Film Finance, Tax Credits, and Securities Laws

Today I want to get a bit boring. I’ve discussed vapid dreams and ambitions here for quite a while now. But as I set out to begin a new project, I must prepare to deal with an element that I haven’t encountered before – raising money.

In the world of art the dollar symbol is nearly a curse word. There is so much joy throughout the creative process that the financial burden is completely ignored in favor of fantasized recognition. The irony is that a person who loses a quarter of their income on a poor financial investment will be more angry than an artist who pisses away half their lifetime on a masterpiece that’s never fully realized.

I’m making a commitment to myself to learn more about film financing. I cannot make legitimate films without an external source of income. Today I’m going to summarize a few of the key points from the video series I’ve been viewing, with links to each. I want to add that I have no connection to Sky Moore and am citing his videos specifically due to the wealth of information he provides in each. If you enjoy his videos, I encourage you to “like” them and subscribe to his channel. My summaries simply recite the main points that he provides.

  1. Basics of Film Financing –

Sky Moore urges us prioritize learning inner workings of the film industry over all other aspects of filmmaking. He states that 80% of films that are made lose money. Moore informs us that studios make money primarily through distribution. They often acquire films that were financed by a third party, get the film to a distributor, and take a cut from that. The principal distinction between film studios & independent studios is that Independent Studios will often collapse after one film failure. They do not have deep enough pockets to cover a major loss. Studios control distribution – Independent Studios do not. Never invest in your own film.

2. Equity & Security –

Moore tells us that if we violate the securities laws, we go to jail. We are also at risk for being held liable for any losses incurred. Security laws apply anytime a person is paying money with an expectation of receiving money back. You can comply with the security laws by filing with the SEC (a headache) or by filing for an exemption. Rely on Rule 506 – All investors must be credited investors: (investors with net worth over a million (excluding their homes), annual income above 300k, or an entity with over 5 million dollars of gross assets. They must meet one of those requirements and also sign a document stating such. Congrats, you got yourself a credited investor! Now file form D with the SEC and don’t do advertising (not sure why).

You have an obligation to disclose all material facts to your investors through a Private Placement Memorandum. (A summary of script, projected budget, distribution plan, your background, etc. Can be short but must meet the burden of meeting all material facts.)

3. Tax Financing –

There are 3 different ways to use tax subsidies for film financing:

1. Foreign (tax shelters) – Sale/lease back model. Sell your rights to a foreign entity. They license the rights back to you. You recover 10% of your budget.

2. US – Section 181. Deduct the first 15 million dollars of the cost of a film produced in the United States. Realize it’s not a credit. It accelerates the deduction by a year. It doesn’t work and ya goofed.

3. State tax credits – This one does work. There are two different models.

  1. Assignable – Receive tax credit based on producing in a local jurisdiction. Sell the credit to a buyer (taxpayer) within that jurisdiction. Some states will give a credit of 20-30%. Spend a million on your film, receive a credit as high as 300k.
  2. Refundable – The state will refund the amount of your credit. You may not be able to sell it but you can borrow against it. You can pledge it to a bank and monetize it (use it to raise money for your film).

I hope these videos and summaries were helpful to you. I know very little about film financing but am motivated to educate myself. I stumbled upon these videos online and found them immensely helpful. I share them with the hope that someone else can find them as invaluable as I have. Once again, I have no connection to Sky Moore.

Have a good one.

Moore, Sky. “1_ Basics of Film Financing – YouTube.” Www.youtube.com, Sky Moore Attorney, 3 Aug. 2017, youtu.be/Qyf97tFxUEE.

Moore, Sky. “3_ Equity & Security – YouTube.” Www.youtube.com, Sky Moore Attorney, 3 Aug. 2017, youtu.be/zkt2EvkSvDg. Accessed 15 May 2022.

Moore, Sky. “4_ Tax Financing – YouTube.” Www.youtube.com, 3 Aug. 2017, youtu.be/2vFJLztFQwc. Accessed 15 May 2022.

