Mechamonsters vs Orchs/Tax credits vs Film funds - Raindance

Looking for money to fund a film can prove a herculean task.

Not only is your film a unique prototype, which is hard enough to explain to potential investors, but money is an incredibly shy entity, especially if compared to the overly bold and borderline irresponsible thugs who sometimes sit at the top of the financial organizations who take care of it.

Added to the fact that the business of making and selling films has one of the highest risk factors out there, you have a serious problem on your hands looking to raise two or three million dollars to make your ultra low level indie.

Film, and TV, and now tablet and OTT content, sibling of the same “visual storytelling family” are, however, a very powerful industry for several reasons.

In a time when labor-intensive manufacturing is dwindling, almost dying out, making films requires a lot of very qualified, very intense, very dedicated professionals, who usually get paid better than average wages, get “pride of manufacturing” out of their jobs and create tight-knit communities around their labor centers.

Films, when seen by others, convey lifestyles, landscapes, landmarks, architecture, dare I say ideology, making for a great tool to wield “soft power”.

When someone sees a film they like about or filmed in a particular place, chances are they’ll want to wear some of the clothes they saw, maybe try some of the food, hear some of the music and, eventually, travel there, spend some coin, and generate more commerce, more spend, more jobs and more cultural exchange, making all of us richer, not only in monetary terms, but enriching our lives by knowing how the rest of the world lives and thinks, and showing them how we live and think.

So, governments all over the world have come up with different ways to support their local film industries into producing and, preferably, exporting, content.

From my experience, you can divide them in two basic categories:

  • Film Funds: either government of private funds, granted to films in development, production or post-production, as either extremely-low-interest loans or angel-capital, allowing producers to use them as seed or finishing money.
  • Tax credits: refunds based on total or partial spend made by producers on a certain jurisdiction.

There are advantages and disadvantages to working with either one, and I’ll try to explain each one.


As you can imply from the name, a Tax Credit is a refund that a government agency grants a producer AFTER (AFTER, please note AFTER) a producer has spent a certain amount of money in a certain type of production within that government’s jurisdiction.

Government agencies in charge of designing, organizing and disbursing them are usually economic development ministries, tourism boars, film commissions and not very often, film institutes.

They can be used to rebate spend made in production as qualified by the government agency that passes the tax credit bill or law applicable, but mostly they are used after a film or TV/OTT series has filmed/wrapped principal or even post production, or for animated or video games. I have never seen a cash or tax rebate designed for development or script writing phases, but there maybe one out there (if you know of one, let us know)

The easiest way to understand this is the VAT refund booths that are available around most international airport departure gates.

VAT is a refundable tax, in most countries that use it, if the goods bought within domestic territory were bought for export (by a tourist) before a certain date (usually the length of a great extended holyday).

So, when the tourist goes to the airport, on the boring two hour wait for the plane to be ready for boarding, he walks to the VAT refund counter, the teller adds the receipts, and presto, he gets the amount “credited” him in tax return, in cash, on an internationally solid currency (USD, Euro, etc).

Imagine this happening, but extended to the proportion of a film.

But film is not always meant to be exported, and even if exported, it’s not always “exclusively” made for export, many films made, for example, in Canada, are meant for all international markets, but will also open, and make a good domestic gross in Canada so, what’s up with that?

Well, as I wrote above, film is a many splendor thing, so governments think it’s good business to help it get rolling, therefore it has a special statue where some of what producers spend making it gets back to their pockets, so they can make more films.

In most cases, tax credits in film will either have a VAT or a State or even City sales tax refund built into them.

The reason for this is quite simple. VAT, and Sales taxes are usually refundable or “creditable “ taxes, so accountants, comptrollers, regulators and actuaries have no problems in regulating and filing compliance for these refunds.

In order to make them selves more attractive, some countries, and even some jurisdictions within those countries, will pile more rebates and refunds (the two are pretty much interchangeable), and will offer a percentage number to be refunded to producers to lure them in.

These percentage numbers have to be looked into very carefully by qualified accountants, because even tough they’re made in good faith, and by public officials, they may be harder to collect than what shows on the brochures.

The main taxes collected by state and local authorities are usually payroll related. They range from unemployment benefits, to special payroll tax (my jurisdiction charges this tax), property taxes, water works and sewage and other similar services, besides state and local sales tax and national income and social security taxes so, their funds depend more on that income than national taxes, the first complication may come in the form of the rebate itself, thus.

Some jurisdictions (I will use the term for any entity granting a refund) will allow a producer to credit the percentage or limit amount set by their rules only in relation to a certain tax or group of taxes due them.

Let’s say your film spent one million dollars shooting in Los Palitos, in the fictional Republic of Palma Grande…

The Government of Palma Grande has a 35% rebate on “all film production”, but the small print (always the small print, you went to film school to run away from the small print, but noooooo!!) states you can only count the spend you made on the “Los Palitos Workers Assitance Fund”, which is a 2,5% fringe added on every local workers’ paycheck, but you hired a large local crew because you’re into new age, and you don’t believe in “neo colonialism”, and the D.O.P. is the son of the president and went to the expensive film school you went to, but still, it only adds up to a mere fifty thousand dollar, instead of the three hundred and thirty five thousand you thought you’d get, so you can’t pay the fee for your only big name American star, and your film is, in essence, destroyed.

The other caveat in this case is sustainability. How long can the rebate keep going before the government running it has to reduce it, change it, or runs out of funds to pay the rebate?

