APPLICATION PROCESS AND PROCEDURES
• Initial Application
Production companies meeting the basic eligibility requirements outlined above must submit an initial application to the VFO at least 30 days prior to production. The application must include any documentation required by the VFO. A copy of the application can be found at the end of this page.
• Processing of Applications by the VFO
The VFO will review each application to ensure that all necessary documentation is attached. If the application is incomplete, the VFO will contact the production company to request missing information. The application will not be reviewed for credit allocation until the application is complete.
Completed applications will be reviewed by the VFO to determine the estimated amount of qualified expenses, the total cost of production and other information necessary to determine both eligibility and level of credit allocation. The VFO will determine which productions to approve and which to deny credit allocations based on any or all of the following factors:
- the amount of in-state production spending; and
- the qualifying criteria of the motion picture production, which shall include, but not be limited to:
- whether the production involves physical production within the Commonwealth of Virginia;
- the number of residents of Virginia that will be employed in the production and the level of compensation they will be paid;
- the extent to which the production will contribute to the support and expansion of existing production companies in Virginia;
- the extent to which the production will impact existing local businesses and the local economy;
- the extent to which the production will involve existing and new companies located in Virginia;
- the extent to which the production provides employment at facilities physically located within the Commonwealth of Virginia; and
- any other relevant considerations as determined by the VFO.
Productions will only be considered when funding is available. As funding is limited, it is possible that all of the funds will have been reserved by earlier productions at the time of the production company’s submittal of its initial application. In this case, the VFO will inform the production company of the next date when a review of the production may be performed. The VFO will also inform the production company if a new application is required for later review. Motion picture production companies that are rejected by the VFO for a particular production may apply in the future for tax credits regarding other productions.
All credit allocations will be at the sole discretion of the VFO. The decisions of the VFO regarding whether a motion picture production company shall be eligible for a tax credit are final. No suit for the purpose of contesting any action of the VFO under these Guidelines shall be maintained in any court of the Commonwealth.
• Credit Notification
The VFO intends to approve or deny completed applications within 10 business days of receipt of application but reserves the right to take up to 30 days to respond.
A decision to potentially grant tax credits to a production company will be confirmed by a Credit Allocation Letter of Intent that will include:
- the maximum amount of the tax credit allotted;
- the date that eligibility for qualified expenses begins; and
- the date that eligibility for qualified expenses ends.
After receipt of the Credit Allocation Letter of Intent, the production company will enter into a memorandum of understanding with the VFO outlining the requirements the production company must meet in order to receive the credits. The memorandum will include at minimum:
- the estimated amount of money to be spent in Virginia;
- the estimated number of Virginia resident hires;
- the timeline for completing production in Virginia; and
- the maximum amount of credits to be allocated to the production company.
By signing the memorandum of understanding, the motion picture production company forfeits any right to contest the amount of tax credits that have been assigned to it and agrees that while the amount of credits granted upon the completion of the motion picture production may be lower than the maximum amount listed on the memorandum of understanding based on the amount of qualifying expenses, it may not be more.
Production companies seeking the tax credit must receive a Credit Allocation Letter of Intent from the VFO before making or incurring any qualified production expenditures in order for those expenditures to be eligible for the credit.
• Requirements During Production
The applicant must at all times keep proper books of record and accounts in accordance with generally accepted accounting principles consistently applied, with the books, records, or papers related to the accredited production in the custody or control of the taxpayer open for reasonable TAX inspection and audits, including, without limitation, the making of copies of the books, records, or papers, and the inspection or appraisal of any of the assets of the applicant or the accredited production. This must include all vendor receipts for which the production is applying for tax credits.
If physical production goes over one calendar year, the production company must file a report with the VFO that verifies the progress of the production. The report shall include a detailed account of amounts spent in the Commonwealth at the current stage of production and provide proof that it is moving forward.
• After Production
Upon completion of a qualified production, the applicant must submit to the VFO proof of the amount spent in the Commonwealth and any additional documentation required by the VFO in combination with TAX. Applications shall be submitted with a form approved by the VFO and signed by an independent certified public accountant licensed by the Commonwealth who states that the applicant is eligible for the credit amount claimed. Although a full audit by the certified public accountant is not required, a financial review is necessary.
Upon approval, the VFO shall issue a Certification Letter to the applicant indicating the amount of the tax credit that the taxpayer may claim on its Virginia income tax return. The Certification Letter will include the name of the production, a description of the production, and a detailed account of the qualifying expenses with respect to which the credit is being claimed.
• Claiming the Credit
Under the requirements of Va. Code ยง 58.1-499 C, the taxpayer, upon receipt from the VFO of copies of the Certification Letter, must file the applicable Virginia state income tax return and attach any required documentation in order to receive the refundable Virginia Motion Picture Production Credit. The credit is refundable and shall be used against the taxpayer’s Virginia individual or corporate income tax liability for the taxable year in which physical production was completed.
Whenever a taxpayer is eligible to claim more than one Virginia income tax credit, the taxpayer shall exhaust all other applicable credits before utilizing the refundable Motion Picture Production Credit to ensure that the taxpayer receives the maximum benefit of his credits. The Motion Picture Production Credit has no carryforward provision, and, as such, must be used against Virginia income tax liability for the taxable year in which physical production was completed. If the amount of the available credit exceeds the taxpayer’s tax liability, the taxpayer will receive a refund from TAX of the net excess of the refundable credit over such remaining tax liability. See Public Document 95-240 (9/22/95) for further information regarding the ordering of tax credits.
Any taxpayer allowed this tax credit must maintain and make available for inspection any information or records that TAX requests.
• Pass Through Entities
The amount of any credit attributable to a pass-through entity, such as a partnership, electing small business corporation (S corporation), or limited liability company, may be allocated to the individual partners, shareholders, or members, respectively, in proportion to their ownership or interest in such business entities.
• Details for TAX’s Annual Report
TAX, in consultation with the VFO, must publish a report by November 1 of each year or the 12 month period ending the preceding December 31. This report will include the following information:
- location of sites used in a production for which a credit was claimed;
- qualifying expenses for which a credit was claimed, classified by whether the expenses were for goods, services, or compensation paid by the production company;
- number of people employed in the Commonwealth in connection with the production for which the credits were claimed; and
- the total cost to the Commonwealth’s general fund of the credits claimed.
• Additional Information
These Guidelines and rules are available on-line in the Tax Policy Library section of the TAX website, located at www.policylibrary.tax.virginia.gov. For additional information, please contact TAX at (804) 367-8037, visit www.tax.virginia.gov, contact the VFO at (804) 545-5530.