Frequently Found Exceptions in NY Film Credit Testing

The New York film credit agreed-upon procedures (AUP) don’t leave much room for error.  All that stands between your AUP and an extrapolation of error rates is a tiny 1% margin.  Due to this, it’s extremely important that NY film credit accountants be sure to avoid as many exceptions as possible.  To assist in that end, here are some of the common mistakes we’ve seen over the first 8 months of this new AUP program:

  • Tolls – Individually they’re very minimal costs but can amount to substantial expenses. Only tolls incurred in NY are qualifying (watch out for Jersey!) but they can be extremely tedious to track.  If you use EZ Pass, you can go through the monthly statements and allocate each toll to qualified or nonqualified, or you can take an 85/15 qualified vs. nonqualified approach on the entire bill.  This is not an official allocation method by the state but has been a generally used practice that the state appears to be allowing.
  • Shipping from out of state other than interoffice documents – While we’ve commonly seen this appropriately excluded, it’s important to be sure that on larger expenditures, shipping, when incurred, is broken out appropriately as a separate expenditure on the invoice for you to track as nonqualified costs. If lumped into the overall costs, a breakout will be required upon testing to ensure the entire cost does not have to be excluded.
  • Out of state service charges – While an item (prop, wardrobe, etc.) can be purchased out of state and then used in state and still qualify, the service costs related to that item if incurred out of state, do not. These service charges are more than just shipping.  Vendors, such as prop houses, may tack on an administrative service charge to your expenditure.  If that “service” was out of state, the cost related to the service should be marked as nonqualified.
  • Custom Built Items – If any item is custom built for the production out of state, a breakdown of the cost of that item by labor and materials is required. Materials related to that item are qualified while the labor associated is not (as it was incurred out of state).  If a breakdown is unavailable, NY allows a 60/40 rule to be applied: 60% is nonqualified labor, 40% is qualified materials.  This specific exception is one we’ve seen put productions dangerously close to the 1% error rate.
  • New York Sales Tax Certificates – These are required for a certain subset of expenditures within the AUP. Do NOT forget these.  NY is now requiring these to be attached to your final application upon submittal.
  • Above-the-line employees and producers – These employees must be excluded from qualified wages. Often these employees accidentally get lumped into qualified costs when there are individuals with dual titles.  Be certain that these dual title employees are being tracked and properly coded to qualified or nonqualified expenditures.  If multiple titles are used for a single employee throughout the various stages of the production, a safe default is to the employee’s title listed on their contract.

If you ever have a question about whether or not a cost is qualified, give us a call (781-380-3520) or shoot us an e-mail before your AUP gets underway.  One of our New York State specialists would be happy to assist you in determining the proper classification.