POSTED ON April 23, 2015

138-day-Tax-rule

By: Helen Han (guest blogger from R&D Incentives Group)

Research and Development tax credits are often affiliated with companies within in the high-tech, biopharmaceutical and manufacturing industries; however one industry that frequently overlooks the R&D tax credit is the entertainment and media industry.

First introduced in 1981, the R&D tax credit has been established as an economic stimulus for companies in a diverse range of industries that create new or improved products and processes; they don’t have to be cutting-edge technology that’s never been developed, but just new to the taxpayer claiming the credit. Companies within the entertainment space may be able to recapture their expenses spent on internal efforts, supplies/materials and contractors as a dollar-for-dollar tax savings on both federal and state levels.

As technology continues to evolve, the entertainment industry has been able to utilize such technologies to raise the bar and advance their creative pieces. Five examples to illustrate how companies in the entertainment and media industries might qualify for the research credit include:

  • A post production and visual effects studio develops 3D modeling for an animated character to be used in a commercial. The 3D modeling involved complex programming to make the textures appear realistic.
  • A company develops and fabricates a specialized hydraulic lift system to be used as part of a theme park attraction.
  • A media-fulfillment and post-production facility develops a unique solution for processing raw content and converting it to a digital format.
  • A digital media company develops a software platform for creators to analyze viewer traffic.
  • A company develops special fixtures and tools for cameras to allow for new filming techniques.

Any company in the entertainment and media industry that encounters and resolves technical challenges may be eligible for the R&D tax credit. The R&D tax credit can help improve cash flow through qualified activities that companies may already perform as their daily business operations.