Rep. Collin Peterson, D-Minn., has introduced new legislation that if passed into law would amend I.R.C. § 181 to disqualify certain movie and television producers from receiving tax incentives from the federal government if any of the production is performed outside the United States or its possessions. The bill, known as the Film Incentive Reform Act of 2014, would amend I.R.C. § 181, to change the requirements required to expense the cost of qualified film, television, and theatrical productions.

As a background, The American Federation of Musicians (hereinafter “AFM”) strategically lobbied Congress in 2003 and 2004 to add § 181 to the Code through the American Job Creation Act of 2004 which outlines the treatment of qualified film and television production expenditures for the purposes of providing tax incentives for domestic film production within the United States and its possessions. According to the AFM, more than $ 400 million per year in I.R.C. § 181 tax incentives are claimed by U.S. film producers since its inception into the Code in 2004.

The Film Incentive Reform Act would remove a loophole in the current statute allowing offshore film production to be claimed. Rep. Collin Peterson, D-Minn., said in a prepared statement that “The Film Incentive Reform Act of 2014 would close this loophole, ending the tax break to companies that send American jobs offshore. This legislation will save taxpayer money and keep more jobs in the United States”. Noting, the AFM estimates that musicians lose at least $30 million in salaries each year through the offshoring of television and film music soundtrack jobs. The legislation would modify the current statute to require film producers to spend 100 percent of its production costs within the United States and its possessions, effectively keeping taxpayer money at home.

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