[Federal Register Volume 77, Number 236 (Friday, December 7, 2012)]
[Rules and Regulations]
[Pages 72923-72924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29630]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9603]
RIN 1545-BJ23


Deduction for Qualified Film and Television Production Costs

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations relating to 
deductions for the cost of producing qualified film and television 
productions. These final regulations reflect changes to the law made by 
the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 and 
affect taxpayers that produce films and television productions within 
the United States.

DATES: Effective Date: These regulations are effective on December 7, 
2012.
    Applicability Dates: For dates of applicability, see Sec.  1.181-6.

FOR FURTHER INFORMATION CONTACT: Bernard P. Harvey, (202) 622-4930 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains final regulations that amend 26 CFR part 1 
to reflect amendments made to section 181 of the Internal Revenue Code 
of 1986 (Code) by section 502 of the Tax Extenders and Alternative 
Minimum Tax Relief Act of 2008, Public Law 110-343 (122 Stat. 3765) 
(October 3, 2008).
    On October 19, 2011, the IRS and the Treasury Department published 
in the Federal Register (TD 9552, 76 FR 64816) temporary regulations 
amending the rules under section 181 for deductions relating to the 
cost of producing qualified film and television productions to reflect 
section 502 of the Tax Extenders and Alternative Minimum Tax Relief Act 
of 2008. A notice of proposed rulemaking (REG-146297-09) cross-
referencing the temporary regulations was published in the Federal 
Register (76 FR 64879) on the same day. No comments were received from 
the public in response to the notice of proposed rulemaking. No public 
hearing was requested or held. The proposed regulations under section 
181 are adopted by this Treasury decision and the corresponding 
temporary regulations are removed.

Effective/Applicability Date

    These final regulations apply to qualified film and television 
productions to which section 181 is applicable and for which the first 
day of principal photography or in-between animation occurs on or after 
December 7, 2012. The owner of a qualified film or television 
production may apply the final regulations to productions to which 
section 181 applies and for which principal photography or, for an 
animated production, in-between animation commenced before December 7, 
2012.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It also has been determined that section 
553(b) and (d) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations. Because the regulations do not 
impose a collection of information on small entities, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to 
section 7805(f) of the Code, the notice of proposed rulemaking that 
preceded these final regulations was submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business, and no comments were received.

Drafting Information

    The principal author of these regulations is Bernard P. Harvey, 
Office of Associate Chief Counsel (Income Tax and Accounting). However, 
other personnel from the IRS and the Treasury Department participated 
in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

[[Page 72924]]

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.181-0 is amended by:
0
1. Adding the entries for Sec.  1.181-1 paragraphs (a)(6), (b)(1)(ii) 
and (c)(2).
0
2. Revising the entry for Sec.  1.181-6 paragraph (b) and removing 
paragraph (c).
    The revision and additions to read as follows:


Sec.  1.181-0  Table of contents.

* * * * *


Sec.  1.181-1  Deduction for qualified film and television production 
costs.

    (a) * * *
    (6) Post-amendment production.
* * * * *
    (b) * * *
    (1) * * *
    (ii) Post-amendment production.
* * * * *
    (c) * * *
    (2) Post-amendment production.
* * * * *


Sec.  1.181-6  Effective/applicability date.

* * * * *
    (b) Pre-effective date productions.


Sec.  1.181-0T  [Removed]


0
Par. 3. Section 1.181-0T is removed.
0
Par. 4. Section 1.181-1 is amended by revising paragraphs (a)(1)(ii), 
(a)(6), (b)(1)(ii), (b)(2)(vi), and (c)(2) to read as follows:


Sec.  1.181-1  Deduction for qualified film and television production 
costs.

    (a) * * * (1) * * *
    (ii) This section provides rules for determining the owner of a 
production, the production costs (as defined in paragraph (a)(3) of 
this section), the maximum amount of aggregate production costs (as 
defined in paragraph (a)(4) of this section) that may be paid or 
incurred for a pre-amendment production (as defined in paragraph (a)(5) 
of this section) for which the owner makes an election under section 
181, and the maximum amount of aggregate production costs that may be 
claimed as a deduction for a post-amendment production (as defined in 
paragraph (a)(6) of this section) for which the owner makes an election 
under section 181. Section 1.181-2 provides rules for making the 
election under section 181. Section 1.181-3 provides definitions and 
rules concerning qualified film and television productions. Section 
1.181-4 provides special rules, including rules for recapture of the 
deduction. Section 1.181-5 provides examples of the application of 
Sec. Sec.  1.181-1 through 1.181-4, while Sec.  1.181-6 provides the 
effective date of Sec. Sec.  1.181-1 through 1.181-5.
* * * * *
    (6) Post-amendment production. The term post-amendment production 
means a qualified film or television production commencing on or after 
January 1, 2008.
* * * * *
    (b) * * * (1) * * *
    (ii) Post-amendment production. Section 181 permits a deduction for 
the first $15,000,000 (or, if applicable under paragraph (b)(2) of this 
section, $20,000,000) of the aggregate production costs of any post-
amendment production.
* * * * *
    (2) * * *
    (vi) Allocation. Solely for purposes of determining whether a 
production qualifies for the higher production cost limit (for pre-
amendment productions) or deduction limit (for post-amendment 
productions) provided under this paragraph (b)(2), compensation to 
actors (as defined in Sec.  1.181-3(f)(1)), directors, producers, and 
other relevant production personnel (as defined in Sec.  1.181-3 
(f)(2)) is allocated entirely to first-unit principal photography.
* * * * *
    (c) * * *
    (2) Post-amendment production. Amounts not allowable as a deduction 
under section 181 for a post-amendment production may be deducted under 
any other applicable provision of the Code.

Sec.  1.181-1T  [Removed]

0
Par. 5. Section 1.181-1T is removed.
0
Par. 6. Section 1.181-6 is revised to read as follows:


Sec.  1.181-6  Effective/applicability date.

    (a) In general. Except as otherwise provided in this section, 
Sec. Sec.  1.181-1 through 1.181-5 apply to productions the first day 
of principal photography for which occurs on or after September 29, 
2011. Paragraphs 1.181-1(a)(1)(ii), (a)(6), (b)(1)(ii), (b)(2)(vi), and 
(c)(2) of Sec.  1.181-1 apply to productions to which section 181 is 
applicable and for which the first day of principal photography or in-
between animation occurs on or after December 7, 2012.
    (b) Pre-effective date productions. For any taxable year for which 
the period of limitation on refund or credit under section 6511 has not 
expired, the owner may apply Sec. Sec.  1.181-1 through 1.181-5 to any 
production to which section 181 applies and for which the first day of 
principal photography (or in-between animation) occurred before 
December 7, 2012, provided the owner applies all relevant provisions of 
Sec. Sec.  1.181-1 through 1.181-5 to the production.

Sec.  1.181-6T  [Removed]

0
Par. 7. Paragraph 1.181-6T is removed.

    Approved: November 30, 2012.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Mark J. Mazur
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-29630 Filed 12-6-12; 8:45 am]
BILLING CODE 4830-01-P