26 U.S.C. § 181 — Treatment of certain qualified productions

(a) Election to treat costs as expenses (1) In general: a taxpayer may choose to deduct the cost of a qualified film or television production, a qualified live theatrical production, or a qualified sound recording production, instead of capitalizing it. (2) Dollar limitation: (A) In general: this deduction does not apply to the part of a film/TV or live theatrical production's total cost above $15,000,000. (B) Higher dollar limitation for productions in certain areas: if a significant part of the production's cost is spent in an area that could be designated (i) a low-income community under section 45D, or (ii) a distressed county or isolated area of distress by the Delta Regional Authority, the cap rises to $20,000,000 instead of $15,000,000. (C) Qualified sound recording production: for sound recordings, the deduction does not apply above $150,000 of cost per production, or above $150,000 total for all such productions by the taxpayer in the year. (b) No other deduction or amortization deduction allowable If a taxpayer elects to deduct a production's cost under (a), no other depreciation or amortization deduction is allowed for that cost. (c) Election (1) In general: the election must be made in the way the Secretary prescribes, by the due date (including extensions) of the tax return for the year the production's costs are first incurred. (2) Revocation of election: once made, the election cannot be undone without the Secretary's consent. (d) Qualified film or television production (1) In general: a production qualifies if it meets (2) and at least 75 percent of its total compensation is "qualified compensation." (2) Production: (A) In general: the production must be property described in section 168(f)(3). (B) Special rules for television series: each episode of a TV series counts as a separate production, but only the first 44 episodes of the series count at all. (C) Exception: a production does not qualify if federal law (section 2257 of title 18) requires it to keep performer records — meaning sexually explicit content. (3) Qualified compensation: (A) In general: this means pay for work done in the U.S. by actors, production staff, directors, and producers. (B) Participations and residuals excluded: this pay does not include participations or residuals, as defined in section 167(g)(7)(B). (e) Qualified live theatrical production (1) In general: a production qualifies if it meets (2) and at least 75 percent of its compensation is "qualified compensation" (as defined in (d)(3)). (2) Production: (A) In general: it must be a live staged play (with or without music), based on a written book or script, put on by a taxable business in a venue (or mostly in venues) seating no more than 3,000. (B) Touring companies, etc.: if the same taxpayer could claim the election for multiple live productions that are either (I) separate phases of one production or (II) separate simultaneous stagings of the same production in different places (not counting different tour stops of one touring show), each one counts as a separate production. (C) Phase: a "phase" means, if the taxpayer treats each as its own separate activity for tax purposes: (i) the first staging of a production, or (ii) later restagings or touring by the same producer. (D) Seasonal productions: (i) In general: for a production not covered by (B) that runs for 10 weeks or less in the tax year, the seating cap in (A) rises from 3,000 to 6,500. (ii) Short taxable years: for a tax year under 12 months, figure the weeks by multiplying the actual weeks by 12 and dividing by the number of months in that short year. (E) Exception: a production does not qualify if it includes the sexually explicit conduct described in section 2257(h)(1) of title 18. (f) Qualified sound recording production This means a sound recording (as defined in section 101 of title 17) that is produced and recorded in the United States. (g) Application of certain other rules Rules like those in section 194(b)(2) and (c)(4) also apply here. (h) Termination This section does not apply to productions that start after December 31, 2025.