Proposed legislation would establish a federal tax credit of up to 30% of qualifying U.S. production compensation, with potential implications for film financing, tax planning, and production-company structuring.
The federal government may soon offer a significant new tax incentive for film and television production in the United States. On September 24, 2026, lawmakers introduced the Motion Picture, Television, and Entertainment Revitalization Act (H.R. 10582), which would create a new federal tax credit for qualifying film and television productions. The act on top of the 30% state of Ohio tax credit, producers could find themselves with more than half of their budget spoken for, in domestic incentives alone.
The proposed legislation would add Section 45BB to the Internal Revenue Code, establishing an American film and television production credit.
Under the bill, the base credit would equal 20% of qualified compensation paid or incurred for qualifying services performed in the United States. The credit could increase in five-percentage-point increments, subject to a maximum rate of 30%, when additional statutory requirements are satisfied.
Potential increases include incentives for qualifying independent productions, certain rural opportunity zone or disaster-area activity, qualifying multistate production, and increased domestic production. Special rules would apply to visual-effects and post-production projects.
Consider a film with $4 million in qualified compensation:
- At the 20% base rate, the potential credit would be $800,000.
- At a 25% rate, the potential credit would be $1 million.
- At the 30% maximum rate, the potential credit would be $1.2 million.
These figures are illustrative. The credit would apply to qualifying compensation, not automatically to the film’s entire production budget. A producer would need to establish which costs satisfy the statutory requirements and which additional percentage increases are available.
Which Productions Would Qualify?
The bill would establish several threshold requirements. Generally, a qualifying production must:
- Be a feature film, television pilot, or television season;
- Be produced in the ordinary course of a trade or business for commercial purposes;
- Be chargeable to capital account for tax purposes;
- Be completed during the applicable taxable year;
- Have total production costs exceeding $1 million; and
- Conduct at least 75% of its principal photography days in the United States.
The proposal excludes various types of programming, including news, live sporting events, talk shows, game shows, advertising, marketing, and certain productions intended primarily for social media or corporate use.
Special provisions would address qualifying visual-effects and post-production projects that do not satisfy the ordinary principal-photography requirement. Those provisions could provide opportunities for U.S.-based post-production and visual-effects businesses even when the underlying production was filmed elsewhere.
Producers should evaluate these requirements early. Production schedules, location decisions, accounting practices, and completion dates could directly affect eligibility.
Independent Producers Could Receive an Additional Five Percentage Points
One of the most important provisions for independent filmmakers is the proposed additional five-percentage-point increase for productions completed by an independent producer.
The bill’s definition focuses primarily on ownership. A taxpayer generally would not qualify if it is a corporation whose stock is traded on an established securities market or if a majority of its ownership interests are held, directly or indirectly, by such a publicly traded corporation. Related entities treated as a single employer under specified tax rules would be aggregated for this determination.
This approach could permit many privately held production companies and single-purpose production LLCs to qualify. However, a privately held production entity would not necessarily qualify if its ownership chain or relationships with other entities caused it to fail the statutory test.
The definition does not simply ask whether the producer is small, whether it has produced only a few films, or whether it operates independently in the ordinary commercial sense.
Producers should therefore examine their ownership structures before assuming that the additional credit will be available. The identity of the taxpayer entitled to claim the credit also matters: the bill directs the Treasury Department to ensure that the credit is claimed by the taxpayer holding the benefits and burdens of ownership of the production.
Capitalization Requirements Require Careful Tax Planning
The proposed credit contains an important limitation: both the qualifying production and the compensation generating the credit must be chargeable to capital account.
In general, capitalization means treating qualifying expenditures as part of the tax basis of an asset rather than deducting those expenditures immediately as ordinary business expenses. The precise treatment depends on the nature of the expenditure and the applicable tax rules.
This requirement warrants particular attention from independent producers considering other federal tax provisions, including Internal Revenue Code Section 181, which has provided an election for current expensing of certain qualifying film and television production costs, subject to applicable limitations.
The interaction between Section 181 and the proposed Section 45BB credit could be consequential. If expenditures are deducted currently rather than capitalized, the production or the associated compensation may fail the proposed credit’s capitalization requirements.
The introduced bill does not expressly resolve every aspect of this interaction. Producers should not assume that they can claim the new credit while simultaneously expensing the same costs under Section 181. Nor should they assume that an election under Section 181 necessarily precludes the entire credit without further analysis.
A tax adviser should model the alternatives, taking into account the value and timing of deductions, the proposed credit, the producer’s ability to use tax benefits, and any applicable limitations. The preferable approach may differ depending on the production’s budget, financing, ownership, and tax circumstances.
The Ability to Transfer the Credit Could Improve Financing Options
The bill would expressly add the proposed credit to the credits eligible for transfer under Internal Revenue Code Section 6418. This would allow an eligible taxpayer to transfer the credit to an unrelated third party for cash, subject to the applicable statutory requirements.
This feature could be particularly valuable to independent production companies that do not have sufficient federal income tax liability to use the entire credit themselves.
Depending on the final legislation and implementing guidance, credit transfers could create opportunities to monetize the incentive through transactions with unrelated buyers. Producers and lenders could also consider the anticipated credit when evaluating production financing.
Nevertheless, the ability to transfer a credit does not guarantee that a buyer will be available, that the credit will be purchased at face value, or that a lender will advance funds against an anticipated credit. Eligibility, substantiation, transfer documentation, timing, and tax risk will remain important considerations.
The bill also provides for a reduction in the tax basis of the production property by the amount of the credit. That basis adjustment should be incorporated into the production’s tax model rather than treating the credit as an isolated source of economic benefit.
What Should Producers and Investors Do Now?
Although the legislation has not yet become law, producers planning projects for 2027 and later should consider several steps:
- Review production schedules and locations: The proposed 75% U.S. principal-photography requirement, completion-year rule, and special location-based provisions could affect production planning.
- Analyze the budget at the compensation level: A detailed breakdown of qualifying U.S. services will be more useful than applying the credit percentage to the total production budget. Contractor and subcontractor compensation may qualify, subject to the statutory requirements and substantiation rules.
- Evaluate capitalization and expensing alternatives: Producers should coordinate with their tax advisers to analyze the proposed credit alongside Section 181 and other applicable tax provisions.
- Review the production entity’s ownership: Independent-producer eligibility, ownership of the production, and the allocation of rights among production and financing entities may affect the availability of the credit.
- Consider credit monetization in the financing plan: Producers and lenders should evaluate the potential value of a transferable credit while accounting for legislative uncertainty, eligibility risk, timing, and transaction costs.
The legislation remains a proposal, not an available tax credit. As of October 20, 2026, H.R. 10582 has been referred to the House Committee on Ways and Means. Its final terms, effective date, and implementing guidance remain subject to the legislative process.
Producers, investors, and lenders should monitor further developments and obtain project-specific tax and legal advice before relying on the proposed incentive in a binding financing commitment. We will be monitoring this legislation and advising our producer and financier clients accordingly. Contact [email protected] with questions.
Legislative reference: H.R. 10582 — Motion Picture, Television, and Entertainment Revitalization Act