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The Independent Filmmaker's Guide to Production Incentives

Expert guidance on how production incentives work, and which may be best for your project and budget.
June 28, 2024

Joseph Chianese

For Independent film producers, the time couldn’t be better to embark on a new project! With the rise of new and expanded production incentives around the globe, filmmakers have more freedom to expand their creativity supported by funding through tax credits, grants, or rebates.

There are significant incentives in locations like the UK (40%), Australia (30%), and Canada (more than 50%, depending on the province in which you produce, and the type of project), and within the US specifically, incentives can supplement an independent film’s financing plan by more that 40%, in certain jurisdictions.

While there is opportunity to bolster a variety of different finance plans, it’s important to first understand how production incentives work, and which types may be best for your project and budget.

If you’re ready to get started, here’s a guide to assist you through the process!

Types of Film Incentives available   

Film incentives come in various forms, each tailored to encourage film production in a specific region. It’s important to understand how each is unique, and which may be best for your film based on your needs. Here are some common types:

Rebates: Rebates (sometimes referred to as Grants) are financial reimbursements paid directly to the production company by the domestic or international film office or another agency. These reimbursements are paid after principal photography wraps, usually within 90 days. Rebates do not require the production company to file a tax return in the jurisdiction where filming took place.

Tax Credits: Tax credits are the most prevalent form of film incentive. Production companies receive credits against their tax liability, often based on a percentage of qualified production expense incurred within the jurisdiction. Tax credits generally come in three forms:

  1. Refundable Tax Credits: A refundable tax credit can reduce a production’s tax liability (even down to zero) and can also result in a refund if the credit amount exceeds the taxes owed. Once all tax liabilities are paid for (if any) productions will receive the remaining amount in the form of a refund.
  2. Transferable Tax Credits: These credits are non-refundable. Transferable tax credits allow productions to transfer, or sell, unused tax credits, often at a discounted rate, to another company or individual with the related US state tax liability.
  3. Non-refundable/Non-Transferable Tax Credit: This type of tax credit has limited flexibility in how it can be used; any excess credit cannot be refunded and is ineligible for transfer or sale to another taxpayer. These credits must be used toward any tax liabilities owed to the US state.

Note: Transferable Tax Credits & Non-refundable/Non-Transferable Tax Credits are unique to US state incentive programs.

Within a given region, incentives can be offered at different levels, sometimes at the state, federal, municipal, or provincial level, and sometimes in combination. Productions filming in Queensland, Australia, or Quebec, Canada, for example, can tap into incentives offered both at the federal government and provincial or state level. Note, Canada has multiple provincial incentives and Australia offers multiple state incentives (in addition to what is being offered in Queensland and Quebec). In Canada, there’s a Federal Production Services Credit at 16% on qualified Canadian labor expenditures. In many of the Canadian provinces there are similar Production Services Credits on production spend (note, the British Columbia incentive is limited to labor expenditures only). The credit amounts vary, ranging from 21.5% to more than 45% (and the provincial incentives can be bundled with the Canadian Federal Incentive). Canada also offers a Canadian Content Credit, 25% at the Federal level, which can be bundled with a similar Provincial credit (with percentages ranging from 25% to 45%).

Which incentives are best for an independent filmmaker?

We are in the midst of a renaissance of independent filmmaking, and many filmmakers are bypassing the studio route to embark on their own path of producing unique content and self-distributing it. Yet, while independent films may have more creative freedom than many studio projects, they also are limited by budgets, financing opportunities and cost.

For the scrappy indie producer, rebates and transferable credits typically are the best incentives for lean budgets because of the quick reimbursement turnaround.     

Rebates tend to be the quickest to monetize, and producers typically receive the money back from the jurisdiction within 60-90 days after the completion of principal photography.

Examples of rebate states in the US, with low or no minimum spend include:   

  • Virginia ($0)
  • Mississippi and Oklahoma ($50K)
  • Maine ($75K)
  • Minnesota ($100K)
  • Tennessee ($150K - $250K)
  • District of Columbia ($250K)
  • U.S. Virgin Islands ($250K)
  • Texas ($250K - $3.5M)
  • Washington State ($500K)
  • Oregon & South Carolina ($1M)
  • North Carolina also offers a 25% rebate; however, North Carolina’s minimum spend is $7M. 

