IRC Section 181

Joseph Chianese

Tick, Tick…BOOM!
As of midnight on December 31, 2025, Section 181 is scheduled to sunset. Unless Congress acts before midnight tomorrow, the incentive will not apply to any productions commencing after December 31, 2025, after which producers will lose the ability to immediately expense production costs (up to $15M/$20M).

So much for our Ambassadors (Joe Buck, Mad Max, and Rocky Balboa!). ;-(

Internal Revenue Code Section 181 is the only federal tax incentive specifically for U.S. film, TV, music, and live theater (while not a tax credit or rebate, it was something).

The CREATE Act is currently the industry's best hope. The CREATE Act is a bipartisan, bicameral proposal led by Representatives Judy Chu and Nicole Malliotakis and is designed to extend the incentive through 2030.  While it hasn't passed, industry leaders are pushing to have it tucked into a year-end "tax extender" package. As previously mentioned, relying on a single 'token' shoot day to satisfy the commencement requirement is a high-risk gamble; without substantive proof of legitimate, ongoing principal photography, the IRS can—and often does—disqualify the entire deduction, triggering massive recapture and penalties for you and your investors.

If passed, it would increase the deduction cap from $15M to $30M and add inflation indexing in future years.

If Section 181 sunsets tomorrow, productions will have to rely on 100% Bonus Depreciation (Section 168(k)). While powerful, it generally requires a project to be "placed in service" (completed), unlike Section 181, which allows for deduction as soon as expenses are incurred.

https://lnkd.in/gFRjawrd

Joseph Chianese

Update - IRC Section 181 is done!! The official sunset of Section 181 marks a significant shift in federal tax strategy, as the bipartisan CREATE Act failed to pass before the December 31, 2025, deadline. While the "One Big Beautiful Bill" (OBBBA) successfully made 100% Bonus Depreciation permanent (Section 168(k)), this alternative lacks the immediate "as-incurred" deduction benefits that made Section 181 a cornerstone for production cash flow. Producers should be further cautioned that "token" shoot days intended to grandfather projects into the old provision are a high-risk gamble likely to trigger IRS disqualification and investor recapture. Moving forward, tax planning must focus on the "placed in service" requirements of Section 168(k), as the industry lost its only dedicated federal incentive for immediate expense acceleration.