Illinois Updates Film Tax Credit for Non-Resident Stars

Somebody in Springfield must follow my blog, because it appears they're going to update the film incentive to include non-resident cast.

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To Defer or Not to Defer

by Jeff Steele

-------Your Production Staff------

Knowing where to put your money is one of the most difficult challenges for independent film producers. It doesn’t matter if you’re backed by a fund, have your own operating capital, subsidize with a day job, or are receiving one of the coveted government film grants that many indie producers rely on.

As an independent producer, every day can be a struggle to move your projects forward while trying to preserve precious capital resources.

When everyone simply can’t be paid upfront due to insufficient funds you’ll have to try and get as many people as you can to work for free or deferred fees.

Who will/would agree to this? 1. “The Unknown” anyone who is looking to build up their portfolios. 2. “A-list Talent” those who have enough money, but haven’t won any awards yet. 3. “The Has-Beens” those who aren’t working and want back in the public eye.

Who won’t agree to this? 1. “The Scorned” anyone who has deferred their fees before on a film and got stiffed. 2. “The Working” those who have reached a level of success in their careers where their track-record speaks for itself. 3. “Lawyers” no explanation needed there.

Here’s the deal. Many producers believe their project is going to get made and because of that people won’t mind deferring, to be paid out of the budget. The problem is few projects are getting financed, so convincing someone to defer has become increasingly difficult.

Here’s a lineup of what professional producers (begrudgingly) pay for to get their films into production:

  1. Lawyer for producer, lender, equity investor, tax credit lender (deposits required from producer)
  2. Title company for escrow fees
  3. Chain-of-title costs
  4. Expert to assist with finance structure, tax credits, foreign pre-sales, budget, cashflow schedule, film closing
  5. Expert to assist with VFX breakdown, post-production workflow, story boards (for bond company)

This doesn’t mean that absolutely every person involved in the closing process needs to be paid up front, but just as the key to controlling costs in post-production is to plan for it in pre-production, so too must a producer be keenly aware before they start the closing process of who and what they need to pay for and when.

If you don’t have a track-record in the business of actively producing finished product you will need to differentiate yourself from an increasing number of charlatans that can run-up tens of thousands of dollars in fees, only to dissappear when it’s time to cut the check.

Getting Technical: Payment for work related to physical production can often be defered by the service provider in anticipation of getting the job when the movie goes into production (i.e. a UPM doing spec budgets/schedules). Legal fees however are incurred by all parties, including the producer, lenders, and investors and they are all billable to the production. In addition, the producer’s lawyer will want a retainer ($5,000) and the lender and equity financiers will usually require legal deposits of $10,000 – $25,000 each, to cover fees they incur while vetting your project. In addition, the financing parties as well as insurnace and bond companies need specific documents to be provided prior to closing by approved experts (i.e. tax credit analyses for pre-certification, finance plans, chain-of-title reports, and so on.) When more films were being financed a few years ago, most of these services were also deferred to be paid out of the production. Now, with most projects not surviving the finance closing process, the few service providers that are left are having to bill for their time. Like the legal deposits, it’s the fastest way to separate producers with viable projects from those who may not be ready (or are just testing the waters.)

Actual conversation with a lit. manager attempting to package the financing for his client’s project:

JEFF: I had a chance to take look over the project you just sent over and, unfortunately, it’s not something I can take on.

MANAGER: Why is that?

JEFF: Well, for starters, your estimates have no presale value because your foreign sales agent isn’t bankable and your financier is too slow for the limited amount of time you have until start of production.

MANAGER: Ahhh DAMN IT!! If I’d known that beforehand I could have saved 6 months of headache.

GI JOE: ….and knowing is half the battle.

Copyright © 2010. Film Closings Inc. All rights reserved.
11 Responses leave one →
  1. Max permalink
    March 10, 2010

    This post was too funny. It had a Family Guy ending! Classic.

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  2. R.Much permalink
    March 10, 2010

    Happy 1 month blog anniversary Jeff! I’m so glad you’re here. I can’t believe this site has only been around since 2/10/10. It seems I get so much of my intel from you now. Oh no, I’ve become dependent!

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  3. March 10, 2010

    Wish more people would listen to G.I. Joe the world would be a better place

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  4. March 10, 2010

    Great article. In a previous one you mentioned some bankable/dependable foreign sales agents. Can you add to that list? And I’d like to find out what projects they’ve sold so that my project fits with their track record. I’ve heard so many thoughts on this subject.

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    • March 10, 2010

      @Juri, the foreign sales biz is a fluid organism that is constantly in a dynamic state of flux, ergo such a list would be out of date 5 days after writing it. One month a company is the “it” company, the next week, their key sales person leaves and they can’t get their footing back.

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  5. March 10, 2010

    While I understand and appreciate the broad strokes of your article here, Jeff … I just want to thank you for depressing me even further.

    I’ll take that drink now Mr. Bartender.

    Oh, by the way, please don’t stop writing.

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    • March 10, 2010

      @Stan, There’s a certain clarity that can only be found at the bottom of a glass, unless you’re drinking red wine. My intent is not to fear-monger (or depress-monger), but rather, it’s my belief that there’s a collective benefit to airing out the dirty laundry of the indie film business. These skeletons will hopefully become less taboo and people can then be more upfront and direct with what they want from people.

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      • March 14, 2010

        Yes, I agree.

        The more projects I work on to produce, the better I’ll get at my skills.

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  6. Pam permalink
    March 11, 2010

    Jeff, loving the new blog. Very informative and honest. There are enough ‘positive affirmation’ blogs out there to keep people dreaming for a lifetime. Yours is refreshing, even if a little depressing – it’s about getting down to business. Looking forward to checking out your future articles. Congrats!

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  7. March 11, 2010

    Appreciate your “Calling It Like It Is” writing. I too, like Stan, can get somewhat depressed by the challenges of the Indy Biz. It takes the fun out of filmmaking. But then the sun rises tomorrow and I’m ready to try again. We all really appreciate your insights and help.

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  8. March 12, 2010

    Great blog. Very informative post. Usually I only hear the word “deferred” from micro-budget indies, and obviously on those projects most the the cast/crew never expect pay, just get more exposure. I don’t find this depressing but liberating. More options if used correctly. At the end, it realy ends up being that a filmmaker needs to create a very original, marketable and well thought out concept they can execute. If the foundation, the story, isn’t good it all starts to crumble.

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