What Is Section 181 & Why Does It Matter For Entertainment?

If you work in the entertainment industry, one of the biggest pieces of good news to hit the scene that it seems like not enough people are excited about is the reinstatement of section 181. This is something that could mean millions more in the budgets for upcoming productions, as well as more stateside productions in general. We're going to dig into what exactly "section 181" is, and why you should care if you're in entertainment. We'll also check out some of the biggest potential benefits that are on the table because of this massive industry windfall.

Section 181 - What It Is

Ok, let's get it out of the way. If you haven't heard, section 181 means section 181 of the US Code, chapter 26 to be specific. It was brought back as part of the national Coronavirus Aid, Relief, and Economic Security, or CARES, Act. It was extended for another 5 years from 2020.

The actual legalese of the important part, , is:

"Treatment of certain qualified film and television and live theatrical productions. A taxpayer may elect to treat the cost of any qualified film or television production, and any qualified live theatrical production, as an expense which is not chargeable to capital account."

And let's face it, that's about as interesting and informative as literally everything else the IRS has ever written, right? Let's break it down.

"Certain qualified film and television and live theatrical productions" means just about any project that you want to put onto stage or screen, or any project that you may work on that is designed for stage or screen. The next part says that a taxpayer funding production costs of the production can elect to deduct 100% of those costs over the first year of production.

Why It Matters

One of the biggest reasons that the return of section 181 is so big for the US entertainment industry is that it means there is now an incredible financial incentive for production companies to create new movies, shows, and stage productions right here in the US, instead of traveling abroad.

The economic boom if a massive fantasy movie now chooses to shoot in the Pacific Northwest, instead of somewhere across the globe would be enormous. This is more money in domestic productions, more money for domestic crews, and more business for domestic shooting locations.

What Benefits Can Section 181 Bring ToThe Industry?

Here are some of the biggest potential benefits of choosing to leverage section 181 deductions.

More Money Available In The Budget

With a massive tax deduction, production teams will have more money available for payroll. This means better pay for crew, services, and so on. Better pay leads to better work and higher-quality productions overall. This money can also be used to secure top talent for some productions. Additionally, more money in the budget can mean greater allowances for special effects or other post-production work.

Increased Investment Attractiveness

With such a massive tax deduction available, investors that are looking for a tax shelter or to leverage additional deductions before the tax year ends may find attractive investment vehicles in upcoming productions. Meaning even more money in the potential budget.

Local Economic Booms

No matter where the production happens, stateside productions will benefit the cities, towns, and communities nearby the production location. In some cases, these local booms can be considerable and can lead dwindling towns to population booms.

The Final Word

While some detractors will scoff at the deductionmaxing out at $15 million, that's a significant sum, and some movies havebecome cult classics that were made on a tiny fraction of that total sum. Whenit comes down to it, the return of section 181 is one of the biggest boons forthe industry, and with only one day of shooting with dialogue to lock in thebenefits, there's never been a better time.