Additional information from the SC Department of Revenue can be found here.
Is above the line talent covered as well as below the line?
May a production company use a payroll service company to perform the SC withholding required to receive the cash rebate on wages?
The SC Film Incentive Program: CASH REBATES
How does the South Carolina Rebate work?
First, we pay cash! South Carolina sends you a check at the end of production. No bartering or fiddling around with credits or filing tax returns.
If your film will spend a minimum of one million dollars ($1,000,000) in South Carolina (vendors, crew, extras, actors) and is financed, contact the SC Film Commission at 803.737.0498 to discuss your options before you begin filming.
Are the incentives in the form of tax credits?
NO! We pay CASH. If you qualify, we send you a check within 30 days of the close of your accounting department.
How much is the film & television production incentive?
For qualifying productions a 30% Supplier Rebate is based upon your total in-state expenditures with SC suppliers. Also, a 25% Wage Rebate is available for all resident wages subject to SC tax, and 20% for non-residents, including all actors and stunt players, no matter their state of residence.
Are there any caps?
The Wage Rebate is capped at the first $1,000,000 of earnings taxed in SC per individual.
There is no cap on the amount a production can receive.
There is an annual cap on the amount of rebate funds available per year. Generally, there is a minimum of $15,000,000 available in rebate funds per fiscal year (July 1 to June 30). The Rebate Fund is replenished each July 1st.
Do you offer Sales Tax Exemptions?
Besides using SC suppliers to receive a 30% cash rebate, your production may be exempt from SC sales and accommodations taxes, which could mean up to an additional 7.5% savings.
How do the Sales Tax Exemptions work?
After your application is accepted, register with the Secretary of State and Department of revenue, and receive a tax exemption certificate which exempts your production company purchases from SC sales and use tax at point of purchase. This exemption includes goods, services, hotel tax, some rental car taxes and the like.
What’s the minimum threshold to qualify?
You must spend at least $1,000,000 in SC. If you are not able to spend this amount, you may still qualify for exemption from SC sales and use taxes, saving your Production up to 7.5% on supplies purchased in SC (see next question for more details).
What if I cannot spend $1 million dollars in SC on my film?
A production company planning to spend $250,000 in SC within twelve (12) consecutive months may receive an exemption from all state sales, use, and accommodations taxes on goods and services purchased, leased, or rented for production by the production company. Granting the exemption from state sales, use, and accommodations taxes is at the sole discretion of the Department of Parks, Recreation & Tourism. If applicable, the sales and use tax exemption will be effective as of the date of approval of the production company’s application by the Director or his or her designee.
Must I apply to become qualified to receive the SC cash rebate?
Yes, you must apply for the film incentives before you begin filming. Contact the Film Commission to discuss your project and receive an application.
What form do I need to fill out to apply for the incentive?
First, make sure your production company will spend at least $1,000,000 in South Carolina. You must meet this threshold by the end of production. When you are green-lit, call the Film Commission to discuss your project. If your project qualifies, SC reserves your rebate funds based upon your estimated SC production expenditures, and that money is not available to any other production.
How long does the incentive application review process take?
The process may take up to 15 business days.
May a production company apply mid-production for a partial film credit?
No. A production company must estimate that it will spend a minimum of $1,000,000 in one calendar year (365 day period) in SC, apply for and be approved for the SC cash rebate. Once approved, the Film Commission reserves this amount until completion of production to guarantee that the funds are ready within 30 - 45 days of final agreement on expenses. Then we send a check for the rebate to you.
When must SC production activities begin - once I have been approved to receive SC’s cash rebate?
Generally within 60 days after application approval.
Must I register my production company in the State of South Carolina?
Yes. All productions doing business in SC must be registered with the South Carolina Secretary of State.
Do I have to complete my project by year-end?
The wages of an individual whose wages are $1,000,000 (one million dollars) or more for the production are not eligible for the Wage Rebate.
You have one calendar year (365 days) to complete your production to qualify for our rebate.
Do commercials qualify?
