We can almost hear the newspaper crier already – ‘Read all about it, read all about it … No changes to Canada’s film tax credit financing!”
What we are referring to is a rash of recent articles and TV news stories around the U.S. situation regarding film tax credit financing. Politicians in a number of states are waging a full stage war in some cases to abolish the entire film tax credit system, taking away these valuable subsidies that have become intrinsic in financing many non studio productions.
That’s in the U.S. – That is absolutely not the case in Canada. One can argue all day about the merits and benefits the government in Canada ( at the federal and provincial level ) reaps via their non repayable film tax credit grants, which currently are some of the most generous in the world , as well as efficiently administered . We’re not going to get into that argument here – suffice to say that we understand the government to be very satisfied with the revenues they recoup via productions in film, TV and animation being produced in Canada.
Canadian producers and investors are still very bullish on film tax credits, and the financing of these tax credits is part of an overalls strategy to get most independent productions financed and completed in the Canadian landscape, covering all ten provinces.
We stated previously that tax credits in Canada are both available and generous. Canadians producers and owners use the tax credits as part of an overall strategy to finance their productions. It is certainly very unusual that any single project in either film, tv , or animation would be financed through just one vehicle, i.e. all equity, all debt, all tax credits, all pre-sales, etc .Therefore tax credits, due to their generous nature, are a lynch pin in the overall finance strategy for tax credits film financing .
Tax credits were increased over the last couple years, due in part to re invigorate Hollywood North – aka Canada, which was starting to lose productions to Louisiana, New Mexico, Michigan, etc.
Tax credits when properly accumulated, filed, and financed (financed at your discretion of course – you could wait for the cheque!) are a combo of federal and provincial in Canada. The key credit on the federal side is the Production Services Film tax credit, which finances up to 16% of your eligible labor. That credit is further augmented at the provincial level on a province by province basis. As an example in Ontario where a large majority of filming and production is done the rebate comes to an additional 25% of the total budget spend. ( Manitoba has one of the most generous programs – Thirty % all-spend tax credit, or offset up to 65% of local labor costs on projects that start location spending/filming in that province!)
We can be forgiven for sometimes not mention Digital Animation credits which in some cases go up to 42% or more of the total spend . Only several years ago digital animation was a weak sister to the industry, but is gaining significant traction due to the popularly of animation, 3D, Shriek ! Etc. Many major animation productions are done in Canada directly by Canadian firms or offshoots of the well known major animation studios.
So the strategy and recommendation we make to clients is quite clear – understand what credit you are eligible for, select where your production creation or filming makes the most sense ( Manitoba has very cold winters !) and finance your credits as a part of your overall cobbling together of a success and profitable venture in film, tv or animation .
Is a film tax credit strategy the holy grail of your financing? Probably not , but used as one tool among your equity, debt and pre sales strategy and you have a strong chance of pulling of a successful financing for your Canadian venture.