Trump's Federal Film Tax Credit Could Change the Math on Independent Movies

Forget the politics for a minute. If Congress gets this right, a federal production incentive could make more independent films financeable—and make shooting overseas considerably less attractive.

President Trump has called on Congress to create a federal incentive for film and television production, throwing his support behind an idea the industry has been quietly pushing for some time. The effort has support from an unusual coalition that includes the Motion Picture Association, DGA, SAG-AFTRA, IATSE and Democrats including Sen. Adam Schiff and Rep. Laura Friedman.

Before filmmakers start plugging numbers into their finance plans, however, nothing has passed yet. Trump has endorsed the concept and called for bipartisan legislation, while one proposal developed by Jon Voight's team calls for a 20% transferable federal credit on qualifying domestic labor, potentially stackable with existing state incentives, with an additional 5% contemplated for qualifying independent films or productions in designated areas. The eventual legislation could look different.

If Congress gets anywhere close to that structure, independent producers should pay attention. Not because we'll suddenly have more money to spend, but because we may finally need less money at risk to make the same movie.

The Problem Isn't Just That Movies Cost Too Much

Here's the disconnect I deal with constantly as a distributor and sales agent: the cost of making independent films has gone up, but their market value has not gone up with it.

In many cases, they're harder to sell for the prices necessary to justify their budgets. Buyers don't care that your labor costs increased 15%, that your insurance became more expensive or that housing your cast now costs twice what it did five years ago. They care what the finished movie is worth to their audience.

That means producers have increasingly had to solve the problem somewhere else in the financing.

One solution has been hopping on a plane and bringing our productions out of the US. Just off the top of my head, in S&R Films’ current new release roster of ten films we have three that shot outside the USA with predominantly American cast and crew (one in Spain, one in the UK, and another in Mexico). With a stronger incentive stateside, that could be a 30% uptick in productions staying and spending in-country.

Canada, the UK and other territories have spent years making themselves financially attractive to American productions. The DGA explicitly argues that a stackable federal incentive is necessary to make the United States competitive with those foreign jurisdictions.

The calculation isn't particularly complicated. If I can make essentially the same movie overseas while reducing the private capital exposed against it, I'm going to investigate that option.

But shooting overseas isn't free simply because the incentive is better. You're potentially flying cast and key crew internationally, paying housing and per diem, dealing with unfamiliar vendors and absorbing logistical costs that wouldn't necessarily exist if the movie stayed home.

A federal incentive changes that equation.

Don't Think of It as 20% Off Your Movie

This is where I think filmmakers could misunderstand the proposal.

If I'm preparing a $3 million independent feature, I wouldn't suddenly take a hypothetical federal credit and say, “Great, let's make a $3.6 million movie.”

I'd still budget backwards from what I believe the movie can support commercially.

Nor would I necessarily approach an investor who was prepared to put $1 million into the movie and automatically reduce my ask to $800,000.

You raise the cash the production actually needs.

The incentive becomes another asset supporting the financing structure. Assuming it is sufficiently reliable and monetizable, it can provide additional security while reducing the portion of the film's ultimate economics that must be recovered entirely through exploitation.

That's a much more useful way to think about incentives than “free money.”

Experienced producers already do this with state incentives. Before I approach investors, I want the incentives identified, applied for where possible and baked into the financing plan. A federal incentive wouldn't fundamentally change that process; it would add another layer to the capital stack.

And that's why one detail may ultimately matter almost as much as whether Congress settles on 15%, 20% or some other number.

The credit needs to be monetizable.

If an independent production company has to wait years to use a federal tax benefit against income it doesn't have, the headline percentage becomes considerably less meaningful. Existing Section 181, for example, provides accelerated deductions rather than the kind of transferable production credit now being contemplated.

A transferable or refundable credit is different. It can potentially become something a producer can actually finance against.

For an independent film, that's where the proposal becomes interesting.

Please Don't “Help” Us Until the Incentive Stops Helping

There will inevitably be attempts to attach conditions to any federal production incentive, and some are necessary. If taxpayers are supporting production, there should obviously be clear rules governing qualifying U.S. expenditures, legitimate production activity, auditing and fraud prevention.

But this can also go wrong very quickly.

A mandatory theatrical-release requirement, for example, would be ridiculous for independent film. It would essentially place a distributor's expense on the shoulders of the filmmaker before anyone knows whether the finished movie commercially warrants theatrical distribution.

Mandatory union requirements could create a similar problem at sufficiently low budgets. The unions have legitimate reasons to support domestic production incentives, and SAG-AFTRA, IATSE and the DGA are all supporting the current federal effort.

But if qualification rules increase the cost of a low-budget movie enough to consume much of the federal benefit, we've defeated the purpose.

