A recent article in the Canada’s business paper, the Globe and Mail, may have caught your attention – it read ‘American Actors – Canadian Movies’. That is an appropriate segues into why that title becomes more of a reality every day – and we have the 3 word answer to one of the major reasons that is currently the case. What are those three words? ‘Film tax credits ‘!
Tax credits and tax credit financing has quickly become one of the cornerstones or underpinnings of any indie film financing. We always also point out to clients that these same tax credits are applicable to televison and digital animation projects in Canada also.
Certainly funding for film, TV and digital animation projects has never been more of a challenge. In the U.S. the overall economic landscape still makes it difficult for owners and financiers to generate the type of funding they need on a project.
In a manner of speaking the Canadian available tax credits compete with themselves on a proving by province basis, with Ontario and B.C. being probably the most popular. However when you consider Canada as a whole many U.S. owners or co owners realize that the economic uncertainty they might be facing on projects can be significantly removed via film tax incentives and the financing of those incentives.
The actual tax credits themselves are very clearly defined by organization such as OMDC in Ontario Canada as an example. So there is never any mystery surrounding the qualifications and per cent ages grants within the various tax credits. What actually becomes a challenge, or shall we say, a requirement is the fact that you need to put a solid finance plan and budget in place – Best guess efforts hardly count in film tax credit incentives and their financing. Careful attention is paid to your budgets and finance timelines.
There are numerous arguments in place as to whether the Canadian film, tv and digital animation industry is flourishing because of the growing quality and bench strength of the productions, or has everyone simply jumped on the Canadian tax credit bandwagon similar to how they behaved in the 1970; s and early 1980’s when film financing was in large part accomplished by complex tax shelters that led to what many call a feeding frenzy of B type productions.
The bottom line is that the industry is quite flourishing and we can argue all day about what part tax credit incentives play – but why don’t we simply take advantage of them, including the ability to finance these credits for valuable working capital. Many feel the greater reality is that as an owner outside of the studio system independent film financing has to be assisted by foreign financing to some degree, and maximization of the tax credits available. Independent financing for U.S. films has been a challenge and Canadian producers and owners have focused on the ‘real money ‘that is available in film tax credit financing.
Your strategy in financing your production should be simple and clear – ensure that you qualify and have access to the tax credits available – ensure you can finance them to ensure you have valuable working capital and cash flow, while at the same time retaining more equity ownership in your production since you have monetized your tax credit. Naturally at the same time you have to focus on your other components, such as pre sales and distribution, etc.
Sometimes what might seem as the most boring aspects of film finance, i.e. budgets, budget adherence, and good payroll systems and production accounting are in fact the key elements that will make the eligibility and financeability of your production a success.
Speak to a trusted, credible and experienced film tax credit consultant and advisor on financing your film, TV and digital animation credits for the purposes of working capital and cash flow for your productions.