Payroll credit and production expense credit are available for motion picture production companies. These credits can be used against Massachusetts personal income tax or corporate excise liabilities.
Each credit has its own qualification requirements. Taxpayers may qualify for and claim both credits.
Payroll Credit Eligibility
The payroll credit may be equal to 25% of the taxpayer’s total qualifying payroll for the employees connected with the filming and production of a motion picture in Massachusetts.
To determine qualified payroll:
- Only actual payments to employees may be used
- Such payments constitute Massachusetts source income to the employees
The qualifying payroll cannot include any payments made to an employee whose total payments in connection with the filming of a motion picture are equal to or greater than $1,000,000.
To qualify for the payroll credit, the taxpayer must incur total production expenses of at least $50,000 in Massachusetts in a consecutive 12-month period.
Production Expense Credit Eligibility
The production expense credit may be equal to 25% of the taxpayer’s Massachusetts production expenses in connection with the filming and production of a motion picture in Massachusetts.
The production expense credit doesn’t include payroll expenses already calculated for its payroll credit.
To qualify for the 25% production expense credit:
- The taxpayer's Massachusetts production expenses must exceed 50% of the total production expenses
- At least 50% of the days spent filming the motion picture must take place in Massachusetts
Minimum Excise, Carryover, Transfer, and Refund
The credit may not be used to reduce a taxpayer’s corporate excise tax liability below $456.
Unused credits may be carried over, refunded, or transferred by the taxpayers for the next 5 tax years (subject to certain conditions).
At the taxpayer’s written request, the credits may be:
- Applied against taxpayer's liability (including the minimum excise), reduced by any other available credits
- Then any film credit remaining may be refunded at 90%
A taxpayer who elects to claim a refund of the film credit may not seek a partial:
- Carryover of the credit
The credits may be transferred by the taxpayer. Transferees may carry forward unused credits for the next 5 tax years subsequent to the first tax year the credits were allowed to the initial transferor. The film credit is not refundable to the transferee.
A production company must withhold at the personal income tax rate under M.G.L. c. 62, § 4(b), on any payment to a loan-out or an independent contractor for that payment to qualify for the motion picture production company credit
Timing of Withholding Remittance. Any production company seeking a credit as to a payment made to a loan-out or an independent contractor, must withhold and remit to the Commissioner the withholding amount required under 830 CMR 62B.2.3(3)(b) prior to the filing of an application for the credit.
For more information, details on how amounts are calculated, and important definitions, please see:
- Massachusetts General Laws Chapter 62, Section 6(l) (Personal income)
- Massachusetts General Laws Chapter 63, Section 38X (Corporate excise)
- 830 CMR 62B.2.3
Page updated: February 24, 2020