interests described herein or has retained the services of a representative who has such knowledge and expertise as may be necessary to evaluate purchase. This memorandum is neither an offer to sell nor a prospectus, but is informational in nature.