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AUP Inspections and the NYS Film Tax Credit Program
With New York State progressing towards extending and amending the Film Tax Credit Program, now is the time to make sure you have a trusted advisor who can help you navigate this tremendously beneficial tax credit.
How Does the New York State Film Tax Credit Program Work, and Who Is Eligible To Claim the Credit?
- This $700 million per year program was created to encourage and increase the amount of film projects that are produced in New York State each year.
- The refundable credit is calculated as 30% of “qualified production expenditures” of a “Qualified Film.” There are also 5-10% credit increases that can be obtained by incurring expenditures outside of the Metropolitan Commuter Transportation District (MCTD).
- A “Qualified Film” can include feature-length films, television films, relocated television productions, and television pilots and/or series. The credit does not apply to productions such as documentaries, news programs, sporting events, game shows, commercials, music videos, and “reality” programs.
- “Qualified production costs” include amounts spent on tangible property used and services performed within New York State that are directly and predominantly associated with the production of a “qualified film” (defined above). Most below-the-line expenses are fully qualified, while above-the-line costs may be subject to certain caps and limitations.
How Will the New York State Fiscal Year 2025-26 Budget Impact This Program?
- On January 27, 2025, New York State released this year’s edition of its “Yellow Book” which provided an analysis of the Executive Budget Proposal for the State Fiscal Year 2025-26.
- Part of the budget proposal called for the state to “Extend and Amend the Film Tax Credit” Program.
- Details are currently sparse, but the proposal calls for extending the program through 2036, adding a 10% credit for certain recurring productions, removing certain restrictions on above-the-line costs (see above), and creating a new $100 million Empire State Independent Film Production program.
What Is an Agreed Upon Procedures (AUP) Inspection?
- An AUP inspection is performed by a pre-qualified CPA firm and is submitted along with the final tax credit application upon completion of the production/project.
- The objective of an AUP inspection is for a third party to confirm that a production company has met the eligibility requirements of the tax credit program and is submitting only those expenditures that are considered “qualified” by NYS.
- The AUP inspection includes but is not limited to procedures such as confirming the final application is complete according to program rules, inspecting the production company’s general ledger reports for “non-qualified” expenditures and ensuring the production is in compliance with the end credit requirements.
What Is a “Pre-Qualified” CPA Firm, and How Can Utilizing Such a Firm for an AUP Inspection Benefit Your Production?
- NYS has set forth a list of CPA firms that the State has “pre-qualified” to perform the AUP inspections discussed above.
- Submitting an AUP report with your production’s final application will significantly reduce the time it takes the state to process your application and issue your credit certificate.
- Using a pre-qualified CPA firm will allow a production company to ensure that their final application is complete, accurate, and complies with the requirements set forth by NYS to receive the tax credit.
- An applicant that does not submit an AUP inspection may have a higher risk of submitting an incomplete or inaccurate final application that could severely delay the receipt of the tax credit and potentially lead to issues receiving the maximum tax credit for which the production company qualifies.
Withum is proud to be one of the “Pre-Qualified” CPA firms eligible to conduct AUP Inspections related to these important tax credits. We look forward to expediting these refunds to production companies at a time when they need them the most.
Author: Michael Markgjonaj, CPA | [email protected]