Feb. 2018 – Latest Developments in Expensing Production Costs for Films!

“‘The Film Act of 2017”

The Latest Developments of Sec. 181

H.R.2450 – FILM Act of 2017 has recently passed extending IRC Sec. 181 of the special expensing of production costs for certain film, television and theatrical productions and it retroactive to 1-1-2017.

There is One Big Caveat: The film or production must be placed into service in the year you can utilize this code section.

What does placed into service(PIS) mean?

The point in time when an asset that can be depreciated is first placed in use for its intended purpose.

The receipt for the good will usually effectively double as both proof of purchase and proof of date placed in service for the IRS in the event of an audit.

So this is subject to interpretation in the context Sec. 181. Does PIS mean placed into the stream of commerce? Likely it does.

Does PIS mean offered for sale at a film festival? Likely it does.

Does PIS mean:
Actively offered for showings in theatres? Likely it does!
Utilized and used for Film Screenings?  Questionable?
Actively offered for distribution rights? Likely it does!

Hopefully, the IRS will clarify what PIS means in applying Sec. 181 and hopefully soon since us practitioners have tax returns to prepare and must advise our clients on the timing of completing a film and having it placed into service for business.