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A bipartisan group of legislators from both sides of the Capitol last week introduced bills to create a new federal tax credit incentivizing U.S. film and television production, proposing a change that could prove more beneficial than the revival of a lapsed tax deduction that entertainment producers previously championed.
The rollout of the credit follows a recent endorsement for the concept by President Donald Trump.
The Motion Picture, Television, and Entertainment Revitalization Act (H.R. 10582/no Senate bill number yet). The bill was introduced in the upper chamber by Senators Tim Scott, R-S.C., and Adam Schiff, D-Calif.; and in the House by Reps. Nathaniel Moran, R-Texas, and Linda Sanchez, D-Calif.
If made law, the bill would create a new federal tax credit under Section 45BB for productions in which the principal photography begins in tax years starting after Dec. 31, 2026. The tax credit would be similar to the incentives some individual states offer — including California, Georgia, Illinois, New Mexico and New York — and could stack on top of those. As proposed, the federal credit also would be transferable, further adding to its appeal for taxpayers, and would increase in value for production in qualified rural opportunity zones and federal disaster areas.
The basic credit would equal 20% of qualified compensation paid for production-related services performed in the U.S. — including that paid to actors — and could increase to as much as 30% under certain conditions. The tax basis of the production would be reduced by the amount of the credit.
Qualification pathways
The proposal would allow feature films, TV pilots or TV seasons that cost more than $1 million and spend at least 75% of principal photography days in the U.S. to qualify for the credit. In the case of animated productions, the location of the animation work rather than the filming would be considered.
A project could also qualify without satisfying the U.S.-filming requirement, if 75% of total post-production or visual effects (VFX) costs are incurred in the U.S. and the production otherwise meets the general eligibility requirements. Post-production activities include work such as editing, Foley (sound effects) work, automated dialogue replacement, sound editing, music scoring, credits production, soundtrack production and dubbing.
The bill excludes news programs, game shows, talk shows, awards shows, live sports programming, radio productions, daytime dramas, social media-focused productions, advertising and marketing content and adult-content productions.
Qualifying compensation excludes payments known as participations and residuals, which are made after a project is produced.
Credit enhancements and transferability
Under the proposal, the basic 20% credit could increase to as much as 30% based on additional qualifications:
- Five percentage points addition if at least 30% of filming days occur in a rural Qualified Opportunity Zone or in a federally declared disaster area
- Five percentage points addition if the production is completed by an independent producer that is not publicly traded and is not majority-owned by a public company
- Five percentage points addition if it has substantial production activity across at least 10 states, meeting specified filming and compensation thresholds
- Five percentage points addition if the producer increases its number of U.S. productions relative to a baseline of foreign productions. The required increase starts at 30% and later rises to 50%
In cases where the producer claims the tax credit based on sufficient U.S.-based post-production or visual effects work, the credit would be capped at 25%.
The credit would be transferable, so a producer that cannot fully use it could potentially sell or transfer it to another taxpayer, similar to several clean-energy and manufacturing credits enacted in recent years.
Grant Thornton insight:
The transferability provision could make the credit valuable even to startup or independent production companies with little taxable income. However, this element of the proposal could face opposition from some lawmakers; transferability makes credits easier to monetize and therefore increases utilization, so it also increases the cost of the credit.
Out with a deduction, in with a credit?
Section 181, which allowed immediate expensing of certain film, TV and live theater production costs, was originally enacted in 2004 and was extended multiple times over the years. It most recently expired at the end of 2025. The incentive was generally limited to $15 million of qualifying costs per production, or $20 million for productions in certain low-income or distressed areas.
Rep. Judy Chu, D-Calif., a member of the House Ways and Means Committee, introduced legislation (H.R. 4840) earlier this session to reinstate the deduction for five years and increase the dollar limitation.
A project with substantial U.S. labor costs could generate a much larger federal tax benefit under the proposed tax credit than was available under Section 181, as the tax credit as proposed is not capped.
Grant Thornton insight:
As with several other tax provisions, the fate of this proposal will be highly dependent on post-election dynamics. The lame-duck session could result in cooperation to enact policies with strong bipartisan support, or we could see gridlock if the election’s winning faction opts to delay action until next year or the losing party chooses to block legislation.
The views of Congress’s tax leaders and other tax writers may also be factors. Three of the bill’s original cosponsors — Moran, Sanchez and Scott — are members of the congressional tax writing committees, which is often a factor driving momentum for tax provisions. The House bill also has several additional cosponsors from the Ways and Means Committee, including Reps. Mike Carey, R-Ohio; Chu; David Kustoff, R-Tenn.; and Tom Suozzi, D-N.Y. However, the committees’ chairs, Sen. Mike Crapo, R-Idaho, and Rep. Jason Smith, R-Mo., have not weighed in yet and will be key deciders on year-end tax priorities.
There is not yet an estimate available of the federal revenue impact the legislation would have, but there could be some headwinds against any policy that would reduce revenue and does not have an offset built in. Cost of the credit and long-held views on corporate subsidies from some members could impact whether it garners enough support to become law in a narrowly divided Congress.
On the other hand, the bill’s incentives align with the GOP’s onshoring and made-in-America focus, and the president could choose to put more weight behind the proposal if a potential legislative vehicle emerges during the lame duck session.
“What we watch on the Silver Screen should be made in what was once the Movie and Motion Picture Capital of the World,” Trump wrote on social media on Aug. 31, previewing the concept of the tax credit as the legislation was being drafted. “Let’s get this done!”
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