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Film and Digital Media Credit

New Jersey’s film and digital media tax credit program has been expanded by the passing of Assembly Bill 5580, which increases the annual cap on incentives for film and television productions to $100 million a year (formerly $75 million) and extends the provisions through 2028.

The demand for tax credits was greater than the supply; therefore, more production companies were applying than there were dollars available. The enactment of this provision will lead to job growth and spur economic activity as studios seek film locations in New Jersey.

For more information on this signed legislation, please contact a member of the Tax Services Group.

Background:

A production company may obtain a transferable tax credit equal to 30% (35% in the following municipalities: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer, or Salem County) as long as qualified production expenses meet the following list of requirements:

  • At least 60% of total film production expenses are incurred in-state (exclusive of postproduction costs) or incur more than $1 million in qualified production expenses on any given project.
  • Principal photography start within 180 days of the original application date or 150 days from the date of approval of the application by the New Jersey Economic Development Authority.
  • Employers must withhold New Jersey Gross Income Tax for employees working in the state and 6.37% from each payment to a loan out company or independent contractor.
  • There is an exclusion for payments greater than $500,000 made to a highly compensated individuals for costs of a story, script, or scenario used in the production of a film; and wages or salaries or other compensation for writers, directors, including music directors, producers, and performers.
  • If the production company producing the show has owned or leased a production facility of at least 20,000 sq. ft. for a minimum of 24 months, and has invested at least $3 million in the facility, which must be located in a designated urban enterprise zone, then a reality television show can qualify for the tax credits.
  • Production companies can take an additional credit equal to 2% of the qualified film or digital media production expenses as long as the application is accompanied by a diversity plan, the plan is approved, and the New Jersey Economic Development Authority has verified that the applicant has met or made good faith efforts in achieving the goals stated within the diversity plan.

The program has an annual cap of $75 million per fiscal year (July 1-June 30) thru June 30, 2023. (N.J. C.54:10A-5.39b)

Author: Bonnie Susmano | bsusmano@withum.com

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