Grace promises to be an artistic achievement for all to enjoy, and a solid investment strategy/opportunity for those interested in participating in its production

[edit] It was with much sadness that I found out about and announce here, Jeffery’s passing. He was so energetic and excited about making this film happen. I think it was going to be killer. Rest in peace, Jeff.

In a previous post, I went over a film my daughter is involved in called “Grace.” Jeffery Schultz, the director, asked Isabela to score the music for some stunning visuals related to the project, and the result of the collaboration was absolutely incredible. I already went over how much I support Jeffery and his team, including Sam Kadi, who’s had a film nominated for an Academy Award.

For this post, I decided to go down the rabbit hole of film financing, and unlike the absurdity of Wonderland, I was pleased to discover a world of well-organized strategies that have enabled investors and artists alike to thrive. Imagine the Cheshire Cat with a grinning, calm voice whispering in your ear: “Film investment is a write-off. THE strategy is TAX strategy.”

Of course, not everyone invests in films for tax write-offs. For some, it’s a fun way to be part of something bigger than themselves, to go behind the scenes and see how films are made, or meet the actors they’d admired on the big screen. And who wouldn’t want to attend red carpet events around the world as one of the Executive Producers (well, me, but I am a different and lower profile sort than most people, in real life ;-)? I can certainly see the attraction for most investors because it sounds like a lot of fun. But let’s also see how savvy investors make it financially rewarding.

Film investors take advantage of tax code Section 181 under the Job Creation Act of 2004 (updated in 2020), whereby an investor can deduct their investment from their passive income the same year it was invested, and if involved in the production (easy with independent films), the investor can also deduct their active income that same year. And what I found particularly interesting is that the “investor” doesn’t have to be an individual. It could be your business.

Section 181 is the federal incentive, and states also have substantial tax rebates for film. Investors combine them with Sec. 181 to reduce risk even further.

This is one significant way that many well off individuals routinely and strategically shelter their income. They’re keeping their hard-earned profits working rather than handing them over to the government. Yes, taxes will need to be paid on profits from the film, but (here’s where the Cheshire Cat whispers in your ear again) there’s an additional 9% tax deduction from gross revenues on American film and television production activities. (Section 199)

So the reality is film investments can be fun and profitable even before the film itself is profitable, since deductions save investors around 50% of the actual cost of the investment and since investors are “first out” they recoup their money in full, before the filmmakers. So, investors are profitable even before the picture reaps a cash profit. And if the film continues on to cash profit, that’s when it really gets good!

Who does this work best for? Generally, this works best for individuals or businesses in higher tax brackets; the more taxes you pay, the more you’ll save on your investment. The other very important point is that you have to find the right project, one with producers who’ve gone through this process before.

So if you are interested, either for the fun and excitement or because you just don’t like paying taxes and would prefer to keep your money working, Jeffery Schultz (jeff@knagenfilms.com) and Sam Kadi (Info@samkproduction.com) have previously organized these strategies, and as independent filmmakers, they are pretty down to earth. In getting to know Jeffery and learning so much about Sam over the last year, I happily and confidently refer you to them for more information. Also, please see the Grace development page for more info.

“But I don’t want to go among mad people,” Alice remarked. “Oh, you can’t help that,” said the Cheshire Cat.

I’ll only add that with a strategy, you can do anything.