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Garden State Film and Digital Media Jobs Act Credit

The Garden State Film and Digital Media Jobs Act provides tax credits against New Jersey Corporation Business and Gross Income Taxes for qualified film production expenses and qualified digital media production expenses for taxpayers that satisfy the eligibility requirements. Credits are available for tax years beginning on or after July 1, 2018, and ending before July 1, 2039.

An application for the credit must be submitted to the New Jersey Economic Development Authority (EDA). Applications will need to be accompanied by a valid Business Assistance Tax Clearance Certificate.

Film Production Tax Credit
The credit is 35% of the qualified film production expenses paid by the taxpayer during a tax year. However, the credit is equal to 30% of the qualified film production expenses that are incurred for services performed and tangible personal property purchased for use at a sound stage or other location that is located in the State within a 30-mile radius of the intersection of Eighth Ave/Central Park West, Broadway, and West 59th Street/Central Park South, New York, New York. The tax credits permitted to be approved for film production projects in a fiscal year may be increased from tax credits in a prior fiscal year that were unapproved or previously approved, but a taxpayer was not able to redeem or transfer to another taxpayer.

The law defines “film” as a feature film or a television series or show of at least 22 minutes in length that is intended for a national or regional audience. This includes game shows, certain reality television shows, award shows or other gala events filmed and produced at a nonprofit arts and cultural venue that receives State funding. It does not include a production featuring news, current events, weather, market reports, or public programming; talk shows; sporting events; a production that solicits funds or contains obscene material; a production primarily for private, industrial, corporate, or institutional purposes; or an award show or other gala event that is filmed and produced at a nonprofit arts and cultural venue that does not receive State funding.

Qualified film production expenses are expenses incurred in New Jersey for the production, including preproduction and post-production, of a film. Expenses include certain compensation such as deferred compensation payments paid by a New Jersey studio partner for work or services provided on a production. This includes payments made to loan-out companies or independent contractors as long as the payments meet the Income Tax withholding requirement, and the cost for items used or services performed directly and exclusively in the production (such as props, makeup, wardrobe, film processing, camera, sound recording, set construction, lighting, shooting, editing, meals, and facilities rentals). It does not include expenses incurred in marketing, promoting, or advertising a film; compensation paid to an individual if the amount is more than $500,000, regardless of whether it is paid by W2, 1099, or through a loan-out company; or salaries or other compensation for writers, directors (including music), producers, and performers (other than background actors with no scripted lines) except under certain qualifying conditions for a New Jersey studio partner.

New Jersey film lease partner means a taxpayer that has made a commitment to lease or acquire all or part of a New Jersey production facility which leased or acquired space shall have an aggregate square footage of at least 50,000 square feet including a sound stage and production support space, such as production offices or a backlot, for a period of five or more successive years and commits to spend, on a separate-entity basis or in the aggregate with other members of the taxpayer's combined group, an annual average of $50,000,000 of qualified film production expenses over the period of at least five but not to exceed 10 years.

New Jersey studio partner means a film production company that has made a commitment to produce films or commercial audiovisual products in New Jersey and has developed, purchased, or executed a 10-year contract to lease a production facility of 250,000 square feet or more. No more than three film production companies may be designated as a New Jersey studio partner.

Eligibility Requirements must be met in order for the taxpayer to claim the credit:

• At least 60% of the total film production expenses, exclusive of post-production costs, are incurred for services performed and property purchased through sellers that are authorized to do business in New Jersey or the qualified production expenses during a tax year exceed $1 million per production; and
• The principal photography must begin within the earlier of 180 days from the date of the original application (filed with EDA) or 150 days from the date of EDA’s approval of the application for the tax credit; and
• At the discretion of the Motion Picture and Television Development Commission, a promotional logo or statement from New Jersey may need to be included in the finished project (at no cost to the State); and
• A tax credit verification report prepared by an independent certified public accountant must be submitted; and
• New Jersey Income Tax must be withheld on payments made to loan-out companies or independent contractors for services performed in New Jersey at a rate of 6.37%.

Digital Media Content Production Tax Credit
The credit is 30% of the qualified digital media content production expenses paid by the taxpayer during a tax year (35% if the services performed or the items purchased were made through a vendor whose primary place of business is located in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer, or Salem County). The credit is capped at $30 million annually. The tax credits permitted to be approved for film production projects in a fiscal year may be increased from tax credits in a prior fiscal year that were unapproved or previously approved, but a taxpayer was not able to redeem or transfer to another taxpayer.

The law defines “digital media content” as any data or information that is produced in digital form (including data or information being reformatted into digital form), text, graphics, photographs, animation, sound, and video content. Digital media content does not include content offerings (websites) that are: generated by the end user (e.g., electronic bulletin boards or chat rooms); primarily local news, events, weather, or local market reports; public service content; electronic commerce platforms; obscene material; produced or maintained primarily for private, industrial, corporate, or institutional purposes; or digital media content acquired or licensed by the taxpayer for distribution or incorporation into the taxpayer's digital media content.

Qualified digital media content production expenses are expenses incurred in New Jersey for the production of digital media content. Expenses include certain compensation paid to individuals employed in production of the digital media content, including payments made to loan-out companies or independent contractors as long as the payments meet the Income Tax withholding requirement, costs of computer software and hardware, data processing, visualization technologies, sound synchronization, editing, facility and equipment rentals. It does not include expenses incurred in marketing, promoting, or advertising the digital media content or other costs not directly related to the production of digital media content. Costs related to the acquisition or licensing of digital media content by the taxpayer for distribution or incorporation into the taxpayer's digital media content are not qualified digital media content production expenses.

Eligibility Requirements must be met in order for the taxpayer to claim the credit:

• At least $2 million of the total digital media content production expenses are incurred for services performed and property purchased through sellers that are authorized to do business in New Jersey; and
• At least 50% of the qualified digital media content production expenses are for wages and salaries paid to full-time or full-time equivalent employees in New Jersey; and
• A tax credit verification report prepared by an independent certified public accountant must be submitted; and
• New Jersey Income Tax must be withheld on payments made to loan-out companies or independent contractors for services performed in New Jersey at a rate of 6.37%.

Diversity Plan Credit
The Act also provides up to a 4% Corporation Business Tax or New Jersey Gross Income Tax credit for taxpayers who qualify for a film or digital media content production expense credit if the taxpayer presents a diversity plan with their tax credit application and the production crew meets diversity standards established by the New Jersey Economic Development Authority.

Using the Credit
Taxpayers can use the tax credit to decrease their tax liability. However, the tax credit cannot reduce the taxpayer’s liability below the minimum tax for Corporation Business Tax purposes or to less than zero for Gross Income Tax purposes.

A taxpayer can carry forward unused tax credits for up to seven years. In lieu of using the credit against its own tax liability, a recipient may apply to the New Jersey Economic Development Authority for a tax credit transfer certificate, which can be exchanged for private financial assistance from the purchaser or assignee. The tax credit must be sold for no less than 75% of the value of the tax credit, and the purchaser is subject to the same limitations and conditions as the seller of the tax credit.

A pass-through entity may apply for the credit, but it cannot take the tax credit directly on its tax return. The credit flows through to the business entity’s members, partners, or shareholders, as set forth in the law.

Additional Information
Additional information can be found in the Garden State Film and Digital Media Jobs Act Credit Question and Answers.

Applicable Laws and Rules
(P.L. 2018, c. 56), (P.L.2019, c.506), (P.L.2020, c.156), (P.L.2021, c.367) and (P.L. 2023, c.97)