I'd also strongly oppose restrictions on where the finished movie can ultimately be licensed. If we're trying to incentivize American production, then incentivize American production.

Once I finish the movie, I want Netflix, Amazon, a German distributor, a Japanese buyer and everybody else on Earth bidding for it.

If Independents Get an Extra Credit, Define “Independent”

The additional 5% contemplated in the Voight team's proposal could be particularly meaningful, but only if Congress gets the definition right.

My own framework would be relatively simple: cap the final production budget at $12 million and don't allow a publicly traded company to participate as a financial partner in the production. An arm's-length MG from a studio or streamer should still be permissible because securing distribution shouldn't magically turn an independently financed movie into a studio production.

I'd also require meaningful verification.

Have the final budget officially confirmed and require a CAMA to distribute revenues among the financial parties, sales agent and unions. The total principal owed to investors—including contractual interest—could then be reconciled against the confirmed production budget.

That's not currently part of the federal proposal. It's how I would structure an independent-film component to make sure an additional benefit intended for independent producers actually reaches independent producers.

The government doesn't need to tell us how to make our movies.

It does need to know what it's subsidizing.

Let the States Fight Over Us

One criticism of a federal incentive is that stacking it with state credits could create enormous subsidies. I actually think the competition it creates could be one of the program's greatest strengths.

We've already seen what happens when one location becomes overwhelmingly popular. Georgia attracted tremendous production volume, demand increased, and eventually certain production costs rose with it. Productions then had more reason to investigate alternatives.

The solution isn't fewer alternatives.

It's more of them.

Hawaiʻi now offers a refundable credit of 22% on Oʻahu and 27% on the Neighbor Islands, with an additional five points available for productions meeting its 80% local-workforce requirement. That means a qualifying Neighbor Island production can already reach 32% at the state level.

Now imagine a properly structured federal labor incentive sitting alongside programs like that.

I don't think Washington should give another five points to Los Angeles because it historically dominated production, nor should it decide that some emerging state deserves preferential treatment because politicians want to build a new industry there.

Give every state access to the same federal baseline.

Then let California, Georgia, Hawaiʻi, Nevada, New Mexico, Texas and everyone else decide how badly they want our business.

Some will build competitive programs, streamline permitting, develop stages and train crews. Others won't.

That's their decision.

The Bigger Opportunity Isn't Hollywood

There is a legitimate debate over whether film incentives generate enough direct tax revenue to justify their cost, and I wouldn't pretend the answer is settled. The economic case becomes much more interesting, however, when you stop measuring only the tax receipts attributable to one production.

Movies don't employ only actors, directors and producers. They employ grips, electricians, drivers, carpenters, caterers, accountants and production assistants while spending money on hotels, restaurants, equipment, construction, transportation and countless other local services.

Get enough production into a region and the effects can become more permanent.

Crew moves there. Rental houses open. Stages get built. Businesses develop around the industry. Workers buy houses, raise families and become local taxpayers, while international productions can bring outside capital into American communities.

That's not an argument that every dollar of film incentives magically returns more than a dollar to the Treasury. Policymakers should demand real evidence about costs and benefits.

It's an argument that the potential economic effect is broader than the rebate attached to one movie.

And new production technology could make this moment particularly interesting. If technology continues reducing certain production costs at the same time more states compete for productions, a federal incentive could help reverse some of the cost pressure that has been making American independent filmmaking increasingly difficult.

What Producers Should Actually Watch

Don't start building a 20% federal credit into your budget tomorrow. There is no enacted 20% credit today, and Congress still has to determine the percentage, eligible costs, caps, transferability, refundability and other qualification requirements.

But start paying attention to the structure, not merely the headline number.

If legislation emerges, I would immediately want to know whether the federal incentive stacks with state credits, what labor qualifies, whether above-the-line compensation qualifies or is capped, when certification occurs, whether the credit is transferable or refundable, what discount lenders or buyers apply when monetizing it, and whether independent films receive an additional benefit.

Those answers will tell us far more than “20%.”

A badly structured 20% incentive could look fantastic in a headline and be nearly useless to the independent producer trying to close a financing gap.

A properly structured one could do something much more consequential.

It could allow us to make the same commercially responsible movie with less capital ultimately exposed against its distribution value, while eliminating some of the costs and complications that currently make shooting overseas attractive.

That's the part of Trump's proposal worth watching regardless of your politics.

A federal production incentive won't make a bad movie good. It won't make buyers suddenly pay more for independent films, and it won't rescue a $5 million movie that should have cost $2 million.

But it could finally address the problem independent producers can actually solve: if the market won't increase what our movies are worth, we have to get smarter about what they cost us to finance.

That's not a subsidy strategy.

That's production strategy.