Yuri Rutman Encourages Chicago Hedge Funds,Tax Professionals, Family Offices To Consider Section 181 For Economic Development

A Chicago film finance and production company is offering an innovative way for high net worth investors, tax credit buyers, hedge funds and private equity groups, private and public companies, and their representatives, including tax attorneys, estate planners, and wealth managers to received 100% deductions for film investments as well as state income tax credits.

Yuri Rutman’s Noci Pictures Entertainment is putting a slate of films to be shot in Illinois using an innovative hybrid tax, finance, risk minimization, and exit strategies that offer dollar for dollar Federal Tax Deductions, state income tax credits, a possible exit IPO on the London AIM., equity in a slate of films, as well as stimulating local economic development, and creating jobs, including for women and minorities.

“I don’t know of any other alternative investment that can offer tax incentives, multiple exit strategies, as well as giving back to the local economy, while being involved with the moviemaking process, Rutman states, “that would add to the long line of recent films either shot in Illinois or about to shoot including “The Dark Knight”, the upcoming John Dillinger film with Johnny Depp and Christian Bale, as well as a lot of other Hollywood films.”

The American Jobs Creation Act Of 2004, the 2004 enactment of Section 181 of the Internal Revenue Code of 1986 (the "Code") marked an unprecedented change in U.S. policy toward the phenomenon known as "Runaway
Production".

Runaway Production refers to a film or television production that leaves one state or country to be filmed in another purely for economic reasons. This movement occurs because producers tend to film in the location where they can minimize production costs through tax incentives, cheaper labor.

Over the years, Canada has been the greatest beneficiary of U.S. runaway productions (according to some reports, Canada has claimed up to 80% of the U.S. runaways, generating an economic impact of $10.3 billion in production output in 1998 alone).

Section 181 represents the first time that the U.S. federal government has recognized this impact by passing tax legislation to actively combat the flight of film and television programming.

Section 181 permits a 100% write-off for the cost of certain audio-visual works, regardless of what media they are destined for (e.g., theatrical, television, DVD, etc.).

An individual or company who makes an investment into Section 181 qualified productions can take a 100% deduction of their investment against their passive income in the year their investment was made.

The deduction can be made against active income should the investment be made by or through a widely held C corporation. The law is in effect until December 31, 2008, therefore investments must be made before that date and the money invested into qualifying productions must be spent by then by the productions.

Rutman stressed that “As an example, should an individual or corporation that is taxed at a 35% tax rate have passive income to take a deduction against, then should that individual make a $1 Million investment into a qualified production or film fund, the actual net investment will be $650,000 since they can take a deduction against that full $1 Million against their passive income, and 35% of $1M is $350,000, which is the value of the deduction they can make in the year they make their investment.

But since Section 181 also allows for all other recourse debt costs which are usually associated with film finance, a $10 million dollar film, where only $3.5 million is equity, an investor can deduct $3.5 million dollars against the $10 million, especially if the latter is mezzanine or gap finance.

Plus, an additional 20% in Illinois tax credits can be generated.

”I am surprised how many investors, tax planners, and public and private companies have no clue about these benefits”, Rutman adds. “Federal Preservation, and other real estate tax credits was the usual route for tax planning, but film production incentives offer a more liquid premium. Plus, it adds more value to job creation to people who really need it”.

Rutman adds that he wishes there was more of a film finance and distribution infrastructure in Chicago. “Without sounding pretentious, I am probably 1 of two or three other film producers in town that understand sophisticated film finance and international distribution. Aside from the major Hollywood studios that are flocking to Chicago, many local filmmakers aren’t conscious of the semantics and even politics involved in properly structuring film deals. I am pretty confident that once we are up and running, it will give a model to other local filmmakers on the right way to finance and produce a movie which film schools do not teach. And empower them to succeed for the long term”.

Chicago Tax Attorneys, Illinois Banks, Family Offices, Private Client Services Look At Section 181

A Chicago film finance and production company is offering an innovative way for high net worth investors, tax credit buyers, hedge funds and private equity groups, private and public companies, and their representatives, including tax attorneys, estate planners, and wealth managers to received 100% deductions for film investments as well as state income tax credits.

Yuri Rutman’s Noci Pictures Entertainment is putting a slate of films to be shot in Illinois using an innovative hybrid tax, finance, risk minimization, and exit strategies that offer dollar for dollar Federal Tax Deductions, state income tax credits, a possible exit IPO on the London AIM., equity in a slate of films, as well as stimulating local economic development, and creating jobs, including for women and minorities.

“I don’t know of any other alternative investment that can offer tax incentives, multiple exit strategies, as well as giving back to the local economy, while being involved with the moviemaking process, Rutman states, “that would add to the long line of recent films either shot in Illinois or about to shoot including “The Dark Knight”, the upcoming John Dillinger film with Johnny Depp and Christian Bale, as well as a lot of other Hollywood films.”