Since the Government of the Republic of Palma Grande has a very understanding Culture and Film Minister, they have widened the gap on their rebate, to include the full million you spent, or so they told you on the phone call you received today, on your break from driving the über car your cousin bought, so you can pay the maxed out credit card you used to buy your ticket out from Los Palitos.

However, as you pull over near the taco stand at Crenshaw for your dinner, you see on the news that the Government of the Republic of Palma Grande has failed to be recognized by the U.S.A. at the U.N.’s General Assembly, so funding for their non-essential programs will be cut immediately, meaning your film has a promissory note from a government that can’t afford basic cable.

Clearly, my example dabbles in exaggeration and (bad) comedy, but I want to show the pitfalls of the system before I talk about its virtues, which are many and great.

The rebate system allows for an easier relationship between government agencies and producers.

The producer does what he does best, and the government agency rewards that by making it more attractive to come back for more.

And the best part, professionals servicing the industry get a lot of work from the symbiosis.

Examples like New Mexico and Georgia in the U.S.A. are worth studying and following, and some others in Europe such as Wallonia, and the U.K., and lately Ireland, both holding solid, culturally relevant local industries, and servicing export and film production services industries as well.

But always ask the right questions, always read the fine print, and never think you know it all, because there is a lot (and I mean a lot) of corporate and government accounting and regulations involved in taxes and rebates.

ORCHS: Film funds

Even the name sounds friendlier, doesn’t it? But it can be a brute.

As above, we’re talking about “soft money”, granted to producers, either by government agencies or private “angels”, at the script writing, development, production or post production/finishing phases of a film.

The larger funds are granted for production and post production of dramatic content, length feature, live action, then animated content, length feature, and then finishing funds, and at the lower end of the cash availability, lies at script writing and development stages.

The government agencies in charge of them are mostly film institutes, some international bodies such as Programa Ibermedia, Eurimages, and MEDIA Program.

When they’re granted by private “angels” it’s mostly private foundations, that have some relationship with a film festival like the Sundance Institute, Cinefondation, The Gabriel Figueroa Film Fund and others like them.

First, I will talk about the government based funds.

Unlike the tax rebates, these funds assume that producers don’t have the necessary equity to start their production and serve as a “low-to-no interest” bank to them.

It’s very generous proposal, that sounds like a great deal at first, however, like all things that sound too good to be true, it probably isn’t.

Government granted film funds require a lot of preparation, most of them demand that submissions be handed in on specific schedules, with paperwork in print or via electronic systems, and will have a judgment body, impartial but made up of humans, with their criteria, their taste and ideas, who will decide which projects get made and which don’t.

Small, intimate, personal films thrive in this environment, while more ambitious, period or commercially oriented projects tend to be rejected, based on the fact that “they’re commercial projects, they’ll find funding in the commercial world”, an argumentative point I heard plenty of times, and could not argue against due to my duty to remain impartial while I was a public servant.

Be advised, if you intend to apply for screen writing of development funds in this kind of system, that most agencies that grant one stage of funding do not automatically have an obligation to fund the next, so your work must excel, outshine, and outclass everyone else’s at every stage of the process to keep getting funded.

Also, regarding screen writing and, in fact, all funding, make a very solid point about intellectual property rights and the money you’re getting.

Government agencies are not in the business of “buying you out” of your scripts, but it’s always better to ask and be sure. Again, read the fine print.

As you approach the production money funding, government agencies change in method, but not in spirit.

Some national film institutes in Europe will grant cash advance warrantees, based on what the film’s expected gross will be. The producer will take this warrantee and go to a private bank to get cash, the bank charges an operation fee, and the producer has to make sure he finishes the film and releases in the fashion and dates set forth on his film institute´s warrantee. If all is well, the film institute will grant a completion form once the producer proves he has made all reasonable efforts to release the film and obtain as much gross, and exposure of the film as the spirit of the warrantee states, and that’ll be the end of the relationship.

Other institutes, some in Europe, but mostly in Latin America and the developing world, have a banking system that gives (stay with me here) little-to-no credibility to a piece of paper signed by a government official (see what I mean?). Other than national treasury bonds, and some other rock solid “letre-de-caché” type government paper, private banks will not loan money unless they have real state as collateral, and most independent producers don’t have or won’t put up their house as collateral so, what they’ve come up whit instead, is granting government based co production money or production loan money, where a government owned bank is the loaner, and the film rights owned by the producer are used as collateral.

In this case, it is essential to know the exact terms of the contract and the deliverables the government agency expects to get in return for the money granted.

Be advised that movies live forever, and governments do to, so you can finish a film, release it, release it on tablets, re release it on theatres, sell rights for a re make, get tired from selling it, work on ten more films, retire, play golf, get old, grow to the ripe old age of ninety and the government may still want to get a report on sales for a film you made forty years ago, and have not seen or heard of in ten, so be sure to make clear and precise annotations on what is expected from you on each stage.

Regarding private “angel” funds, they’re even better if you get them, but harder because they’re less funded, and they have a narrower scope.

A certain film festival may be interested exclusively in funding and promoting films of a certain genre, so yours may be instantly excluded.

Be a student of the festivals, and their funds, when you like what they like. Chances are you’ll write something in the line they fund, and then you’ll be rolling.

They’re great to get things started, because your film will have a laurel from a festival on it when it hits the government fund circuit, and that always helps.

But they won’t get it made on their own, because they just can’t afford it.

So, that’s what I know from the dark and dangerous battle of tax credits vs film funds, I hope it helps.