Poyner Spruill congratulates EUE/Screen Gems Studios on bringing the filming of Iron Man 3 to Wilmington! We’re proud to have helped close the deal!

Gov. Bev Perdue said in a press conference today, “Iron Man 3′ will be made here in Wilmington, NC. How about that?” Gov. Perdue says with the film will come many economic advantages to the Cape Fear. “This is a great day for North Carolina.” Five-hundred-fifty jobs, all the other sub-jobs, the construction jobs, that’s what it’s all about to us here locally. But around the country and around the world it’s about North Carolina’s brand. Today we are Hollywood East, and it starts right here in Wilmington.” Shooting for the film will start in 2012 and ”Iron Man 3″ is scheduled to hit theaters May 2013.

About EUE/Screen Gems Studios

EUE/Screen Gems provides worldwide production, studios, sound stages and technological infrastructure and support for major motion pictures, films, commercials and television shows and television series. EUE/Screen Gems Studios North Carolina has a total of 150,000 square feet of column-free studio stage space, and is comparable to any major studio in the country. Based in Wilmington, North Carolina, this 50-acre film and television production complex has 10 sound stages, two special effects water tanks and 30,000 square feet of office space. Why go to Los Angeles if you don’t have to? We don’t have an answer for that because we know where you should be. We also know that our studios offer the convenience of the east coast, full-access to our lighting and grip inventory and the advantages of all of our amenities.

We are very excited for Betsy’s Kindergarten Adventures, winner of another Parent Choice Award for 2011.

Betsy’s Kindergarten Adventures proves kindergarten is about more than just learning how to color inside the lines. In this animated half-hour series airing on PBS, stories follow the antics and activities of little Betsy and her friends as they navigate new experiences at school. In each episode, Betsy confronts novel emotions and social situations, which she tackles with sweet but straightforward charm.

Please click here for more information on Betsy’s Kindergarten Adventures.

Whether you’re a musician, filmmaker, painter, game developer, actor, or gallery owner, sooner or later you will be asked to sign a contract. If you are serious about your art (as art and as business), you will take a serious approach to understanding, negotiating and performing the contracts that are presented to you. Here’s a list of 10 things you should consider when someone hands you a contract.

1. Establish expectations. A contract should establish the parties’ expectations for the relationship. This is just as important as the payment terms or your ability to get out of the contract. If you sign a contract that doesn’t reflect your expectations, the relationship is destined for failure. For example, if you’re negotiating a recording agreement, and you expect to keep all your publishing rights, but the record label expects to share in the publishing rights, you have a problem. If the parties’ expectations are not aligned, you may be better off finding another deal.
2. Keep it simple and clear. Deals in the entertainment industry can be very complex, and so can the contracts for those deals. Sometimes the complexity is necessary, but not always. If possible, try to use contracts that say what you mean in a simple, concise and clear manner, but be sure not to oversimplify. If you understand what the contract means, and the other party understands what the contract means, you’ve hit the mark.
3. Everything is negotiable. Everything, even terms that the other party tells you aren’t negotiable. You’re not likely to get everything you want, and if you push on things that are extremely important to the other party, you may lose the deal, but you will quickly learn where there’s flexibility. Part of the art of negotiating (which is a give-and-take process) is identifying the things that are important to you and the things that are important to the other party and finding a middle ground. If an important point becomes non-negotiable—i.e., a “deal killer”—then you may have to walk away from the deal.
4. Be willing to walk away. This is very important and, sometimes, it may be your only leverage in negotiating a contract. Leverage—the principle of using a small advantage or even merely a perceived advantage to gain a benefit—is critical in contract negotiations. Sometimes, especially as an artist, the only leverage you will have is the ability to walk away from a deal. If you indicate you’re willingness to walk away, the other party may be more willing to negotiate terms in your favor.
5. If you don’t understand something, ask. Contracts are legal documents often drafted by lawyers. Lawyers sometimes use confusing language or concepts. So, don’t be afraid to ask a question if you don’t understand what something means (remember, there are no stupid questions). If you sign a contract, it’s binding on you whether you understand it or not, so you should understand what each provision means before you sign it.
6. Use a qualified lawyer if you can. While lawyers can be expensive, they can also save you money and aggravation in the long run (and the short run). A lawyer can help you understand the contract and negotiate terms in your favor. A qualified lawyer will know your industry and which terms should be negotiated. Avoid using a friend or relative who is a lawyer, but doesn’t specialize in your industry—you may end up paying for it down the road.
7. Put all deal terms in writing. It’s surprising how many times you may hear “just trust me” when you’re negotiating a contract. That’s a negotiating tactic—an appeal to your emotions—often used by people who don’t have a legitimate negotiating position. All your important deal points should be in the contract and not left to “trust.” These include: (a) the reason for entering the contract; (b) what you agree to do and what the other party agrees to do; (c) when these things are supposed to happen; (d) what the financial terms of the deal are (e.g., how and when you get paid); (e) how you get out of the deal if something goes wrong; (f) how long the deal lasts; etc.
8. Don’t make assumptions. Don’t assume anything when drafting or negotiating a contract. Spell out all the key assumptions in the contract. For example, if you’re negotiating an agreement with a personal manager named John who works in a company with several personal managers, don’t assume that John will actually do your work. If it’s important to you that John actually does your work, make that clear in the contract.
9. Pay attention to “boilerplate.” Boilerplate refers to the standardized, formal language in a contract that is often located at the end of the contract. Boilerplate provisions affect your legal rights and are binding on you when you sign the contract even if you don’t read them. Be sure you read and understand these provisions, and negotiate them if you don’t like what they say. Examples of boilerplate provisions are: (a) requiring the loser in a lawsuit to pay the other party’s legal fees; (b) requiring a lawsuit to occur in a selected state (which may be far from where you are); (c) prohibiting transfer or assignment of the agreement; (d) specifying which state’s law controls the interpretation of the agreement; and (e) requiring arbitration.
10. Understand your business. Translating your business deal into a contract requires a good knowledge of the customs and nuances of your business. If you don’t already have an intimate knowledge of how your business works and how deals are structured, talk to others who have done similar deals. If you don’t know what’s customary in your industry, you may not end up with the best contract.

