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Everything You Wanted to Know about Tax Incentives: The Doc Film Money Map 2.0 Explains It All For You

By Tom White

Yellow graphic that reads The Doc Film Money Map, a state-by-state guide to tax incentives.

In concert with IDA's Getting Real '16 conference, the Sundance Institute's Documentary Film Program, under the guidance of (now former) Film Fund Director Rahdi Taylor and former NYC Film Commissioner Cynthia Lopez, published the Doc Film Money Map, a state-by-state guide to tax incentives. A year later, the team, including Betsy Tsai, brings you the new and improved Doc Film Money Map 2.0. Following Taylor and Lopez's September 7th presentation at IDA's offices about tax incentive programs, and just prior to an NEA Webinar on the subject, we caught up with them for a few questions about how the study came about, the new features of Money Map 2.0, and what you can do to get a tax incentive program in your state.

Talk about the genesis for the Doc Film Money Map 1.0. What was the process? What were the challenges in researching the information?

Rahdi Taylor: As a film funder, I've been looking at indie doc budgets and budget reports for more than a decade. Almost never would I see state tax incentives as a production resource. But because Sundance Institute works with filmmakers in nonfiction and fiction, I could see the disparity in use. After the first IDA Getting Real conference, I developed an even deeper passion for tackling issues that face nonfiction filmmakers generally. As a former labor and community organizer, I have a background in looking at challenges systemically and trying to find a collective solution—something that can help more than one person at a time.

Initially I thought docs weren't eligible for incentive programs. When I understood they might be was when we launched our research study. Sundance Institute spoke with friendly research firms and academic institutions, but chose to do the field research ourselves. After consultation with Cynthia Lopez and an additional conversation with former film commission officer Betsy Steinberg and with film producers, our staff and amazing interns proceeded to research every state in the nation. Film offices and film commissions were generally friendly and helpful. We had to learn as we went because this was new territory for us. But our lack of background in tax incentives may have made us a good fit for the project. I think of Sundance Institute as an organization by artists for artists. As filmmakers ourselves, we could come at it with a filmmaker's needs in mind!

Cynthia Lopez: During my time as NYC Film Commissioner at the Mayor's Office of Media and Entertainment, one of my goals was to create equitable distribution of resources for those creatives working on large-scale feature films, episodic series and smaller productions including documentaries. However, New York and LA do not offer tax credits to documentary storytellers. So I began to educate myself on the tax credits and how they worked in service of the industry. The major revenue stream set by each state to generate film industry business was the tax credit or special incentive programs, and I became intrigued by how and in which states offered this opportunity to nonfiction filmmakers and smaller productions.

For years as an executive at POV, assisting filmmakers to complete their films, we were always looking for innovative ways to assist in fundraising. Holistically, the fundraising "pie" for indie films includes philanthropic, private and public (government) funding. So it was always my intention to assist the nonfiction field with understanding how and where to access government resources. When Rahdi and I sat down to discuss this further, it was evident that developing a comprehensive guide that works in service of the indie community was needed to educate our field about the use of this often untapped resource. The team at Sundance Institute has done a superb job at research and trouble-shooting every aspect of what a filmmaker needs to know.

According to Doc Film Money Map 1.0, 31 out of 51 states and territories have tax incentive programs that are friendly to documentary makers. Why have the rest of the states—most glaringly, New York and California—excluded documentary/nonfiction projects?

RT: In order to understand the answer, filmmakers need to understand why tax incentives exist. Incentive programs "incentivize" a certain activity—in this case, economic activity of film production. In states with sufficient film production, no added incentive is needed. And if documentary production budgets and economic activity don't compare with fiction production budgets, they may not generate incentive programs. Finally, in addition to economic activity, states are interested in job creation. Does a $3M documentary create as many high-paying, in-state jobs as a $3M fiction film? I do not know—research study, please!

CL: (Laughing) I agree with Rahdi: indie film research is essential. Let us dig into the issue of why states provide tax credits to the film industry in the first place. They do so to generate new business and to encourage film studios, television and digital production departments to "shoot in their town," so that they spend money in the local economy and thus give an economic boost to their vendors. For example, most productions spend major dollars on dry cleaning of wardrobe/costumes, lumber to build sets, employing local creative talent, craft services (restaurants), and they often pay location fees to shoot in museums, libraries and private establishments. All of this revenue assists the local economy, and that is why states use the "tax credit" as a driving force to encourage film industry business. In New York City, one of the first steps that I did as commissioner was to have our team at the Mayor's Office work with the Boston Consulting Group to conduct a study to evaluate a variety of measures of how the film industry infused the local economic growth and created jobs.

This same type of research approach is desperately needed in the indie community. A comprehensive and analytical industry research piece is mandatory, that evaluates how indie films create jobs, encourage diversity among its production talent, contribute to the local economy in cultural and artistic ways and can showcase local communities and even encourage tourism.

