Film and television productions could receive transferable federal tax credits

The federal tax credit would equal 20% of covered compensation for a qualifying production. The main credit covers commercially produced feature films, TV pilots, and TV seasons costing more than $1 million when at least 75% of main filming occurs in the United States. It excludes adult productions subject to federal performer-record rules and several formats, including news, sports, social-media content, advertising, fundraising, and corporate productions. Animation uses the share of U.S. animation costs instead of filming days. Covered pay includes U.S. work by cast, crew members, directors, and producers, including pre- and post-production work, but excludes profit shares and residual payments. The production must be completed during the tax year, and its production costs and covered pay must be treated as part of its tax cost. Only the taxpayer bearing the benefits and risks of owning the production could qualify initially. The credit would apply when main filming begins in a tax year that starts after December 31, 2026.

Taxpayers could elect to transfer the credit, and the credited amount would be removed from the production's tax basis. The transfer election and basis reduction apply to the film and television production credit described in the proposal. Reducing tax basis means the credited amount could no longer remain in the production's tax cost when calculating later gains or deductions. These rules would apply to eligible productions whose main filming begins in a tax year starting after December 31, 2026.

Each applicable bonus would add five percentage points to the credit, but the total rate could not exceed 30%. Bonuses cover qualifying rural or disaster-area filming, independent producers, producers with qualifying activity in at least 10 states, and producers that increase domestic production compared with foreign production. A location bonus requires at least 30% of filming days in a federally designated rural opportunity zone or disaster area. Disaster filming must start within five years after the President determines that federal assistance is warranted. An independent producer cannot be publicly traded or majority-owned by a publicly traded company. In each of at least 10 states, a multi-state producer must meet both a half-of-filming-days test for one production and a $10 million covered-pay test during the measurement period. The domestic-production bonus starts in the producer's first tax year beginning after December 31, 2026. The added U.S. production count must equal at least 30% of the three-year foreign-production average that year, 40% the next year, and 50% thereafter.

Certain U.S. visual-effects and traditional post-production projects could qualify even if the production fails the 75% U.S. filming test. The project must involve an otherwise eligible production, incur at least 75% of its visual-effects or traditional post-production costs in the United States, and avoid the excluded production types. Traditional post-production includes editing, sound, music, credits, and dubbing, but not visual effects or promotional work. Only pay for the relevant work performed in the United States would count. Other bonuses would not apply. One five-point increase would be available if at least 30% of covered pay supports work in a qualifying rural or disaster area, or if an independent producer completed the underlying production. Location work must begin while the rural-zone designation applies or within five years after the federal disaster-assistance determination. These rules would apply when the production's main filming begins in a tax year starting after December 31, 2026.