Partial Income Exclusion for films produced in the US
The 2004 Tax Act also provides for an exclusion of a percentage of worldwide net income attributable to audio-visual works if at least 50% of the total compensation relating to production of the audio-visual work is compensation for services performed in the United States. The exclusion is 3% in 2005 and 2006, 6% from 2007 through 2009, and 9% thereafter. In no event may the exclusion exceed 50% of the total W-2 wages paid by the taxpayer during the applicable tax year. The exclusion also applies for purposes of the alternative minimum tax.
The exclusion applies regardless of the medium (i.e., theatrical, television, or DVD). Films will not qualify for this benefit if the film includes “visual depictions of actual sexually explicit conduct.”
Again, as with the Section 181 deduction, the
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