Kennebec video for 26 Interstate has been accepted into the 2011 Live From Memphis Music Video Showcase. The 6th Annual Music Video Showcase, March 11-13, features 49 music videos from Memphis and around the world!

Click here for more on the Music Video Showcase Awards.

To hear Kennebec’s music, click here.

The Kids are All Right won a Golden Globe for the Best Motion Picture, comedy or musical at the ceremony on January 16th.  Poyner Spruill is pleased to have represented one of the producers on the project. Annette Benning also won Best Performance by an Actress in a Motion Picture – Comedy Or Musical for her performance in The Kids Are All Right.

Click here to read an article on the win.

In this week’s local and national news, tax incentives for the film and television industry have come under scrutiny. With states across the U.S. facing billion dollar budget gaps, the question is can states afford these tax incentives?

We’ve included links below to several articles written this week discussing these incentives.

State Government News Service, The Insider

Strengthened film incentives face uphill battle, The Wilmington Star News

States Weigh Cuts in Hollywood Subsidies, New York Times

Tax bill helps indie filmmakers with an extension of Section 181 tax relief. To read more, click here.

The new tax bill that Obama recently signed into law will extend the Section 181 film tax credit to the end of 2011. In addition, it can be applied retroactively to all qualifying films produced in 2011 and 2010.

The bill allows producers to deduct the cost of qualifying expenditures in the year they occur rather than having to amortize those costs over several years. This is great news for independent filmmakers and their equity backers, who can now offset their equity investment by as much as 50 percent or more through the combination of state and federal incentives. (reprinted from thewrap.com)

reposted from John Morris in Uniquities - Good Night Raleigh

Raleigh’s miniature version of the iconic Hollywood sign appears on Hillsborough Street across from Cup-a-Joe’s

To view other photos of the sign, click here.

Poyner Spruill is serving as production counsel on an independent feature film directed by Carrie Preston (www.carriepreston.com) and starring Anne Heche (www.anneheche.com). Filming starts this week.

On Friday, October 1, 2010, the North Carolina Department of Revenue published Answers to Frequently Asked Questions about Tax Credits for Qualifying Expenses of a Production Company. We’ve included those answers below.

Unless specifically noted, all references to the “Department” mean the North Carolina Department of Revenue.

What is the audit process? What can the production company expect?

