OT: Domestic Production Activities Deduction

jkrepner wrote on 3/8/2006, 8:54 AM

A while back I read over on the Creative Cow boards about a new U.S. tax deduction for 2005. (The person that posted said he was a CPA.) Anyway, it is equal to 3% of your net income this year and 2006, but it is designed to go up to 9% by 2010. It does cover motion picture production.... and I am sure they don't mean just Hollywood. This could be a nice deal, so I figured I'd pass it on.

Anyone else looked into this?

http://taxes.about.com/od/deductionscredits/a/domesticproduct.htm

Jeff

Comments

Steve Mann wrote on 3/8/2006, 9:29 PM

I suspect that you would be guaranteed an audit. The official definitions run several pages. While one paragraph taketh away:

"The term production personnel also does not include individuals whose activities relate to fixing the film on tangible personal property. The definition of qualified film is limited to the master copy of the film (or other copy from which the holder is licensed to make and produce copies), and, except as provided in paragraph (j)(2) of this section, does not include tangible personal property embodying the qualified film, such as DVDs or videocassettes."

The following four paragraphs give back. Sort of.

Unless you make a lot of money on a movie produced entirely in the US (including the disc replication*), it's probably not worth going for the deduction.

*Since most disc replicators ship the work offshore, this may disqualify your movie.