What the proposed federal film tax credit would subsidize

A movie’s payroll reaches well beyond its cast: set builders, electricians, drivers and visual-effects artists help get it made. A bipartisan bill would have federal taxpayers cover part of qualifying U.S. production pay through tax credits. For workers, that could influence where the next job happens. For taxpayers, the question is how much work the subsidy would bring here that would otherwise happen elsewhere.

Sens. Tim Scott, a South Carolina Republican, and Adam Schiff, a California Democrat, joined House lawmakers from both parties in introducing the Motion Picture, Television, and Entertainment Revitalization Act on September 24. Their official announcement argues that foreign incentives are drawing work overseas. It is an interested source: the sponsors explaining and promoting their proposal.

Under proposed Section 45BB of the bill text, the general production credit starts at 20% of qualifying compensation, with five-percentage-point bonuses that can raise it to 30%.

Qualifying pay covers production services performed in the United States by employees, contractors and subcontractors, recorded as part of the cost of creating the production. It excludes participations and residuals—payments commonly tied to later performance or reuse. The calculation uses defined compensation, rather than the entire film or television budget.

A conventional production’s total costs must exceed $1 million, and at least 75% of principal-photography days—the main filming days—must occur in the United States. For animation, the domestic-work test compares U.S. animation-activity costs with all animation-activity costs, rather than the overall budget.

Visual-effects and traditional post-production work, such as editing and sound, could qualify separately when the underlying production fails the filming-location test but meets the other production requirements. At least 75% of the relevant activity’s total cost must be incurred domestically. These standalone credits cover only qualifying U.S. compensation for that activity. Under Sections 45BB(e)(2) and (f)(2), they start at 20%, permit one five-percentage-point bonus and reach a 25% maximum.

These are arithmetic illustrations: qualifying compensation multiplied by the applicable rate. Eligibility and bonuses are conditional; the table does not estimate any actual production’s award.

General production bonuses cover qualifying rural opportunity-zone or disaster-area work, independent producers, multi-state producers and increases in domestic production. The multi-state bonus applies to the taxpayer: qualifying activity must span at least 10 states during the tax year and preceding 12 months. Each state must account for at least $10 million in qualifying compensation and at least half of one qualifying production’s filming days.

The bill’s transfer provision would let an eligible taxpayer sell the credit for cash to another taxpayer, rather than needing enough tax liability to use it itself. A buyer might pay less than face value, reducing the cash reaching the production. Selling a credit differs from a direct government refund, which this text does not provide.

The text sets no national annual cap, per-production dollar cap, individual-compensation cap or expiry date. It would reduce the production’s tax basis—the cost used for tax calculations—by the credit amount. Federal credits could supplement state incentives, making the federal award only part of a project’s possible public subsidy. The provisions would apply to productions beginning principal photography in taxable years starting after December 31, 2026.

The employment backdrop is stark. Bureau of Labor Statistics data show production employment falling from 234,000 in February 2016 to a preliminary 185,200 in February 2026: 48,800 fewer jobs, or about 21%. February’s figure was roughly 104,000 below the October 2022 high of 289,100.

Those observations do not isolate the causes. BLS describes pandemic disruption, fewer film releases and multiple worker strikes. Its figures cannot establish how much of the decline foreign incentives caused.

The widely cited economic forecast answers a different question. Olsberg SPI’s study, commissioned by the Motion Picture Association, launched September 15—before the September 24 bill introduction. Reporting published that day explains that it modeled an earlier industry-supported proposal: a 20% base credit with disaster-area and independent-company bonuses, different provisions from the introduced bill.

For 2027–2035, the model compared scenarios with and without a federal incentive, using an illustrative assumption that the U.S. share of projected global production reaches 65%. Its conditional results were $249.1 billion in cumulative additional gross value added and an annual average of 143,500 additional full-time-equivalent jobs created and supported across the economy.

Gross value added measures economic contribution. Full-time equivalents combine working hours: two half-time jobs equal one full-time equivalent. That projected economy-wide measure differs from BLS’s observed production-industry employment.

These earlier scenario results do not establish this bill’s economic effects, federal revenue cost or net taxpayer benefit. The reviewed materials supply no official federal revenue-cost estimate. Evaluating the subsidy requires that figure alongside evidence of which productions changed location because of it, their state incentives and the resulting U.S. work. Economists call the central test additionality: how much subsidized work would not have happened here without the credit.