After receiving the completed Form NC-415, Tax Credit for Qualifying Expenses of a Production Company, the Department will contact the taxpayer to set up an audit appointment to review the taxpayer’s information. An appointment letter is sent to the taxpayer confirming the date of the audit along with an Information Document Request (IDR) outlining the information needed to conduct the audit upon arrival.

Approximately when will the audit begin in relation to submitting the Form NC-415?

The Department will set up an audit appointment within three to four weeks after receiving the request for refund (Form NC-415). The audit will begin based on an agreed upon time by the taxpayer and the Department.

What are typical questions during the audit?

Typical questions and document requests include but are not limited to the following:

1. Power of Attorney (Form NC Gen. 58, Power of Attorney and Declaration of Representative)

2. A detailed explanation of the corporation’s business activity in North Carolina, which includes all locations and business functions of each location.

3. Copies of W-2s and 1099s for all activities in North Carolina.

4. Detailed list of all people employed in NC with respect to the production including social security numbers for each employee. This includes all individuals who received a W-2 or 1099.

5. Detailed list of all qualifying expenses for goods leased or purchased in North Carolina, services leased or provided in North Carolina, production-related insurance purchased in North Carolina from an unrelated entity and qualifying expenses spent for compensation and wages paid in North Carolina. Total wages and compensation for the entire production of the film are also requested. Taxpayer must provide a copy of all receipts.

6. Copy of the North Carolina and federal income tax returns for the periods covering the expenses.

7. Detailed description of the film and copy of the production (rough-cut or finished copy “DVD”).

All the above information is requested in an electronic format (excel) in order to expedite the audit.

What is the duration of a typical audit?

The duration of the audit depends on the volume of the documents to review (usually four or five days at the taxpayer’s office). The Department will send the preliminary audit papers to the taxpayer to review within a couple of weeks of the office visit. (This is assuming all documentation is provided timely.)

Knowing that production companies contract with payroll service companies, is the payroll service company required to withhold taxes on loan-out corporations? Or is it the responsibility of the loan-out corporation to take care of its own taxes?

Withholding law requires the payroll company to withhold taxes on compensation paid to an out-of-state loan-out corporation unless the out-of-state loan-out corporation registers to do business in North Carolina. However, to be eligible for the film credit, tax must be withheld on the payment to the loan-out for the compensation to be considered a qualified expense. The production company or the payroll company can do the withholding.

Please explain the law changes from Session Law 2010-31 (House Bill 1973).

G.S. 105-130.47(a)(4) was amended to add employee fringe contributions, including health, pension, and welfare contributions, as well as per diems, stipends, and living allowances paid for work being performed in the State to the list of expenses that qualify for the production credit. This section is effective for taxable years beginning on or after January 1, 2011 and applies to expenses incurred for productions ending on or after that date. In addition, G.S. 105-130.47(b) was amended to increase the credit percentage from 15% of the production company’s qualifying expenses to 25%. Finally, G.S. 105-130.47(f) was amended to increase the ceiling of the production credit from $7.5 million to $20 million.

Is the production company’s ability to claim payments to loan-out corporations as qualifying expenses tied to the filing of the loan-out’s tax forms? Or are the loan-out’s taxes an issue between the State and the loan-out?

Taxes must be withheld on the payments to a loan-out for a production company to claim them as qualifying expenses. The production company’s eligibility to claim the compensation in calculating the film credit is not contingent on the loan-out corporation filing a North Carolina Income tax return.

To what kind of “companies” must payments be made to classify payments as “qualifying expenses”? (1) NC corporations, (2) Companies that pay corporate taxes in NC, (3) Companies that have a physical presence in NC. (Examples: Vehicle Rental Company based in Georgia that rents vehicles in NC. If this company charges NC sales tax on rentals, does it qualify? What if this company opens a “satellite office” in NC?)

Payments for goods must be made to persons with a physical location in North Carolina. In the example, charging sales tax is not enough. The production company must rent the vehicle from a North Carolina store. Payments to persons for a service can be paid to an out-of-state person if the production company substantiates that the service was performed in North Carolina.

Do payments to a NC Production Services Company qualify? (Example: A production company needs a widget. Widgets are not available in NC. A NC Production Services Company is contracted to locate and purchase the widget in another state and then sell the widget at a mark-up to the production company.)

The payment to the NC Production Services Company qualifies.

