Film Accounting Glossary
Monetization
What is monetization?
Also called credit monetization, or credit sale.
Monetization is converting an earned tax credit into cash, either by selling a transferable credit to a taxpayer with liability in that jurisdiction, or by borrowing against a refundable credit while waiting for the government to pay.
Sales settle at a discount to face value, historically in the high eighties to mid nineties of a percent depending on jurisdiction and demand. The discount, plus broker fees and interest, is a budget cost that must be modeled from the start.
Example
A $2.1M transferable credit sold at 90 cents yields $1.89M, less a 2% broker commission of roughly $38,000, netting about $1.85M. Model the credit at face value and the picture is short $250,000 before it starts.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Modeled in the financing plan from day one, at expected net proceeds rather than face value.
Common mistake
Modelling a transferable credit at face value. The discount, the broker fee, and the interest while waiting are all real, and together they are material.
Related questions
- How do productions monetize a film tax credit?
- By selling a transferable credit to a taxpayer with liability in that jurisdiction, or by borrowing against a refundable credit while waiting for payment.
- What discount applies when selling a tax credit?
- Historically in the high eighties to mid nineties of a percent of face value, depending on the jurisdiction and buyer demand, plus a broker commission.