Among the 31 states and territories that are doc-friendly, did you find that there was parity across the board between features and documentaries in terms of tax incentives?

RT: Many states make little distinction between an in-state production budget of $3M for a fiction film vs. $3M for a nonfiction film. Even further, some states actually lower the minimum spend for productions such as music videos, commercials, video games and even sometimes, documentaries. This makes it even easier to qualify, so do your research!

CL: I agree, it is less about the distinction between indie features and documentaries. Most states look strictly at the economic spend in their "state/local community." My advice to both indie feature and documentary makers is, You need someone on your team—the producer, generally—to really understand as much as they can about the "tax credit and other incentives" offered by the state you are working in. And then get the best entertainment accountant who knows how to leverage all of the assets possible in that state.

Can docmakers apply to both city and state tax incentive programs? How about county programs?

RT: Most tax programs are run by the state, which manages taxes. But many municipalities have non-tax incentives through their Film Office or Film Commission. In addition to providing locations, permits, and vendor discount programs, some cities have grants, marketing spends, city-owned properties for filming, and other attractions, so be sure to ask!

CL: Ditto! My only suggestion is that like any government program, storytellers need to understand who are the primary decision-makers of each of these programs and get to know them. Government offices that process these grants and marketing opportunities need to know who you are and how your particular production will work in their city. Also, always thank them and invite them to special screenings and premieres.

What are some common mistakes that docmakers make in applying for tax incentives?

RT: The most common mistake is not applying for tax incentives in the first place!

CL: Cannot agree with RT more! The other big mistake boutique productions often do is waiting until the deadline to learn about how to apply. You need to really take these opportunities seriously. The Hollywood studios cultivate relationships, have teams of professionals ensuring that the tax credit applications are done well in advance, and trouble-shoot any clarifications needed. In the nonfiction community, we need to appoint someone on our production team as "government liaison"— the specialist, if you will, for all government-related programs: NEA, NEH, local government grants, tax credit programs, government-sponsored incentive programs and public location requirements.

Is it more advantageous to incorporate as an LLC or as a nonprofit?

RT: It is far less important to have a single answer for every state—which generally is not likely to happen—than to have a good question (like this one) to ask your Film Office or Film Commission. That's why we've included "12 Questions to Ask" in the Doc Film Money Map!

Have there ever been any comprehensive studies of the measurable impact of doc/nonfiction projects in a given city, state or region?

CL: The Boston Consulting Group has done many studies about the film industry growth in NYC, but due to our objectives of measuring the media and entertainment spend in the local economy, nonfiction analysis was a minor factor. It is vital that an economic research piece is done to evaluate the contributions made by nonfiction storytellers.

Talk about Doc Film Money Map 2.0. What are the new features?

RT: One of the reasons documentary filmmakers rarely use tax incentives is because it may feel foreign and confusing. We've included a Step by Step Guide to walk filmmakers through the process, and a Glossary to give filmmakers the ABCs of incentive programs. We're not saying it isn't hard work to raise funds from a given source—but we believe it shouldn’t be mysterious or scary! We've also included case studies from independent film producers to give a personal perspective on the journey to tax incentive finance. We’ve also included Top 12 Questions to Ask your Film Office (see above). We've updated some features as well, like our hyperlinked map, our state-by-state comparison chart, and the state-by-state cheat sheet.

CL: What is so helpful and exciting in the Doc Film Money Map 2.0 version are the case studies and updated information. Compared to all the government charts and other guides geared at major feature film productions, this guide is specifically for doc and indie creatives. It is so user-friendly, up-to-the-minute information with live links that will get you (digitally) exactly to where you need to go!

Raising money, everyone knows, is not easy, but this is an awesome tool!

What would you recommend for docmakers to do to advocate for tax incentive programs in their states?

CL: Get organized, when you are not in production. Get to know other IDA members in your area. Call the film office in your area and understand all the tax credit and incentive programs available in your community, city, suburb, state. Hold a "Let's Learn More about Government Funding" meeting with indie filmmakers, use the Doc Money Map 2.0, share best practices and then set a second meeting to learn more about how the film office is working and how best you can collaborate together. Have someone from their office present to your group.

I always encourage, Small steps, done consistently, will get you to your destination. Set realistic joint goals collaboratively with your government partners.

RT: Cynthia has contributed a special section to the new Money Map 2.0! It features fresh strategies for film commissions and film offices who want to be indie friendly and documentary filmmaker-friendly—even if they don't have any tax incentive program at all! Filmmakers can learn from this pull-out section, and think creatively about how to partner well with their city or state.

CL: Special thank you to Sundance Institute (Rahdi Taylor, Betsy Tsai and the team) for your leadership on this incredible resource and Documentary Magazine for getting the word out to the field and to encourage its use. So proud to be part of this important endeavor.

Tom White is editor of Documentary magazine.