Commercials? What’s that? Oh right, those things we all fast forward on the DVR or skip before a YouTube video. As little as we love to watch them, outside of the Superbowl, commercials are an extremely important business that helps drive products in our economy. There are thousands upon thousands of commercials created each year. Did you know that you can earn a tax credit if you film commercials in the state of New York?
The Commercial Production Credit is a tax incentive program for commercials produced in New York State which the Empire State Development (ESD) has allocated $7 million dollars toward. The commercial credit is a combination of three separate credits: the growth credit, downstate production credit, and upstate production credit. The maximum credits are 20%, 5% and 5%, respectively, of qualified production costs for qualified commercials.
A qualified commercial is an advertisement recorded on film, audiotape, videotape, or digital medium in NY for distribution by way of networks, cable, satellite, or motion picture theaters. Commercials produced for distribution on YouTube and the internet are also eligible.
Qualified production costs are costs incurred for tangible property or services used or performed within NYS directly and predominantly in the production, (including pre and post production), of a qualified commercial. Qualified costs generally include most below-the-line items including costs of technical and crew production, expenditures for facilities, props, makeup, wardrobe, set construction, and background talent. Generally excluded are costs of stories and scripts and wages for writers, directors, producers and performers (other than background extras).
The credit for growth is based on year-to-year growth of an applicant’s qualified production costs, as long as they are for qualified commercials. As stated above, the applicant can receive a credit of up to 20% of growth in commercial production costs. For example, if an applicant in 2013 incurred no qualified production costs and in 2014 incurred $100,000 of qualified production costs, its growth would be $100,000. As such, the applicant could receive a credit of up to $20,000. This credit would be refundable to the extent the credit exceeds the applicant’s New York State tax liability. Remember, the credit is based on year to year growth so if the applicant incurred qualified costs of $110,000 in 2015, its “growth” would $10,000, ($110,000-$100,000) and the credit would be $2,000 (20% x $10,000).
The credit for Downstate and Upstate are very similar. The credit for Downstate is based on filming within the Metropolitan Commuter Transportation District (MCTD). The MCTD includes New York City, Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester counties. To qualify for this credit, an applicant must spend a minimum of $500,000 for qualified commercials within the MCTD. Any qualified expense that exceeds the $500,000 is eligible for the 5% credit. The credit for Upstate is for all qualified commercials filmed outside of the MCTD but within NY State. To qualify for this credit an applicant must incur at least $200,000 of expenses for qualified commercials outside the MCTD. Any qualified expense that exceeds the $200,000 is eligible for the 5% credit.
An application needs to be submitted to Empire State Development by 5 PM on April 1st to be eligible for a tax credit for the preceding year.