Changes

==Funding for Never Split Tens==

==Funding for Never Split Tens==

===Proposal===

===Proposal===

The producers request a $2.9 million loan for up to eight months from those with large state and federal tax liabilities to whom you provide professional accounting and investment advice.  The collateral items are related to:

The producers request a $290,000 loan for up to eight months from those with large state and federal tax liabilities to whom you provide professional accounting and investment advice.  The collateral items are related to:

a) Illinois tax credits based on 35 ILCS 16/, and </br>

a) Illinois tax credits based on 35 ILCS 16/, and </br>

The loan will provide a significant portion of the production costs of the filming of a major motion picture in Illinois in the popular casino gambling genre.  The eight month period results from a projected five month filming period and a two to three month period for receipt of the Illinois tax credit from the Illinois Film Office after filming has been completed.

The loan will provide a significant portion of the production costs of the filming of a major motion picture in Illinois in the popular casino gambling genre.  The eight month period results from a projected five month filming period and a two to three month period for receipt of the Illinois tax credit from the Illinois Film Office after filming has been completed.

Please note that the request of $2.9 million, while based on a preliminary production budget estimate, is for illustrative purposes.  The actual amount requested will result from an audit by the Illinois Film Office of the production budget.  This will determine the actual amount to be spent in Illinois.

Please note that the request of $290,000, while based on a preliminary production budget estimate, is for illustrative purposes.  The actual amount requested will result from an audit by the Illinois Film Office of the production budget.  This will determine the actual amount to be spent in Illinois.

The producers calculate below an annualized 35% return using a federal tax bracket of 20% and an annualized return of 58% using a federal tax bracket of 35%.  These surprisingly large returns result entirely from state and federal government investment incentive programs.

The producers calculate below an annualized 35% return using a federal tax bracket of 20% and an annualized return of 58% using a federal tax bracket of 35%.  These surprisingly large returns result entirely from state and federal government investment incentive programs.

Michele.McGee@illinois.gov

Michele.McGee@illinois.gov

As an example, say a film company spends $10 million in Illinois in 2013.  They obtain a 30% or $3 million tax credit.  That credit can be transferred to any entity which has an Illinois tax liability and, assuming the film production occurred in 2013, it can be broken up into credits from tax year 2013 through 2017.  This is not a deduction; it is an actual tax credit.

As an example, say a film company spends $1 million in Illinois in 2013.  They obtain a 30% or $300,000 tax credit.  That credit can be transferred to any entity which has an Illinois tax liability and, assuming the film production occurred in 2013, it can be broken up into credits from tax year 2013 through 2017.  This is not a deduction; it is an actual tax credit.

In the usual scenario, film companies obtain payment of the tax credit from the state of Illinois after production is completed, sell those credits through a broker, and use the proceeds to cover post-production expenses such as editing, sound dubbing, and deferred A-list actor salaries (usually combined with points on the film profits).  The credit is provided by the state to the producer after auditing, within 2-3 months of the termination of film shooting.  As a result, if the film takes 4-5 months to shoot, the credit is provided by Illinois within 6-8 months of the beginning of shooting.

In the usual scenario, film companies obtain payment of the tax credit from the state of Illinois after production is completed, sell those credits through a broker, and use the proceeds to cover post-production expenses such as editing, sound dubbing, and deferred A-list actor salaries (usually combined with points on the film profits).  The credit is provided by the state to the producer after auditing, within 2-3 months of the termination of film shooting.  As a result, if the film takes 4-5 months to shoot, the credit is provided by Illinois within 6-8 months of the beginning of shooting.

The producers therefore wish to approach those with large Illinois tax liabilities.  Either corporations doing business in Illinois or attorneys in large firms are appropriate fits.  Some of these have large incomes, large tax liabilities, and are associated with a significantly large number of partners.  The appropriate manner by which to approach these groups is through their advising accountants.

The producers therefore wish to approach those with large Illinois tax liabilities.  Either corporations doing business in Illinois or attorneys in large firms are appropriate fits.  Some of these have large incomes, large tax liabilities, and are associated with a significantly large number of partners.  The appropriate manner by which to approach these groups is through their advising accountants.

