Introduction of Legislation to Extend Section 181 of the Tax Code

Floor Speech

Mr. COLLINS of Georgia. Mr. Speaker, I rise today to introduce legislation with my friend from New York, Congressman Crowley, to extend section 181 of the tax code to continue to allow for the immediate tax write-off of the first $15 million (or $20 million where the production is made in a distressed community) of production expenditures for qualifying domestic film and television productions. In addition, our bill would extend section 181 treatment to live theatrical productions. We are joined on this bill today by our colleagues Mr. Boustany (LA), Mr. Neal (MA), Mr. Nunes (CA), and Ms. Sanchez (CA).

Section 181 was first enacted in the American Jobs Creation Act of 2004 and has been extended several times since. It was added to protect the U.S. television and film industry and to counteract the increasingly aggressive incentives offered by many foreign governments to attract production overseas. The Directors Guild of America noted, at the time that section 181 was passed, ``globalization, rising costs, foreign wage, tax and financing incentives, and technological advances, combined are causing a substantial transformation of what used to be a quintessentially American industry into an increasingly dispersed global industry.''

Thus, in enacting section 181, Congress recognized the important and unique contribution our television and film production industries make to providing high-paying jobs and economic benefits in communities across the country. These productions provide good jobs not just for actors, writers and directors, but also for the local carpenters and electricians, the drivers and equipment operators, the caterers and hotel-keepers who provide services to these productions. It is estimated that a major motion picture shooting on location contributes $225,000 every day to the local economy. For example, in 2011, the major studios alone paid over $530 million to nearly 4,000 vendors in Georgia.

Section 181 of the Internal Revenue Code allows production companies to deduct the cost of qualified U.S. productions immediately rather than capitalizing the costs and deducting them slowly over time. The incentive accelerates the timing of the deduction but it does not change the amount of the deduction. In order to qualify, a film must be domestically-produced, that is, at least 75 percent of the total compensation paid for the production must be for services performed in the U.S. by actors, directors, producers and other production staff personnel. The deduction applies to the first $15 million ($20 million for productions in low income communities or distressed area or isolated area of distress) of a qualified film or television production. The cost of the production above the dollar limitation is capitalized and recovered under the taxpayer's normal method of accounting.

I believe that section 181 remains an appropriately targeted provision, designed to encourage television and film producers to stay here in the United States and keep those jobs in our communities. For example, incentivized productions contributed over $800 million annually to Georgia's economic output from 2007 to 2010. In 2012 alone, the entertainment industry spent more than $870 million in Georgia, including new investments in infrastructure as several studios and other industry-related businesses have expanded or relocated in Georgia. This bill will help to ensure that those jobs stay here in the U.S.

The bill I am introducing today also includes a new feature to extend section 181 benefits to live theatrical productions. As with films, theater not only provides cultural benefits but also provides economic benefits to local communities in the U.S. For example, according to the Broadway league, Broadway contributed $11 billion in 2012-13 to New York City's economy on top of ticket sales and supports 86,000 jobs. And the benefits are not limited to New York. Traveling Broadway shows contributed almost $3.4 billion to the U.S. economy, which helps sustain regional and local theatres allowing them to offer their cultural events. Live theatre audiences make numerous ancillary purchases, including restaurants, hotels, parking, taxis and souvenirs.

Unfortunately, as with film, other countries are becoming more aggressive in attracting theatrical production overseas. This is important because future income associated with a production, such as licensing fees and royalties, return to the country of the production's origin. Thus, as more original productions move overseas, the U.S. will lose tax revenue associated with those productions. To help prevent this from occurring and to allow investors to recoup their risky investment more quickly, we believe it is important to extend section 181 to theatrical productions.

Finally, it is important to note that, while both film and television production and theatre production are inherently risky capital-intensive businesses, neither industry qualifies for bonus depreciation that covered virtually every other American industry. Section 181 acts similarly to bonus depreciation to allow investors in these uniquely American industries to recoup their investments more rapidly. This can aid the decision to green-light a project or to produce it in the U.S. This will have ripple effects across the economy by generating revenue and jobs for a range of local businesses, such as caterers, hotels, equipment rentals, etc.

This legislation works to protect these important industries and stem the flood of production to non-U.S. locations. Section 181, which expired at the end of 2013, should be extended and expanded as soon as possible in order to encourage domestic investment and keep television, film and theatrical production jobs in the United States.

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