For investors exploring opportunities in film, television, or live entertainment, there’s a powerful but often underutilized area of the U.S. tax code worth your attention: Section 181.

Originally introduced to encourage domestic media production, Section 181 was made permanent in the 2020 tax overhaul. It provides a significant tax incentive for those funding qualified entertainment projects by allowing 100% of production costs to be deducted in the same year the money is spent.

Section 181: The Federal Advantage

Here’s what makes Section 181 noteworthy:

• Immediate Deduction: Investors and production companies can deduct up to 100% of the cost of qualified productions in the year the expenditure is made, instead of amortizing costs over multiple years.
• U.S.-Based Focus: The project must have at least 75% of compensation paid for services performed in the U.S., encouraging domestic job creation.
• Budget Limits: Applies to productions with budgets up to $15 million, or $20 million for projects in low-income or economically distressed areas.
• Eligibility: Open to individuals, LLCs, corporations, and partnerships investing in film, television, and live stage productions.

This provision offers a valuable planning tool, especially for high-income individuals looking to offset other taxable income while supporting the growing demand for streaming content, documentaries, and theatrical works.

New Jersey: Stacking the Incentives

While Section 181 handles the federal side, many states are competing to become media production hubs and New Jersey is at the forefront.

The New Jersey Film & Digital Media Tax Credit Program provides generous incentives that can be combined with Section 181, maximizing investor benefits.

Key Highlights from the NJ Program:

• 30% Base Tax Credit: On qualified production expenses incurred in New Jersey.
• 35% Regional Bonus: For projects using vendors and locations in southern counties such as Camden, Gloucester, and Atlantic.
• Post-Production Credit: Up to 40% credit for post-production work done in New Jersey, including visual effects and editing.
• Transferability: The credit is transferable, meaning investors or producers can sell unused credits to generate liquidity.
• Studio Partner Program: Offers additional benefits to companies that commit to long-term development and production in the state.

New Jersey’s aggressive posture on attracting content creation paired with its proximity to New York City and Philadelphia has made it a competitive location for independent productions and larger studio projects alike.

What This Means for Investors

Taken together, Section 181 + state-level credits like those in New Jersey can create a compelling environment for entertainment investing:

• Lower your federal and state tax liability.
• Accelerate depreciation schedules for immediate tax benefits.
• Enhance IRRs and project-level returns through stacked incentives.
• Support U.S.-based job creation and content development.

These incentives can make otherwise marginal projects financially attractive and for investors, they offer an additional layer of security and upside.

Final Thought:

Tax treatment should never be the sole reason to pursue an investment, but for those already interested in content creation or alternative investing, these benefits can materially improve the after-tax return profile.

At Eppler Capital Funds, we stay informed on how structural advantages like Section 181 and state-level credits can impact the broader investment landscape. If you’re interested in learning more or evaluating opportunities where these incentives may apply, let’s connect.

Best,

Craig