Budget Update, September 5, 1996

Introduction

In order to support the Ontario film and television industry, the 1996 Ontario Budget introduced a refundable Ontario Film and Television Tax Credit (OFTTC) for eligible Ontario-based productions.

Generally, the credit will be available at a rate of 15 per cent of qualifying labour costs after June 30, 1996; first-time producers will be eligible for a 30 per cent credit.

Following consultations with the film and television industry, the government has broadened eligibility for small production companies and include interprovincial co- productions. This update describes these new features of the tax credit and provides further detail on some of the terms in the 1996 Budget announcement.

How has eligibility for small production companies been broadened?

• To help small production companies adjust to a changing financing structure, Ontario will extend its credit to include productions that include third party private financing.
• Eligible third party private financing will be limited to copyright investments in the production not greater than 50 per cent by Canadian investors and 15 per cent by foreign broadcasters.
• Eligible individual production budgets may not exceed the following limits:

- $1.5 million for theatrical feature films or series,

• $500,000 for documentary/performing arts productions, and
• $750,000 for all other eligible types.

· To target small production companies in general, total annual production activity may not exceed $3 million for production companies undertaking theatrical feature films or series and $1.5 million for all other productions.

· This feature of the tax credit will be effective until June 30, 1998.

Are interprovincial co-productions eligible for the OFTTC?

· The Ontario portion of an inter-provincial co-production will be eligible for the OFTTC.

How are the benefits of this tax credit targeted to Ontario?

• To assist in the growth of the Ontario film and television industry, eligibility for the OFTTC will be targeted to Ontario.
• To qualify, an Ontario-based production company must have a "permanent establishment" in Ontario and meet the definition of a qualified corporation for the purposes of the federal film tax credit.

· 75 per cent of all production costs must be Ontario costs.

• Qualifying labour costs will be limited to remuneration paid to individuals who were residents of Ontario at the end of the previous calendar year.
• The producer must be resident in Ontario at the end of both of the two previous calendar years.
• The production must be distributed by a Canadian-owned theatrical distribution company with a "permanent establishment" in Ontario.

Does the exclusion of programming not shown in prime-time apply to children's programming?

· No. Children's programming need not be aired during prime-time in order to qualify for the OFTTC.

Further details will be provided in the Regulations to the Corporations Tax Act.

For further information contact:

Ministry of Revenue Tax Design and Legislation Branch 95 Grosvenor St. Toronto, Ont. M7A 1Z1 Attn: Rick Munro 416 325-2451 Fax: 416 314-8635

Ontario Film Development Corporation 175 Bloor Street East North Tower, Suite 300 Toronto, Ont M4W 3R8 Attn: Corrie Coe 416 314-6858 Fax: 416 314-6876