Film Accounting Glossary
Tax credit broker
What is a tax credit broker?
Also called credit broker, or tax credit buyer.
A tax credit broker matches a production holding a transferable tax credit with taxpayers in that jurisdiction who want to buy it to offset their own liability.
The credit sells at a discount to face value, historically in the high eighties to mid nineties of a percent depending on jurisdiction, and the broker takes a commission on top. Both the discount and the fee are real budget costs, so a transferable credit is worth measurably less than a refundable one of the same rate.
Example
A $2.1M transferable credit sells at 90 cents for $1.89M, less a 2% commission of about $38,000, netting roughly $1.85M. The $250,000 difference from face value is a budget cost, which is why a transferable credit is worth measurably less than a refundable one at the same rate.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Engaged after the credit is certified. Both the discount and the commission belong in the financing plan from the start.
Common mistake
Ignoring the broker commission when modelling proceeds. Discount plus commission is the real cost of turning a transferable credit into cash.
Related questions
- What does a tax credit broker do?
- Matches a production holding a transferable credit with local taxpayers who want to buy it to offset their own liability, for a commission.
- What price do transferable tax credits sell for?
- Historically in the high eighties to mid nineties of a percent of face value, depending on the jurisdiction and demand, before broker commission.