leave many stuck

Proposed changes by the federal government in the tax code could have a serious impact on productions which are not grandfathered or certified by April 26.

The new stipulations fall into the categories of at-risk rules and limited recourse financing, and affect revenue guarantees for certified productions and alter how the cost base for a production is calculated.

While the new tax credit, announced in February’s budget, was being worked out, this calendar year was intended to be a transitional period with the old shelter system in place. Now, with these proposed changes, many producers don’t have either system to work with.

Norman Bacal, partner at Heenan Blaikie says, ‘Any producer that had not committed to sell a project by April 27 is probably stuck right now. Given these new rules there doesn’t seem to be any realistic hope of being able to tax shelter those projects.’

To complicate matters further, delays on the tax credit front in establishing the administrative body are creating some doubt in the industry as to whether the credit will be in operation by the end of the year. Originally, cavco was expected to administer the tax credit and now Telefilm Canada has made a proposal to handle the job.

It was not clear at press time whether the amendments, which apply to many industries, are intentionally aimed at the production sector.

Tom Berry, chair of the Canadian Film and Television Production Association, says, ‘It’s my strong hunch any problems created for our industry are inadvertent.’

Berry says the production industry and its two major organizations – the cftpa and its Quebec equivalent, the aftpq – ‘have developed a sort of relationship with the government which has enabled us to solve this kind of problem in the past.’

If the changes are not reversed, Berry estimates a substantial amount of production, especially for the upcoming tv fall season, could be disrupted.

‘There certainly is widespread concern and we’ll know whether or not this concern is trouble after we sit down with (the Department of) Finance.’

The cftpa expects to meet with Finance officials by mid-May and hopefully resolve the matter.