Transferable credits are also relatively quick to monetize, although it’s important to remember you may need to sell your credit to monetize, and you may only net between 85% - 95% of the total amount (3rd party negotiating and supply & demand in the relevant jurisdiction determine the pricing).

U.S. jurisdictions offering transferable tax credits with related low minimum spend include: 

  • Massachusetts, West Virginia, and Puerto Rico ($50K)
  • Maine ($75K)
  • Illinois, Missouri, and Rhode Island ($100K)
  • Connecticut ($100K - $1M)
  • Arkansas ($250K)
  •  Montana ($350K)
  • Georgia and Nevada ($500K)
  • New Jersey ($1M or 60% of your total production expenses; Pennsylvania has a similar 60% rule)
  • Minnesota and California also offer a transferable tax credit ($1M) although in California transferable credits are limited to independent producers (specifically producers who are not publicly traded companies, or owned more than 25% by publicly traded companies, and limited to $10M of qualified spend). Also important to note: Effective July 1, 2025, the California incentive will become refundable for all approved qualified applicants.

Criteria to qualify for the incentive

Productions must meet certain conditions to qualify for any jurisdiction’s film incentive, and these criteria can vary significantly between regions and countries. When comparing location incentives, you should carefully review the specific requirements of each incentive program to determine your eligibility and ensure you can stay in compliance.

Here are some common criteria for film incentives:

  • Overall production spend: Productions often need to spend a certain amount of money in the region providing the incentive. Qualified expenditures can include salaries for talent (ATL), crew (BTL), goods, and services purchased within the jurisdiction, and other expenses related to production. Although equipment purchases and post-production costs may be eligible, other expenses like marketing and distribution may not qualify.
  • Labor: Some incentives limit hiring to local residents only (this is referred to as resident vs. nonresident labor). There may also be rules pertaining to the hiring of ATL or BTL positions. Hiring from a diverse pool of talent may also be a factor in some regions; Missouri and Texas, for example, offer a 2.5%-5% labor uplift if productions employ local apprentices and/or veterans, while New Jersey offers a 2% labor uplift for productions employing underrepresented groups.
  • Minimum spending: There may be a minimum budget requirement for productions to qualify for the incentive, mostly to ensure that the incentives are primarily benefiting productions that make a substantial financial contribution to the local economy.

    For lower-budget projects or independent films, states with lower minimum spends are worth considering as an ideal filming location. Montana and Colorado, for example, require $350,000 and $100,000 respectively to qualify for credits, while Mississippi and Oklahoma comes in even lower with a $50,000 minimum spend criteria. Independent-friendly New Mexico has no minimum spend requirement. 
  • Project Cap: An incentive project cap is a limit on the total amount of incentive funds that a single production can receive. It is often set to help control the overall cost of the incentive program and to distribute funds equitably among productions. 

    Furthermore, there is a distinction between the absolute cap, a fixed maximum amount that a production can receive in incentives, and an annual cap, setting a maximum on the total amount of incentive funds available for productions combined. 

    New York recently increased its annual cap to $700 million, up from a previous cap of $420 million, aiming to draw in more production and remain competitive with its neighboring states. Georgia, on the other hand, currently has no annual cap but the state’s senate committee did consider limiting tax credits to $900 million a year and rendering them non-transferable (this did not pass in Georgia’s 2024 legislative session).    
  • Location: States or countries may attempt to stimulate production business in certain cities or provinces by increasing the incentive for those regions. Productions choosing to film in upstate New York, for example, may qualify for an additional 10% refundable tax credit, while Illinois offers 15% on salaries of individuals who live in economically disadvantaged areas whose unemployment rate is at least 150% of the State's annual average, and Texas offers a 2.5% uplift for productions filming in underutilized or economically distressed areas of the state.    

It’s also important to know that some international locations, including Ireland, the United Kingdom, all European countries and Japan, have specific cultural requirements for film production. This can come in the form of passing a “cultural test” where productions must meet criteria related to promoting the region’s culture to a global audience, as well as demonstrate the use of local crew, talent, and locations in the project.   