Cheaters Prosper – 1/8

20160106_122300Just wrapped up the third day in a row of heavy duty filming. I’m exhausted, but happy. I’ll get to today’s filming in Saturday’s post. Today I’ll discuss yesterday’s shoot.

El Nino struck Southern California for 2 straight days. The first day didn’t affect us much. Wednesday was much more trying.

Not only were we freezing our asses off, but the downpour came sporadically. The scenes we shot were all outside, and on several occasions we had to cut the scene early to protect the equipment. The rain fell so hard we actually added a line to the script – “It’s raining, let’s go play inside.”

Thankfully, conditions improved so that line can be omitted.

The biggest difference in writing for film versus writing for books is that you have to consider your budget in each and every scene. I can’t afford to have any car accidents, expensive props, or high-octane action sequences. I wrote this script knowing full well the dramatic twists would have to come from relationships. Good stories move us emotionally, so this isn’t as limiting as one might think.

Dan filmed for the second day in a row, and got more footage and takes than I could have possibly requested. One reason I think this Independent film will be great is the devotion of all the individuals involved.

It’s incredible to see so many individuals come together and put forth so much effort into making this project the best it can be. I’m not paying anyone, and therefore they’re not obligated to put in the amount of time they are dedicating to this.

Dan filmed until we ran out of daylight and shot every scene I hoped to complete. I’m really happy he did, because everything we filmed takes place during the same day in the script. I was terrified of having to re-shoot, because shooting exterior scenes with rainfall in Southern California is a surefire way to get some major continuity errors.

I tried to upload a video of the footage to youtube. For some bizarre reason, the audio plays fine while the video only shows up when it is paused(on my computer at least). Going to take a crack at fixing it tomorrow, but thought I’d attach the link to this post anyway, in case it is fixed automatically.

The video below features behind the scenes difficulties and a rough, rough edit of one of the scenes we filmed. There is no color grading, audio syncing, or any kind of real editing. All I did was trim shot and put together bits and pieces from the four different angles we had. Unfortunately, one of the takes was recorded with an ambulance passing in the background, so that one’s worthless.

I’m looking forward to telling you all about Thursday’s shoot, with my brother back at the camera, tomorrow.

  • Thomas M. Watt

 

Waddup – 11/20

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On the set of “Vernon Time”

Waddup everyone.

I know I’ve been MIA for a while but starting now I’m back in action. I have many comments to respond to and obligations to fulfill, and I plan on doing so ASAP… just not tonight (as I write this).

I mainly stopped posting because I had reached semesters end, and found myself simply overwhelmed with computer work. It takes a lot of time and effort to maintain a blog, and I haven’t had that recently.

My newest project, and the one I will blogging about here leading up to its release, is a student/indie film. As I’ve mentioned before, my older brother is an outstanding cinematographer. Many of you are aware that I took an acting course during my latest semester.

So I’ve decided to put my screenwriting skills to the test. During a trip to Burbank with my friend Scott last week, we discussed various premises that would be convenient and cheap to shoot. We hatched an idea that involved young adults playing poker to make a living. To make things interesting, the show is about cheating unsuspecting players out of big pots.

I will play Torque, a former poker pro who got busted for cheating and consequently banned from every casino in the country. Scott will play Jax, a good honest kid who is desperate to provide for his now-pregnant girlfriend.

The script comprises 50 pages, which theoretically amounts to 50 minutes of filming. I chose to write it at this length in order for network executives to be able to compare it to any dramatic television pilot on cable(That’s right, I’m shooting for the stars, but why not?).

When the film is fully edited, I will be posting it on Youtube and entering it into Independent film contests. I’m really grateful to have legit actors from my class willing to work for free during our winter break. Filming begins this upcoming Tuesday.

Will keep you updated.

  • Thomas M. Watt

Author of Master