Similar to question #9, can a production company form its own NC Production Services Company and utilize it to source and purchase goods that can not be found in NC? This avoids doing business with another entity and avoids a mark-up?

No. This equates to a phony transaction by a business formed with no purpose but to circumvent the tax laws. Conversely, if the affiliated production services company performs a service, charges fair compensation for the service, files a tax return and pays the income tax due, then the expense would qualify for the credit.

An out-of-state production company wishes to make a movie for $2.5 million dollars. It contracts with a NC production company “to make the movie”. The out-of-state company pays the NC Company $2.5 million for the movie. Since the full $2.5 million was spent with a NC company, can the out-of-state company file for an incentive using the full $2.5 million payment as a qualifying expense?

No. The North Carolina company makes the movie. Therefore, the North Carolina company qualifies for the credit.

Do payments to shipping companies count as qualifying expenses? (FedEx, DHL, UPS?) These companies obviously have facilities and employees in NC.

Yes, to the extent that the service is obtained from a North Carolina location. If goods are delivered into North Carolina from an out-of-state location, the shipping charge does not qualify.

An out-of-state caterer is brought to North Carolina to serve meals at a production site for twelve weeks. The caterer’s employees are placed on the production company’s payroll. The production company rents the caterer’s mobile kitchen. The caterer then charges a per person /per meal price which covers the cost of supplies (food, dry goods, fuel, ice, etc.) and includes profit. The caterer then spends money locally to purchase these supplies. Do the meal prices paid to the out-of-state caterer count as qualifying expenses? Does the truck rental paid to the out-of-state caterer count as qualifying expenses?

The meal price paid to the out-of-state caterer for service performed in North Carolina qualifies if the production company substantiates that the services were performed in North Carolina. The truck rental from the out-of-state caterer does not qualify.

Is “NC Sales Tax” a qualified expense?

No. It is not considered a good or service eligible for the tax credit.

A production company films for six weeks in NC and then moves to SC and continues filming an additional four weeks. The “filming equipment” (lights, cable, generators, cameras, grip equip, etc.) is being rented from a company based in NC. Can the production company receive a credit in NC for the equipment rental fees paid while working in SC?

No. The credit is allowed only for the equipment rental fees paid while working in NC.

Related to #15 above, a production company is filming completely in SC. However, it has rented all of it’s’ “filming equipment” (lights, cable, generators, cameras, grip equip, etc.) from NC since there are no vendors in SC. Will NC give a credit against expenses in NC from an out-of-state production?

No. The credit is allowed only for an in-state production.

Some production companies are part of larger companies that have their own in-house travel departments that purchase airline tickets with their corporate discounts. If travel is booked on US Airways (for example, which has a huge North Carolina presence) by a larger company’s travel department located out of state for a film shooting in North Carolina, do those costs count as qualifying expenses?

No. The travel has to be acquired from a North Carolina vendor to be considered a qualified expense.

If a company produces multiple productions in North Carolina in one year, does it file one corporate tax return and a separate form NC 415 for each production?

Yes.

Do the amounts spent in North Carolina by a production company during the phases referred to within the film industry as “pre-production” and “post-production” count as qualified expenses? “Pre-production” encompasses expenses incurred in connection with a production before actual filming begins. “Post-production” encompasses expenses incurred in connection with a production after actual filming is concluded but does not include expenses related to distribution and marketing.

Yes.

Are C-Corporations required to add back to federal taxable income the amount of the film tax credit allowed against income tax per G.S. 105-130.5(a)(10)?

Effective January 1, 2011, pursuant to SL 2010-147 (HB 1973), C-Corporations are not required to add back to federal taxable income the amount of the film tax credit allowed against income tax per G.S. 105-130.5(a)(10).

Are purchases/rentals made by a production company subject to North Carolina Sales & Use tax?

Prior to January 1, 2011, production companies qualified as a manufacturer. Therefore, purchases/rentals of items directly used in the production of the film, such as cameras and set decorations, were exempt from sales and use tax and subject to a 1%, $80 max, mill machinery privilege tax. Purchases/rentals of general use items, such as office supplies and construction tools, were subject to the general rate of State and county tax.

Effective January 1, 2011, pursuant to SL 2010-147 (HB 1973) production companies no longer qualify as manufacturers. No exemption from sales and use tax exists. Purchases/rentals of production related items and general use items are subject to the general rate of State and county tax.