Studios enjoyed their best year ever at domestic box offices in 2012 — but still managed to persuade lawmakers that movie and TV investors need a sweet tax deduction to keep the cameras rolling in the U.S. The new agreement to avoid the so-called fiscal cliff collection of spending cuts and tax hikes includes a provision enabling investors in productions shot in the U.S. to deduct the first $15M of the costs or $20M if the shooting takes place in low-income areas. Investors love the break, in Section 181 of the Internal Revenue Code, because they can take the entire deduction in the first year instead of spreading it over several years, and can combine it with state tax credits. It began with the American Jobs Creation Act of 2004 and in 2008 was amended and extended to the end of 2011. But Congress didn’t renew it in time for 2012 productions. No matter: the package that lawmakers just approved will provide the deductions for productions made in 2012 and 2013. Supporters led by Representatives Howard Berman (D-Calif.) and David Dreier (R-Calif.) say that other industries enjoy tax breaks that don’t apply to Hollywood, and that the deductions are needed to counteract incentives that other countries offer to shoot movies and TV shows abroad. MPAA spokesperson Kate Bedingfield says that the film and TV industry “has been a significant contributor to growth in our economy”, employing 2.1M workers with $137B in wages. “A strong American film industry contributes to a strong American economy.”

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