Yes, as long as they meet the $1,000,000 spending requirement. Like films, the state requires an audit to verify expenditures.
Do reality TV series qualify?
Reality TV series are not eligible.
Does SC allocate a certain amount of money that can be used for the rebate program each year?
There is an annual cap on the amount of rebate funds available per year. Generally, there is a minimum of $15,000,000 available in rebate funds per fiscal year (July 1 to June 30). The rebate fund is replenished each July 1st.
Is there a sunset clause in the SC incentive legislation?
Who qualifies for a 25% cash rebate in SC?
A production company may receive a rebate on the money spent on resident wages directly associated with the production and subject to South Carolina withholding tax. Feature films, television pilots, videos, and commercials are eligible for Rebate #1, listed below.
Television Series are eligible for Wage Rebate #2, also found below.
In order to qualify for the Wage Rebate, a production company’s total production costs in SC must exceed $1,000,000 (one million dollars) in a single taxable year. For wages to qualify for the rebate the individual must qualify under the Motion Picture Incentives Act and the individual must have had South Carolina income tax withholding withheld and remitted
to the Department of Revenue.
Only those wages that are subject to South Carolina withholding tax are eligible for the Wage Rebate. An individual is only liable for income taxes for personal services actually performed in South Carolina and is only subject to income tax withholding on payroll paid while that individual is working in South Carolina. Therefore, the Wage Rebate is available only for wages attributable to work performed while an individual is actually working in South Carolina.
Is above the line talent covered as well as below the line?
Yes. Compensation for payments up to the first $1,000,000 made to above the line personnel, such as producers, directors,writers, and actors, may be qualified if subject to SC taxation.
Must all hires be South Carolina Residents?
No. However, you maximize your wage rebate if they are. The SC resident rebate is 25% of your SC payroll subject to SC tax. You also may receive a 20% rebate for actors and stunt players - no matter where they are from.
How is a South Carolina Resident defined?
In order to qualify for the maximum twenty-five percent (25%) Wage Rebate, each South Carolina resident employed in the production of a feature length film, video, commercial, or television production that does not qualify as a television series must complete a Declaration of Residency form and provide proof of residency, which is one of the following:
Do you accept loan outs?
- Valid South Carolina driver’s license, or;
- Current South Carolina voter registration card, or;
- Copy of last year’s South Carolina personal income tax return
Yes. Loan out payments qualify. Your payroll company is required to pay withholding taxes of 2% on each individual’s SC compensation.
Are there restrictions on the amounts paid to any employee?
Total payments to any one employee are capped for the purposes of our cash rebate at $1,000,000.
What if I take a South Carolina crew to another state?
The wage rebate is based upon taxable wages paid for services performed in SC.
May a production company use a payroll service company to perform the SC withholding required to receive the cash rebate on wages?
The SC Film Commission and the SC Department of Revenue will treat a payroll service company as the employer of record for all state and federal income tax purposes, provided that the motion picture production company contracts with the payroll service company to carry out withholding responsibilities and that the company properly registers with the SC Department of Revenue and the SC Secretary of State. There are required accounting and payroll forms in Excel that the SC Film Commission requires. The State and Federal withholding is done with standard forms.
May a motion picture company obtain a cash rebate for payments made to a loan-out corporation (or personal service corporation) when a payroll service company does the withholding and, what is the proper procedure?
Payments to a loan-out corporation, rather than to an individual employee, qualify for the SC rebate. This can be handled two ways:
- The Loan Out corporation may register in SC and must withhold and remit a portion of the individual’s wages,
- The payroll company may withhold 2% of the individual’s wages.
In any case the payroll and loan out corporations must still register to do business in SC.
Do employer-paid payroll expenses that are not included in the gross salary payment to the employee (e.g., SUTA/FUTA, FICA, workers compensation, health insurance, pension contributions) qualify for the payroll and production expense credits?
No, unless they exceed the Federal tax limit and are subject to SC taxation.
Are box rental expenses paid to employees eligible for the SC rebate?
