Making a film has never been easy. Raising the cash, securing a bankable cast and finding a distributor are the obstacles most independent filmmakers face. And while independent producers have always had to leave no stone unturned when raising film financing, in today’s economy filmmakers, perhaps now more than ever, must look for alternative methods to finance their productions.
One resource that has become increasingly available to filmmakers in recent years is state tax incentives. “All of the states are beginning to offer tax credits,” says Peter M. Graham II, principal at New York-based 120dB Films, a film finance company. States offer such credits in an effort to attract film production and spending in their local economies.
So, just how do these tax credits work? First, it should be understood that the filmmaker must provide the initial funds to actually shoot the film. The tax credits can then effectively result in reducing the film’s overall budget after the respective production company files state tax returns for the appropriate year. Some states, such as Michigan and New York, allow for refundable tax credits. Such tax credits essentially allow the filmmakers to receive a cash refund should the tax liability incurred on the production fall below the eligible tax credit.
For example, if come tax day the production owes $100,000 in taxes to the state in which the film was shot, yet has earned a tax credit in that state of $150,000, that production would receive a refund of $50,000. Non-refundable tax credits, on the other hand, would allow a credit to reduce the aforementioned tax liability to zero, but would provide no such cash refund.Graham points out that Michigan offers the most generous tax credits available. This past spring, Michigan state legislators passed a bill to provide filmmakers with up to a 42% refundable tax credit. That credit extends across the board on qualified expenditures–including those for the film crew, locations, studio and equipment rental, food and lodging, and other miscellaneous costs. Under this scenario, a film budgeted at $10 million in qualifying production expenditures in the state, could be eligible for more than $4 million in tax credits.
Tax credits can often mean enormous savings for small, independent productions. Jeff Clanagan, CEO and president of Codeblack Entertainment, got the benefits of Louisiana’s program when he shot the film Mama I Want to Sing there in 2007. “The film’s budget was $4 million, and we saved approximately $600,000,” says Clanagan, who received the savings in the form of a cash refund and who strongly advocates using the programs.
New York, California, New Mexico, Connecticut, and Massachusetts have also been aggressively pushing their tax credit incentives. In fact, this past spring, New York state and New York City tripled the combined tax credit to up to 35%, which includes a 5% additional credit for productions shooting in one of the five boroughs of New York City. For a complete list of states offering film tax credits, the specific requirements, along with the types of projects eligible, visit www.theincentivesoffice.com.
In evaluating financing options, filmmakers might also consider looking outside the U.S. for potential investment. “Countries all around the world–South Africa, Namibia, to countries in the Middle East–may step in as equity players for film projects. That’s nothing new,” says actor, producer, and director Danny Glover. After having difficulty obtaining international sales estimates for his project on Toussaint L’Ouverture, a black man who led the Haitian revolution, Glover, a Goodwill Ambassador for UNICEF, approached Venezuela’s Villa del Cine, a government-sponsored foundation for film and television. The foundation made an $18 million equity investment in the film, which has a $30 million budget. “Venezuela saw the historical and cultural relevance of this film, and they saw it as a chance to
provide opportunities for disenfranchised communities in Venezuela, many of whom are Afro-Venezuelan,” he says. Glover, who will direct the film, is still in the process of procuring additional funds for the project.When making his documentary The Twelve Disciples of Nelson Mandela, New York-based documentary filmmaker Thomas Allen Harris was able to raise an initial round of financing from Bloemfontein, South Africa, the town where the subjects of the film had lived before going into exile to spread their anti-apartheid message. “Bloemfontein’s department of culture provided me with a grant equal to approximately 10% of the film’s budget,” Harris says of the film, budgeted at under $1 million. That contribution, along with additional funds, allowed Harris to shoot the film. He also raised finishing funds for editing and other post-production work from ITVS/PBS and other sources including the National Endowment for the Arts.
And in March, the South African government announced location incentives to attract big-budget overseas projects produced by foreign-owned companies. The Location Film and Television Production Incentive offers a 15% rebate to foreign-owned productions that spend at least 12 million rand ($1.5 million) in the country.
Another way to finance a film is through
the process of foreign pre-sales, a practice in which a film’s producer sells the distribution rights to the film in foreign territories around the world prior to production. The film’s producer then raises production capital–through banks or other film financing entities–by using the distribution agreements as collateral. Foreign presales have historically, however, been a hurdle for films with African American content, with the perennial argument being that films with all-black casts or urban-oriented storylines do not typically perform well overseas. Films starring mainstream crossover stars such as Will Smith and Denzel Washington are considered rare exceptions. Graham, of 120dB Films, said the company is currently working on a film on the life of iconic jazz great Miles Davis and that the film has been presold in Japan. This suggests that music-driven movies like the film, along with 2004’s Ray and 2006’s Dreamgirls, which earned $37 million and $50 million abroad, respectively, have strong overseas potential.Though raising money for a film will undoubtedly never be simple, African American filmmakers can’t help but be encouraged that evolving financing options continue to dot the landscape, hopefully paving the way for stories that would otherwise never be told.
George Alexander’s column on the business of entertainment appears weekly at blackenterprise.com. He is the author of Why We Make Movies (Doubleday Harlem Moon, $15.95).