Making The Most of Your Dollars: Production Incentives

In today’s economy, agencies are graded not only by how far they can stretch their imagination to make truly buzzworthy and impactful advertising, but also by how well they can stretch a dollar.  Advertising budgets are tighter than ever today; this at a time marked by the advent of new digital platforms where brands also have to make their mark, as the dollars available to achieve these expanded aims largely remain unchanged.

To meet this challenge, it is incumbent that agencies take maximum advantage of every possible way to return money to their clients, to make non-working production and talent dollars go further.

One opportunity agencies and in-house units may not be making the most of is Production Incentives.  This is the rich and ever-changing array of rebates, grants, tax credits and discounts that more and more U.S. states and municipalities, and their foreign counterparts, are offering to attract a slice of the massive amounts spent annually producing commercials. Why? Because commercial production, like film, can be deeply lucrative for where it takes place – with the monies spent on hotels, restaurants, local crews, local talent, equipment rental and transportation, etc.

Here’s a quick primer on what you need to know to begin maxing out the many benefits from Commercial Production Incentives:

• 35%+ – The Top-Line on the Bottom-line Paybacks– Across the board, the dollars that can be recouped with commercial production incentives are pretty staggering, averaging 20% plus from our experience working with our agency and advertiser clients.  At the moment, the dollar-wise richest program available comes in Louisiana.  Here, with a minimum production spend of $300K within a year, which can be applied over multiple projects, you can earn credit amounts of 30 – 35%, with the extra 5% being a bonus for utilizing local crews and talent.  Georgia provides a 20% tax credit for companies that spend $500K or more on production and post-production in the state, and an additional 10% credit if the content promotes the state (via use of logo and link to its website).

• Who’s in the Game? – Right now, nearly 40 states, plus Puerto Rico, with Arkansas and Oklahoma only providing their incentives for the production of national commercials.  One especially noteworthy venue to consider is Illinois, which has been aggressive in its offers to commercial producers since the 2008 establishment of its film and commercial tax credit program.  The benchmark to benefits here is extremely attractive; just $50,000 in production spends can get you to the recoup table.  Commercial producers can cash-in 30% on Illinois salaries of up to $100,000, and garner an additional 15% tax credit on salaries of staffers who reside in high poverty and unemployment areas.  In the past 18 months, the credits our company alone has recouped for clients is nearly $3 million.  Some states, like Pennsylvania, offer their benefits on a first-come, first-served basis, so producers should plan early to get a share of that state’s $60 million annual commercial rebate pie.

• The Array of Ways to Collect – Incentive models and amounts vary from venue to venue, and naturally, are updated and modified often, adding more complexity.  First and most popular are tax credits; whether upfront production discounts in the form of sales tax exemption (or rebates), rebates at the end of production or tax credits issued against future state liability, there are significant sums to be had. Each state has its own requirements for type of production and expenses that will qualify.

• The Tax Credits Are Long-Term and Transferable – Another thing that advertisers will love is the flexibility of the production tax credits offered by most states and municipalities.  The tax credits earned by commercial producers are often transferable, meaning they can be sold, assigned and transferred between parties for cold, hard cash. Most states like Connecticut and Pennsylvania allow these credits to be carried forward for three years.  Illinois and Georgia allow tax credits to be carried forward up to 5 years, while Louisiana presently offers the industry’s most flexible, 10 years.

• The Paperwork Headache, from Filings to Collections – Lest we forget, all the production incentive opportunities discussed come by the way of government programs.  So, naturally, they all demand the blizzard of paperwork that government programs are known for – filing a variety of forms and documents, review by a third-party CPA, audits, and more, before the check comes in the mail, so to speak.  As stated earlier, the rules, forms, regulations and lead-time needed to apply, and the post-production process time and procedures for payment, change from place to place, and within a venue with maddening frequency.  For example, Illinois recently began requiring proof of vendor payments in the form of cancelled checks or credit card statements—news to all those already midway through submitting their substantiation.  Staying on top of the changes and procedures and marshalling it through the bureaucracy is a full-time job, best completed with the help of dedicated experts. In many cases, the complete compensation to get specialists on the case can come directly from the rebates and tax credits accrued with smart planning.

• Plan Early to Maximize the Benefits, but Don’t Sacrifice Quality – As with any endeavor dependent on so many variables, scenario building before any production location is selected is the best way to optimize your production dollars.  This relates not only to the production of television spots but the new content forms that brands are now producing to promote their wares, from reality television to digital shorts, where like incentives are also available. But advertising is, first and foremost, a creative business, and the creative component of each project should be primary in this decision.  Garnering deep incentives without a significant bench of qualified performers and behind-the-scenes crewmembers, or in a setting that cannot deliver the look and feel your creative requires, will not achieve your goals.  What’s needed is a careful consideration of the potential savings and local resources that come with the production incentives provided, to create a win-win for both the financial and creative bottom lines.

Paul Muratore is President and Chief Executive Officer of Talent Partners, a talent and production support services firm serving the commercial, film and television industries. Talent Partners, together with newly acquired PES Payroll, have been navigating the intricacies of production incentives for their clients for more than 10 years.