Sect 181 Grandfathered

MegaBall$ is Section 181 Grandfathered

The federal film tax incentive known as Section 181 expired December 31st, 2016. The incentive allows film investors to minimize their risk by deducting their investment against passive income as soon as spending begins (capitalization of the offering).

A bill has been introduced to once again renew but, based on past renewals – and considering how slow Washington moves, and a new administration – we can anticipate many months will pass before the bill comes to a vote; and who knows if it will pass. We can be sure there will be a gap until such time 181 renews where investors cannot deduct their investment as per the incentive.

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We at Oroloro Entertainment are happy to report that our comedy feature film MegaBall$ has been grandfathered in, and the tax benefit for investors did not expire, but remains with our project. This gives us a very specific advantage over other films not covered by 181, making our project more attractive to prospective investors. Combining the benefits of 181 and state/local incentives, investors can see a substantial reduction in the financial risks of film investment.

For more information on how Sect. 181 can benefit you check with your tax advisor – or, if you wish, send us an email and we will connect you with our lawyer (who was very involved in the drafting of Sect. 181). You may also ‘Google’ “Section 181” to see many legal opinions of the incentive.

3 Comments

  1. Just curious what you mean by your film being grandfathered in to this year’s 181?
    My understanding of 181 is that individuals or companies can invest in a film project, and as long as the money that they invest has been invested in the tax year, and that the production has begun expenditures in the tax year, then the deduction is available to the investor.

    I am assuming that your film has already made expenditures in 2016 (or will have by the end of December). Are you saying that if an investor does not invest their money in your film until sometime in 2017 that their investment would still qualify for the 181 tax credit? And did you get an IRS decision letter saying your film is “grandfathered” in this way?

    Very interesting. Thanks.

    Reply
    • According to our lawyer, who has been actively involved in Sect 181, we have fulfilled all the requirements to be ‘grandfathered’…so when Sect 181 expires in a few weeks, investors will still benefit by the terms of the incentive. The deduction begins in the year when the project capitalizes and breaks escrow. There is a form filed by our attorney…To get the specifics I suggest contacting an entertainment attorney who firmly understands the incentive.

      The advantage for us (and others) is as we fundraise into the new year we should [hopefully] attract investors because of the deduction, a distinct over other projects that will not qualify until if/when 181 is renewed.

      Reply

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