In order to qualify for the higher ($20 million) deduction, what does it mean to require that a significant amount of the expenditures be incurred in an eligible area?
The IRS temporary regulations outlined two alternative tests to determine if the significantly occurred requirement is met. One test is based upon production costs and establishes a 20% threshold for the test. It compares production costs incurred in first-unit principal photography that takes place in a designated area to all productions costs incurred in first-unit principal photography. This does not include preproduction, editing and post-production costs. The second test is based upon the number of days of principal photography. If at least 50% of the total days of principal photography take place in the designated area, the production will be deemed to satisfy the significantly occurred test.
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