Tax Law Insights

South Carolina provides an income tax credit to a taxpayer who invests in motion picture related projects. Specifically, the state provides a credit equal to 20% of the cash invested by a person in a company that: (1) develops or produces a qualified South Carolina motion picture project or (2) constructs, converts, or equips a motion picture production facility or post-production facility in South Carolina. Key requirements of each credit are:

• Motion Picture Project Credit
  • The credit is earned when cash only is spent. This credit, when combined with a taxpayer's other South Carolina income tax credits, cannot exceed 50% of the taxpayer's South Carolina income tax liability. The credit is allowed over more than one taxable year, but the total credit in all years for any one project may not exceed $100,000. Any unused credit can be carried forward for 15 years.
  • The cash investment must be expended for: (a) services performed in South Carolina, (b) tangible personal property dedicated for first use in South Carolina, or (c) real property in South Carolina.
  • The "motion picture project" must be intended for commercial exploitation and incur at least $250,000 of costs directly in South Carolina to produce a master negative motion picture, whether film, tape, or other medium, for theatrical or television exhibition in the United States. At least 20% of the total filming days of principal photography, but not fewer than 10 filming days, must be done in South Carolina.
  • The project must submit all required documents to the South Carolina Film Commission to have the project certified as an eligible "qualified South Carolina motion picture project" for purposes of this credit.
  • Once approved, the qualified South Carolina motion picture project must register with the Department of Revenue and submit its record of allocation of credits and documentation required to meet the credit requirements.

• Motion Picture Production or Post-Production Facility Investment Credit
  • This credit is earned when cash is spent or when qualifying real property is dedicated for use as part of a South Carolina motion picture production facility or South Carolina post-production facility.
  • A "motion picture production facility" means a site that contains soundstages designed for film and television production for both theatrical and video release. The production facility must include production offices, construction shops/mills, prop and costume shops, storage area and parking for production vehicles, all of which complement the production needs and orientation of the overall facility purpose. The term does not include television stations, recording studios, or facilities predominately used to produce videos, commercials, training films or advertising films.
  • A "post-production facility" means a site designated for the express purpose of accomplishing the post-production stage of film and television production for both theatrical and video release including the creation of visual effects, editing, and sound mixing. A post-production facility site is not required to contain a soundstage or be physically located at or near soundstages.
  • No credit is allowed unless the total amount invested in the motion picture production facility is at least $2 million, exclusive of land costs, or the total amount invested in a post-production facility is at least $1 million, exclusive of land costs. The total credit claimed by all taxpayers for a single motion picture production facility or post production facility is limited to $5 million for all years.
  • Investments in cash must be expended as stated above. Investments in the form of real property must be real property located in South Carolina on which the facilities are located. Real property invested also includes the fair market value of any real property lease with a term in excess of 36 months minus the fair market value of any consideration paid for the lease.
  • The taxpayer must apply and provide sufficient documentation to the South Carolina Film Commission to confirm the total amount of the investment. A taxpayer may claim the credit only one time for a single motion picture production facility and one time in a single post-production facility.