T +1 312 602 8929
T +1 312 602 8173
T +1 612 677 5324
T +1 312 602 8791
T +1 312 602 89150
In an effort to attract the production of scripted television series to the state, the Tennessee Entertainment Commission (“TEC”) increased the state’s film and television incentives beginning Sept. 1, 2018.1
The revised incentives provide an increase in grant support for Tennessee labor and encourage non-resident labor for the first time.
Tennessee’s efforts to attract film and television production projects date back to 1987, when it created the TEC with hopes to “attract and bring to [the] state the production activities of film, television, record and other producers of entertainment properties.”2
The state later enacted the Visual Content Act of 2006 which established a fund to provide incentive grants to encourage production activities.3
The TEC production incentives offer grants for qualified Tennessee expenditures for feature films, and scripted television series and pilots filmed in Tennessee.4
Qualified expenditures include payments and purchases directly associated with the production, such as direction, wardrobe, location fees, rental of facilities and equipment. In addition, qualified expenditures include a portion of gross wages, salaries, fees, per diem amounts, and fringe benefits paid to each Tennessee resident.
Since the implementation of the fund, Tennessee has experienced significant success in the entertainment industry. Recent film and television projects, which generated $228.3 million in new income for Tennessee and provided jobs with wages nearly 28% higher than the state’s average for all industries, highlight the state’s desire to continue to develop the entertainment industry within its borders.5
New incentives for scripted television series
Beginning Sept. 1, 2018, TEC has revised the production eligibility requirements and incentives for scripted television series “to build upon the momentum and success from the television series ‘Nashville’ and other film projects.”6
In order to receive incentives, a scripted television series must now spend at least $500,000 per episode in Tennessee and include a “Filmed in Tennessee” logo. If the series meets these qualifications, it is eligible to receive a grant of 25% of qualified expenditures, which includes non-resident compensation, and up to 30% in grant support for the cost of Tennessee resident labor. Non-resident labor will be capped at $2 million.7
While Tennessee continues to incentivize several forms of television and film production, the program changes effective Sept. 1, 2018, are meant to directly target new television series to help fill the void left by the Nashville series finale. Unlike films, television series typically have longer production schedules and if successful, often last for several seasons. This recurring production provides year-to-year continuity that can employ hundreds of state residents. Indirect benefits from scripted series include crossover benefits for the music industry, increased tourism and increased levels of local tax revenue based on purchases made in and around filming locations. In addition, having an extensive incentive program for film and television production is likely to keep Tennessee competitive with other states actively pursuing production companies, and may allow Tennessee to develop a more permanent infrastructure and workforce that can support future growth in this industry.
Film and television incentives are not without their detractors. For example, critics have noted the poor return on investment for production activity incentives, particularly given the unpredictability of the entertainment industry.8
While the television series Nashville
was an example of a success story, it is difficult for television series to consistently obtain the audience necessary to maintain the popularity needed for an extended run.
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.