In the above example, the producers budget spending $10 million in Illinois.  The loaning entity or individuals provide a loan of $2.9 million.  After six to eight months, Illinois provides our production company the $3 million tax credit which is then transferred to the loaning entity or individuals.  With that $100,000 paid back in interest, the earnings on the loan is $100,000/$2,900,000 x 100 = 3.4% for eight months, equivalent to 5.2% interest annualized.  (Note:  The full payment comes from the Illinois tax credit, not the production company, and therefore the "interest" is not income.)

In the above example, the producers budget spending $100,000 in Illinois.  The loaning entity or individuals provide a loan of $290,000.  After six to eight months, Illinois provides our production company the $300,000 tax credit which is then transferred to the loaning entity or individuals.  With that $10,000 paid back in interest, the earnings on the loan is $10,000/$290,000 x 100 = 3.4% for eight months, equivalent to 5.2% interest annualized.  (Note:  The full payment comes from the Illinois tax credit, not the production company, and therefore the "interest" is not income.)

===Federal Deduction===

===Federal Deduction===

====Example B – Corporate====

====Example B – Corporate====

If a single firm provides the entire loan, its loan-investment of $2.9 million results in a $2.9 million federal deduction.  For those in, for example, the 20% tax bracket, this results in a tax savings of $580,000.  The earnings on the loan ($580,000+$100,000)/$2,900,000 x 100 = 23% for eight months, equivalent to 35% interest annualized.  A corporation paying federal taxes at the 35% rate would earn 58% annualized.

If a single firm provides the entire loan, its loan-investment of $290,000 results in a $290,000 million federal deduction.  For those in, for example, the 20% tax bracket, this results in a tax savings of $58,000.  The earnings on the loan ($58,000+$10,000)/$290,000 x 100 = 23% for eight months, equivalent to 35% interest annualized.  A corporation paying federal taxes at the 35% rate would earn 58% annualized.

As mentioned earlier, please note that the request of $2.9 million, while based on a preliminary production budget estimate, is only for illustrative purposes.   

As mentioned earlier, please note that the request of $290,000, while based on a preliminary production budget estimate, is only for illustrative purposes.   

NOTE:  If the following Table is not visible in your browser, go directly to the Table here:</br>[[Media:Taxincentivescorporate.jpg]]

NOTE:  If the following Table is not visible in your browser, go directly to the Table here:</br>[[Media:Taxincentivescorporate.jpg]]

The loan/investment proposal takes advantage of Illinois and federal statutes and now promises a large return because of the increase in the state of Illinois income tax rate to 5%.

The loan/investment proposal takes advantage of Illinois and federal statutes and now promises a large return because of the increase in the state of Illinois income tax rate to 5%.

For an up to eight month loan of $2.9 million, the loaning entity or individuals receive $3.0 million (Illinois income tax credit) + $2.9 million (Federal income tax deduction) = $5.9 million in consideration.  Based on a 20% corporate federal tax bracket, the net "earnings" are $100,000 + $580,000 = $680,000.  That yields an annualized 35% return on the $2.9 million.  Based on a 35% individual federal tax bracket, the return is equivalent to an annualized 58% return.

For an up to eight month loan of $290,000, the loaning entity or individuals receive $300,000 (Illinois income tax credit) + $290,000 (Federal income tax deduction) = $590,000 in consideration.  Based on a 20% corporate federal tax bracket, the net "earnings" are $10,000 + $58,000 = $68,000.  That yields an annualized 35% return on the $290,000 loan/investment.  Based on a 35% individual federal tax bracket, the return is equivalent to an annualized 58% return.

<b>Please note that neither the state nor federal tax credit/deduction is based on the motion picture earning any profits.  They result solely on expenditures during production being made in the state of Illinois and the United States.</b>

<b>Please note that neither the state nor federal tax credit/deduction is based on the motion picture earning any profits.  They result solely on expenditures during production being made in the state of Illinois and the United States.</b>