These FAQs provide general information about film production incentives. For detailed information, see Department of Revenue directives. Massachusetts General Laws and DOR directives prevail over information presented here.
- Project Eligibility
- Eligibility Requirements
- Residency Requirements
- Above- and below-the-line payroll expenses
- Loan-outs and personal services companies
- Payroll service companies
- Employer-paid payroll expenses
- Per diems
- Qualifying salary
- Qualifying production expenses
- Calculating eligibility based on production expenses
- Out-of-state rentals and purchases
- Travel and living expenses
- Massachusetts Film Office registration/approval
- Film Credit
- Incentive application process
- Multiple/amended applications
- Taxable year
- Film credit transfers
- Domicile of production company
Q 1: Project eligibility
Q: Which projects are eligible for the incentives? Which projects are ineligible?
A: Eligible productions: feature-length film, video, digital media project, a TV series with a maximum of 27 episodes, a commercial for theatrical or TV viewing or as a TV pilot. Multiple episodes of a TV series or multiple commercials for the same client may be aggregated to qualify.
Not eligible: individual TV series episodes, news, current events, weather and financial market reports; talk show; game show; sporting events; awards show or other gala event; fundraising production; long form production marketing product or service; a production containing obscene material or performances; corporate training and in-house corporate advertising; video games. TIR 07-15
Q 2: Eligibility requirements
Q: What are the eligibility requirements for the film credits and the sales tax exemption?
A: The basic eligibility requirement for al incentives is that a film production company must spend $50,000 or more in Massachusetts qualifying costs during a consecutive 12-month period.
The production credit has an additional qualification: the film production company’s production expenses in Massachusetts must exceed 50% of all production expenses for the project (production expenses for this purpose include all qualifying payroll expenses.) or at least 50% of the production company’s total principal photography days, exclusive of pre- or post-production, must take place in Massachusetts. TIR 07-15
Q 3: Residency requirements
Q: Does the payroll credit require that all employees are Massachusetts residents?
A: No. All payments which constitute Massachusetts source income are eligible for the payroll credit, provided that Massachusetts personal income tax is withheld. TIR 07-15
Q 4: Above- and below-the-line payroll expenses
Q: Does the payroll credit apply to both above- and below-the line personnel?
A: Yes, the credit applies to all in-state employment of persons directly engaged in the production, provided that Massachusetts personal income tax is withheld. The entire salary of any employee whose total payments in connection with the production are $1 million or greater is excluded from the qualifying aggregate payroll but it is eligible for the production credit. TIR 07-15
Q 5: Loan-outs and personal service companies.
Q: Is a film production company eligible for payroll credits if payments are made to loan-outs and personal service companies ?
A: Yes, provided that Massachusetts personal income tax is withheld and that the production company files with the DOR a Loan-Out Affidavit/Allocation form for each loan-out or personal service company. Directive 07-01, Motion Picture Production Company Withholding, Loan-Out Affidavit/Allocation form
Q 6: Use of a payroll services company
Q: Can a production company manage its payroll through a contract with a payroll services company?
A: Yes, provide that the payroll services company registers for Massachusetts withholding and transmits all required withholding to the DOR. Directive 07-01
Q 7: Employer-paid payroll expenses
Q: Do employer-paid payroll expenses that are not included in the gross salary payment to the employee (e.g., SUTA/FUTA, FICA, workers compensation, health insurance, pension contributions) qualify for the payroll and production expense credits?
A: Employer-paid payroll expenses qualify for the production credit. Directive 07-01
Q 8: Per diems
Q: Are per diem payments made to employees an allowable production expense?
A: Yes if the per diem is made to reimburse qualifying food, lodging, and transportation expenses. Directive 07-01
Q 9: Qualifying salary
Q: When a part of the employee’s salary is not subject to state income tax withholding, e.g., there are allowable deductions or exclusions, is the payroll or the production expense credit based on the gross salary payment to the individual or is it based on the amount that is subject to withholding?
A: In general, the payroll and production expense credit is based on the gross salary or wage payment to the individual. For example, if a qualifying payment of $100,000 is made to an individual, and the amount subject to withholding is $80,000, the motion picture production company may claim a payroll credit of $20,000 (20% x $100,000). Directive 07-01
Q 10: Qualifying production expenses
Q: What expenses qualify? What do not?
A: Expenses must be directly incurred in the Massachusetts production, preproduction, and postproduction. Insurance expenses, loan fees, completion bond expenses, and interest expenses do not qualify for the production expense credit, regardless of the location of the lender, insurance company, or the completion bond company. Other non-qualifying expenses include: qualifying payroll included in payroll credit, payroll services fees, rights and script fees, marketing and advertising, fees for stock footage and archival materials, and travel to and from Massachusetts. Other exclusions may apply. Directive 07-01
Q 11: Calculating eligibility based on production expenses
Q: A movie production company may qualify for the production expense credit if its Massachusetts production expenses exceed 50 percent of the total production expenses. For purposes of this calculation, are the company’s payroll expenses included in the “Massachusetts production expense” numerator and the “total production expense” denominator?
