Film Accounting Glossary
Transferable tax credit
What is a transferable tax credit?
Also called transferable credit, or sellable credit.
A transferable tax credit can be sold to an unrelated taxpayer with liability in the issuing jurisdiction, which is what makes it usable by a production entity that owes no local tax.
Because it must be sold, it realizes less than face value after the buyer's discount and the broker's commission. Productions model transferable credits at their expected net proceeds, never at face, and the difference is a budget line of its own.
Example
A single-purpose production entity owes no local tax, so a non-refundable credit would be worthless to it. Transferability is what makes the $2.1M realizable, at roughly $1.85M net of the buyer's discount and the broker's commission.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Modeled at expected net proceeds rather than face value, with the difference budgeted as a financing cost.
Common mistake
Budgeting a transferable credit at face value. It has to be sold at a discount and a commission paid, so the realizable amount is meaningfully lower.
Related questions
- Why would a production sell a tax credit?
- Because a single-purpose production entity usually owes no tax in the jurisdiction, so the credit is only worth anything if it can be transferred.
- How much less is a transferable credit worth than a refundable one?
- The buyer's discount plus the broker's commission, which together commonly reduce proceeds by a meaningful percentage of face value.