The New Jersey Economic Development Authority (EDA) recently opened applications to the New Jersey Film and Digital Media Credit to incentivize businesses to create digital media content within the state. This credit, which is awarded through a competitive application process with a first-come, first-serve component, provides a tax credit against state corporation tax and the gross income tax for certain expenses incurred for the production of film and digital media content in New Jersey.
The Film and Digital Media Credit contains two distinct programs: The Film Tax Credit Program and The Digital Media Tax Credit Program. The Film Tax Credit is narrowly focused on production companies who are creating feature films or television series. The Digital Media Tax Credit Program embraces broader eligibility for many businesses outside of the traditional film industry.
Digital Media Tax Credit Program
To be eligible and apply for the New Jersey Digital Media Tax Credit Program, a company must (1) incur at least two million dollars of its total digital media production expenses either internally or through vendors authorized to do business in New Jersey and (2) pay at least 50 percent of the qualified digital media content production expenses in wages and salaries for full-time employees in New Jersey.
According to the New Jersey EDA regulations, “Digital media content” is defined as any data or information that is produced in digital form, including data or information created in analog form but reformatted in digital form, text, graphics, photographs, animation, sound, and video content.
New Jersey expressly excludes the following from the meaning of “Digital media content:” offerings generated by the end-user (including postings on electronic bulletin boards and chat rooms); content offerings comprised primarily of local news, events, weather, or local market reports; public service content; electronic commerce platforms (such as a retail and wholesale website); websites or content offerings that contain obscene material; websites or content that are produced or maintained primarily for private, industrial, corporate or institutional purposes; or digital media content acquired or licensed by the taxpayer for distribution or incorporation into taxpayer's digital media content.
Because of the broad definition of qualifying digital media content, many businesses who may not anticipate qualifying for the credit may be eligible under the Digital Media Tax Credit Program.
For qualifying business, the New Jersey Digital Media Tax Credit Program offers a transferable credit equal to 20 percent of qualified digital media production expenses, or 25 percent of qualified digital media production expenses incurred through preapproved New Jersey vendors. The program is capped at $10 million for 2019.
Additionally, this credit includes an option to increase the value of the credit by two percent through the diversity plan, which can be entered into by employing the services of women and minority persons and submitting a separate application with the New Jersey EDA.
This program is awarded through a competitive application with a first come first serve component. Consequently, it is crucial to begin conversations with your tax advisors and the state as soon as possible.