Does a production company that fails to withhold or insure that the loan out corporation or personal services company withholds the proper amount still get the rebate?
No. Taxes must be withheld in order for the production to claim the SC rebate.
What qualifies for 30% cash rebate in SC?
A production company spending at least $1,000,000 in South Carolina may receive a thirty percent (30%) rebate on goods and services acquired in the State from a South Carolina Supplier.
The Supplier Rebate is personal to the production company.
All expenditures and the Supplier Rebate Request must be filed with the Film Commission and the Film Evaluation Committee prior to the departure of the production company from South Carolina. In addition, all supplier expenditures must be audited, with a company accounting representative present to answer any questions, before the South Carolina production office closes. Failure to do so may result in disqualification for the Supplier Rebate.
The production company must provide a complete vendor list to the Film Commission.
Any scouting expenditures incurred or contracted for in South Carolina by the production company sixty (60 ) calendar days or less prior to the approval of the application may be eligible for reimbursement.
The Supplier Rebate may not be used to reimburse any personnel expenditures, however structured or classified.
The Supplier Rebate is available only for those purchases that are made at fair market value in arms length transactions.
Only actual expenditures paid shall be qualified expenditures, not outstanding accounts. Purchases over $5,000 (five thousand dollars) for real or personal property are subject to review and any rebate may be prorated based on the use of the real or personal property in the film.
How do I know if it’s a “South Carolina Spend?”
A “South Carolina Supply” is an item or service typically subject to South Carolina sales tax and obtained by the production company from a South Carolina Supplier.
A “South Carolina Supplier” is an entity, including but not limited to a limited liability company, a single member limited liability company, a corporation, an S corporation, a partnership or a sole proprietorship that:
- Has at least one full-time employee within the State;
- Has a physical location in the state that consists of more than a post office box or drop box and that maintains normal business and has a South Carolina telephone number;
- Has registered to pay South Carolina income taxes and withholding taxes, and if applicable, South Carolina sales tax;
- Has registered to do business with the South Carolina Secretary of State; and
- Evidences an intent to be permanently domiciled in this State.
To the extent that a purchase is made from someone other than a SC supplier, that expenditure will not be eligible for the Supplier Rebate.
I spent money in South Carolina to scout locations before applying for the incentives. Can I claim these expenditures?
Yes. Any scouting expenditures incurred or contracted for in SC by the production company sixty (60) calendar days or less prior to the approval of the application may be eligible for reimbursement.
Do insurance expenses, loan fees, completion bond expenses and interest expenses incurred in connection with the production of a film qualify for the production expense credit?
Insurance expenses, loan fees, completion bond expenses and interest expenses do not qualify for the production expense credit, regardless of the location of the lender, insurance company or completion bond company.
Do living expenses and travel expenses such as airline tickets for motion picture employees flying in and out of South Carolina, incurred during the pre-production, production or post-production of a motion picture qualify for the production expense credit?
Airfare does not qualify. Production company expenditures for lodging, food and other expenses qualify for the SC rebate, including those scouting expenses incurred 60 days before the production.
The only “spend” that is credited toward the rebate is that which is spent in SC.
Does "local spend" include bond fees and insurance?
Insurance? Yes, if obtained from a SC supplier.
Bond Fees? No.
Do equipment purchases outside of South Carolina used directly in the production of the motion picture qualify for the 30 per cent cash rebate?
No. Only those expenditures made by a qualified SC vendor are eligible for the cash rebate in SC.
Do archival material costs, fees for stock footage, or costs for licensing footage from another production entity or from an archival source constitute qualifying production expenses?
Yes, if they are purchased from a SC supplier.
Do payments to shipping companies count as qualifying expenses? (FedEx, DHL, UPS?)
Yes, to the extent that the service is obtained from a SC supplier. If the shipments are made to and from the SC production office, they qualify.
Do “pass throughs” qualify?
Pass through company transactions are not eligible for the SC cash rebate.
Does the rental of specialized motion picture equipment from a vendor located outside SC qualify for the rebate?