A: Yes, the company’s qualifying payroll expenses, regardless of amount, are included in the “Massachusetts production expense” numerator and the company’s total payroll expenses for the production (qualifying and nonqualifying) are included in the “total production expense” denominator. Directive 07-01
Q 12: Out-of-state rentals and purchases
Q: Does equipment or other tangible personal property rented or purchased outside of Massachusetts qualify for the production expense credit?
A: Yes, the proportionate cost of the equipment or other tangible personal property incurred in Massachusetts qualifies for the production credit. E.g., , if an equipment rental cost $1,500 and 60% of the rental use was incurred in Massachusetts, the qualifying portion of the rental cost for purposes of the production expense credit would equal $900. Proportional cost of equipment or personal property is based on depreciation cost, not purchase price. Directive 07-01
Q 13: Travel and living expenses
Q: What travel and living expenses are eligible for the production credit?
A: Lodging, food and other living expenses qualify for the production expense credit when the expense is clearly incurred in Massachusetts. Travel expenses qualify for the production expense credit when the travel originates and concludes within Massachusetts. Travel to and from Massachusetts does not qualify. Directive 07-01
Q 14: Massachusetts Film Office registration
Q: Is a production company required to register and/or get approval from the Massachusetts Film Office (MFO)?
A: There is no approval process, but you should complete the Massachusetts Film Office Production Registration Form prior to filing for the sales tax exemption. This form will connect you with MFO services and alert you to requirements for aerial photography; use of state roads, highways, and ports; use of children and animals; and fire regulations.
Q 15: Film Credit
Q: Does the MFO require a film credit?
A: Yes, the MFO requires that all projects that take advantage of the tax incentives program include a credit to the Commonwealth of Massacahusetts. Contact the MFO for details.
Q 16: Incentives application process
Q: When does a production company apply for the film credits and the sales tax exemption?
A: The application for production and payroll credits is filed after all production has been completed in Massachusetts and all expenses have been paid. For the sales tax exemption, a production company must file an application with DOR and estimate expenditures prior to the start of production. TIR 06-1
Q 17: Multiple/amended applications
Q: Can a movie production company apply mid-production for a partial film credit and then submit an additional final film credit application for the remaining qualifying expenses? Similarly, may a movie production company file a film credit application with estimated expenses and then subsequently amend the application with final expenses?
A: No to both questions. A production company may submit only one film credit application per movie production. Qualifying expenses submitted to the DOR on the film credit application must be final and paid, and not just accrued or anticipated at the time of the application. If the movie production company chooses to file a film credit application mid-production, it will not be allowed to file additional qualifying expenses either by amending the initial application or submitting a subsequent application. Directive 07-01
Q 18: Taxable year
Q: If the credit application and the issuance of a film credit certificate by the DOR cross the production company’s taxable years, which tax year is the initial tax year for purposes of applying the film credit?
A: The initial tax year for applying the film credit is the taxpayer’s tax year during which the DOR received the film credit application. For example, if the DOR receives a completed film credit application on December 15, 2010 and the Department issues a film credit certificate on January 29, 2011, the film credit certificate could be applied to the taxpayer’s 2010 tax year. Directive 07-01
Q 19: Recapture
Q: If the Department of Revenue (DOR) disqualifies some or all of a motion picture production company’s film credit, can a transferee be held liable for, or subject to, an assessment pertaining to the disqualified portion of the credit?<
A: In general, a transferee will not be held liable for the disqualified portion of a film credit. In the event of disqualification, the DOR would typically seek recourse against the motion picture production company and not the transferee.
However, the DOR will disallow credits in any case where a motion picture production company (or other entity) originally obtained the credit through fraud. For example, production credits claimed in the instance where no production activity took place would be disallowed to the applicant and any transferee.
In addition, while generally a transferee is not liable for the disqualified portion of a film credit, a transferee may be assessed for claiming credits to which it is not entitled under applicable law. For example, a transferee would be assessed additional tax if, upon audit, the DOR determined that the transferee had used a credit beyond its allowable five-year carryover period or had claimed an amount in excess of the unused amount transferred.
Q 20: Film credit transfers
Q: May a film credit transferee apply a purchased film credit to the transferee’s tax liability for its tax year during which the initial film credit certificate was applied for, even if such tax year pre-dates the tax year that the transferor submitted its film credit transfer application to the DOR?
A: Yes, but the transferee may only apply the credit to its tax year immediately preceding its tax year in which the transfer of the credit takes place and only if its tax return for the previous tax year has not yet been filed (including a valid extension period, if any). For example, assume that the DOR receives a film credit application on December 22, 2010. Subsequent to its receipt of a film credit certificate from the DOR, the movie production company files a film credit transfer application that is received by the DOR on March 26, 2011. The DOR issues a film credit certificate to the transferee on April 16, 2011. The transferee is an individual who seeks to apply the credit to her 2010 personal income tax return. The transferee may apply the film credit to her 2010 taxes so long as her tax return has not yet been filed and she has a valid extension in place. Note that a transferee may not apply a film credit to its tax return until a credit certificate is issued from the DOR. Directive 07-01
Q 21: Domicile of production company and Loan-outs
Q: Does the production company applying for the credits have to be domiciled in Massachusetts? Do Loan-outs have to be domiciled in Massachusetts?
A: No, but non-Massachusetts production companies and loan-outs are required to register with the Secretary of State as a foreign LLC or Corporation. Foreign LLC registration or Foreign Corporation registration