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New Jersey expands film and digital media tax credit program
August 2024
In brief
What happened?
On July 10, 2024, New Jersey Governor Phil Murphy (D) signed legislation (P.L.2024, c.33, S.3275) modifying provisions of the film and digital media tax credit program (Film Tax Credit). The legislation expands the amount of tax credits available for taxpayers other than New Jersey studio partners and film-lease production companies, includes wages paid to out-of-state residents with reciprocity working in New Jersey as qualified wages, modifies definitions, and increases the tax credit percentage for taxpayers whose application is accompanied by a diversity plan.
Why is it relevant?
Film and digital media production companies that are claiming or are considering claiming the New Jersey Film Tax Credit may be affected by the modified provisions of the credit, effective retroactive to January 1, 2024. The additional allocation of funds, expansion of qualifying media formats, and qualifying expenses broaden the scope of qualifying projects, making the tax credit more accessible and aligned with current industry trends.
Actions to consider
Taxpayers engaged in the film and digital media industry should evaluate the program modifications and significant financial benefits available through participation in the Film Tax Credit program within the state.
In detail
The New Jersey Film Tax Credit funding for fiscal year 2025 is as follows:
- $250 million for New Jersey studio partners (same as prior year),
- $250 million for New Jersey film-lease production companies (same as prior year), and
- $300 million for taxpayers other than studio partners and film-lease production companies (previously $0 in 2024).
Other key changes to the Film Tax Credit program include:
- Lowering the requirement from $4 million to $2 million for total digital media content production expenses that are incurred for services performed, and goods purchased through vendors authorized to do business, in New Jersey.
- For applications submitted after the effective date, qualified wage and salary payments made to full-time employees working on digital media are not deemed an expense incurred for services performed.
- Providing a 40% tax credit (instead of the standard 30% credit) for qualified post-production services if certain additional requirements are met.
- Qualified productions commencing on or before July 1, 2039 that include an approved diversity plan are eligible for a 4% tax credit increase, up from 2%.
Qualified production expenses now include wages paid to out-of-state residents working in New Jersey despite those wages not being subject to New Jersey gross income taxes due to a reciprocity agreement with another state. Further, qualified digital media content production expenses now include payments made by the taxpayer to a loan out company for services performed in New Jersey by individuals who are employees of the loan out company and whose wages and salaries are “subject to withholding” but not subject to tax due to a reciprocity agreement with another state.
The legislation also makes key changes to certain definitions, including:
- "Digital media content" now includes animation, video games, visual effects, and interactive media (virtual, augmented, or mixed reality).
- "Film" now includes certain reality shows if they have a minimum six-episode order from a major linear network or streaming service.
- "Highly compensated individual" now includes individuals compensated over $750,000 for services in a production (specific to taxpayers other than New Jersey studio partners and film-lease production companies). This is an increase of $250,000 compared to the individual cap of $500,000 for New Jersey studio partners and film-lease production companies.
- "Loan out company" must now be authorized to do business in New Jersey for applications submitted on or after July 10, 2024.
- "New Jersey film-lease production company" requires that either 50% of a project's shoot days or 33% of the total qualified film production expenses be incurred at the New Jersey film-lease partner facility.
- "Qualified digital media content production expenses" now includes various post-production costs like editing, sound design, visual effects, etc., for applications submitted on or after July 10, 2024. The law also clarifies that for applications submitted after July 10, 2024, such expenses shall not include (1) expenses incurred in marketing, promotion, or advertising digital media; (2) costs incurred for the design, maintenance, and hosting of websites; or (3) other costs not directly related to the production of digital media content.
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