What if the rental is handled by a South Carolina based rental vendor?
Yes, in that case, if the transaction occurs between the qualified film production company and a SC supplier that rents similar items. For example, you can not obtain camera equipment from a SC prop house and have it qualify. You may rent a camera from a SC grip and electric company and have it qualify for the supplier spend. However, the transaction must have economic substance and not merely be a pass through transaction.
Are kit or box rental expenses paid to employees eligible for the SC rebate?
I heard that your supplier rebate is more like 37%. What does that mean?
Any production spending over $250,000 in SC and qualified by the SC Film Commission may apply for tax exempt status. All films approved for our rebates spending more than $1,000,000 in SC are automatically exempt from sales and use tax. That means you pay no sales and use tax at the point of purchase. In some cases this could save you an additional 8% on purchases such as hotel rooms, and also includes 5% on rental cars, 3% on heavy equipment; any sales and use tax administered by the SC Department of Revenue.
Who performs the audit?
The State of SC provides an auditor to the production while in SC.
How much is the audit?
The audit is free of charge.
How does your audit work?
We send our auditor to your SC production office at no expense to your company. It is a progressive audit. Your production accountant emails your first wage and spend reports in Excel via email within two weeks of the opening of the production office. Updated reports are emailed weekly. This does two things: We audit your spend to help assure that (1) you are gaining the maximum value from our program and (2) your rebate checks are received as soon as possible.
After our auditor reviews spending reports, he will schedule a time to come to your SC office to verify wage and supplier expenditures. He will review receipts and ask questions as necessary. These on-site audits happen about every two weeks or so, depending upon cash flow. The final audit reviews only the last two weeks of spend, so figuring out your cash rebate is completed quickly once your production wraps.
RECEIVING MY CASH REBATE
When do I get my cash?
Once the production company has completed all production-related work in South Carolina, the auditor, production accountant and executives will agree on the amount spent on wages and suppliers – and the rebate amounts that may be due- in SC.Usually within 30 - 45 days of the close of the production office and final agreement on accounting, you will receive your check from SC.
SC PRODUCTION TAX CREDITS
Do you offer Tax Credits as well?
Yes, several, including credits for SC investors…..read on!
1. Tax Credits for the Creation of South Carolina Motion Pictures or Facilities
The investors in SC created motion pictures and/or production/post-production facilities are entitled to State income tax credits based upon their investment amount.
Application by the production company and certification before any activities begin and approval by the Department of Parks, Recreation & Tourism are required for all parties.
A. Motion Picture Project Tax Credit
A taxpayer may claim an income tax credit of up to twenty percent (20%) of the taxpayer’s cash investment in the development or production of a single South Carolina motion picture.
B. Production/Post-production Facility
- Credits are limited to $100,000 (one hundred thousand) per taxpayer
- Unused credit may be carried forward fifteen (15) succeeding taxable years
- All credits cannot reduce a taxpayer’s income tax liability by more than fifty percent (50%) for any given year
2. Tax Credit for South Carolina Companies that produce Commercials
- A taxpayer may claim an income tax credit of up to twenty percent (20%) for the construction or conversion, or equipping, or any combination of these activities of a motion picture production or post-production facility. Minimum investments in the facilities apply.
- Total credits claimed by all taxpayers may not exceed $5 million in a single qualified facility.
- Unused credit may be carried forward fifteen (15) succeeding taxable years.
- All credits cannot reduce a taxpayer’s income tax liability by more than fifty percent (50%) for any given year.
Production companies that produce commercials and that make a total base investment of more than $500,000 in filming commercials in the State during a calendar year are eligible for a State income tax credit equal to ten percent (10%) of the total investment made in South Carolina. The total amount allowed to all production companies each year cannot exceed $1,000,000.
Are there other Federal tax incentives that may be valuable to film productions?
Yes, all US based productions continue to have other potential incentives including a 6% tax deduction from gross revenues for U.S. film and television production activities (Section 199). Producers should consult their professional tax advisers for other tax incentives that may be available.