How to apply for an incentive program

You’ve locked in the script, created a budget, and may even have your star attached! Now it’s time to start applying for production incentives, but where to start? 

  1. Scout locations using Entertainment Partners' Production Incentives Map to discover the best incentives and resources for your budget and creative vision. You can compare three different locations using our handy incentives comparison tool and estimate how much you’ll receive back here.
  2. Research the incentives that are available in your chosen jurisdiction and ensure that your project qualifies. You can typically find this information on each film office’s website. For example, New Mexico’s incentive requirements can be found here, and some of their requirements include that the project must be commercially viable and already greenlit. A quick way to research contact info for a specific film office is to utilize Entertainment Partners’ Production Incentives Map.
  3. Once you’ve identified the right incentive for your project and you qualify, then it’s time to apply (and be sure to check the deadline)! The application process may require supporting documents such as a budget, shooting schedule, and how your project is being financed.

Every state and country have different requirements on how you qualify, when you might receive a refund back, and even different incentive structures.

Again, Canada includes Federal and Provincial Production Service credits. Depending on the province in which you film, the effective rate could range from 30.3% to 50.8% (not including potential regional uplifts available in certain provinces). In addition, there is a very favorable foreign exchange benefit between the US and Canada. To qualify for the Canadian incentive, you only need a project with a total budget of $1M or more (you don’t need to spend $1M in Canada, just have a total budget of $1M or more).

In the UK, for a project to be considered, it must undergo a Cultural Test, a point system that ensures a project can be considered “culturally British.” Keep in mind, this doesn’t impact how much you’ll receive, only if you qualify for the incentive.

Australia’s tax incentives are largely supported by the federal government and government-industry partnerships. Their incentive consists of three distinct off-sets (Producer Offset; Location Offset; and Post, Digital, and Visual Effects “PDV” Offset). Each of these off-sets requires productions to incorporate job training and hire locally for at least one position in post, digital and visual effects.

Pitfalls to avoid when seeking incentives

Research, research, research! It’s easy to miss the fine details when planning to apply for an incentive for your production. Of course, if you have any questions, EP experts are here to help you navigate the process. In the meantime, here are some common pitfalls you should watch out for when factoring incentives into your budget plan:   

  • Is your project eligible? Some incentives require specifics about the type of production you can create, talent you hire, and even how it will be distributed.
  • Have you factored in the timeline it takes to receive your refund back? Remember, rebates and transferrable credits typically have the quickest turnaround. This timing can impact cashflow and make or break your project if you haven’t budgeted for the timeline.
  • Are you familiar with the local regulations and policies governing the incentive? These may vary by location and can affect the availability and terms of incentives.
  • Is there a minimum spend requirement? Certain jurisdictions require you to spend a certain amount locally to receive the incentive; if your budget doesn’t allow for it, you may need to keep searching for a lower minimum. 

Consult the incentive experts    

Choosing the right location with the best incentives for your project is a strategic and thoughtful process. It can seem overwhelming, but Entertainment Partners is here to help! Our production incentive experts can guide you through the application process while educating you on any new updates to legislation that could impact your eligibility (or handle the entire incentive process for you).

To get started, visit our Production Incentives page to view incentives by geographic location, the Incentives Estimator to calculate savings by North American locations, or the Jurisdiction Comparison tool for quick side-by-side views of incentives in up to three locations at once. If you need support in choosing the best location for your project, we’ve created this helpful resource and if you’re in the US.

Entertainment Partners has the experts and resources you need to navigate the entire incentive process, from understanding incentive legislation to the application and administration of the incentive. We’ll help you maximize your tax credits, and secure the financing you need to make your vision a reality. Contact our dedicated incentives team for expert guidance and take the guesswork out of the incentive process!

Disclaimer: This article contains general information we are providing on a subject that may be of interest to you. Nothing in this article should be considered tax, accounting, or legal advice. You should consult with your own tax, accounting, or legal advisors regarding the applicability of this information to your specific circumstances.

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