The American Jobs Creation Act Of 2004, the 2004 enactment of Section 181 of the Internal Revenue Code of 1986 (the "Code") marked an unprecedented change in U.S. policy toward the phenomenon known as "Runaway
Production".

Runaway Production refers to a film or television production that leaves one state or country to be filmed in another purely for economic reasons. This movement occurs because producers tend to film in the location where they can minimize production costs through tax incentives, cheaper labor.

Over the years, Canada has been the greatest beneficiary of U.S. runaway productions (according to some reports, Canada has claimed up to 80% of the U.S. runaways, generating an economic impact of $10.3 billion in production output in 1998 alone).

Section 181 represents the first time that the U.S. federal government has recognized this impact by passing tax legislation to actively combat the flight of film and television programming.

Section 181 permits a 100% write-off for the cost of certain audio-visual works, regardless of what media they are destined for (e.g., theatrical, television, DVD, etc.).

An individual or company who makes an investment into Section 181 qualified productions can take a 100% deduction of their investment against their passive income in the year their investment was made.

The deduction can be made against active income should the investment be made by or through a widely held C corporation. The law is in effect until December 31, 2008, therefore investments must be made before that date and the money invested into qualifying productions must be spent by then by the productions.

Rutman stressed that “As an example, should an individual or corporation that is taxed at a 35% tax rate have passive income to take a deduction against, then should that individual make a $1 Million investment into a qualified production or film fund, the actual net investment will be $650,000 since they can take a deduction against that full $1 Million against their passive income, and 35% of $1M is $350,000, which is the value of the deduction they can make in the year they make their investment.

But since Section 181 also allows for all other recourse debt costs which are usually associated with film finance, a $10 million dollar film, where only $3.5 million is equity, an investor can deduct $3.5 million dollars against the $10 million, especially if the latter is mezzanine or gap finance.

Plus, an additional 20% in Illinois tax credits can be generated.

”I am surprised how many investors, tax planners, and public and private companies have no clue about these benefits”, Rutman adds. “Federal Preservation, and other real estate tax credits was the usual route for tax planning, but film production incentives offer a more liquid premium. Plus, it adds more value to job creation to people who really need it”.

Rutman adds that he wishes there was more of a film finance and distribution infrastructure in Chicago. “Without sounding pretentious, I am probably 1 of two or three other film producers in town that understand sophisticated film finance and international distribution. Aside from the major Hollywood studios that are flocking to Chicago, many local filmmakers aren’t conscious of the semantics and even politics involved in properly structuring film deals. I am pretty confident that once we are up and running, it will give a model to other local filmmakers on the right way to finance and produce a movie which film schools do not teach. And empower them to succeed for the long term”.

Chicago Business News Announces Section 181 For Illinois Companies, Hedge Funds, Wealthy Investors

A Chicago film finance and production company is offering an innovative way for high net worth investors, tax credit buyers, hedge funds and private equity groups, private and public companies, and their representatives, including tax attorneys, estate planners, and wealth managers to received 100% deductions for film investments as well as state income tax credits.

Yuri Rutman’s Noci Pictures Entertainment is putting a slate of films to be shot in Illinois using an innovative hybrid tax, finance, risk minimization, and exit strategies that offer dollar for dollar Federal Tax Deductions, state income tax credits, a possible exit IPO on the London AIM., equity in a slate of films, as well as stimulating local economic development, and creating jobs, including for women and minorities.

“I don’t know of any other alternative investment that can offer tax incentives, multiple exit strategies, as well as giving back to the local economy, while being involved with the moviemaking process, Rutman states, “that would add to the long line of recent films either shot in Illinois or about to shoot including “The Dark Knight”, the upcoming John Dillinger film with Johnny Depp and Christian Bale, as well as a lot of other Hollywood films.”

The American Jobs Creation Act Of 2004, the 2004 enactment of Section 181 of the Internal Revenue Code of 1986 (the "Code") marked an unprecedented change in U.S. policy toward the phenomenon known as "Runaway
Production".

Runaway Production refers to a film or television production that leaves one state or country to be filmed in another purely for economic reasons. This movement occurs because producers tend to film in the location where they can minimize production costs through tax incentives, cheaper labor.

Over the years, Canada has been the greatest beneficiary of U.S. runaway productions (according to some reports, Canada has claimed up to 80% of the U.S. runaways, generating an economic impact of $10.3 billion in production output in 1998 alone).

Section 181 represents the first time that the U.S. federal government has recognized this impact by passing tax legislation to actively combat the flight of film and television programming.

Section 181 permits a 100% write-off for the cost of certain audio-visual works, regardless of what media they are destined for (e.g., theatrical, television, DVD, etc.).

An individual or company who makes an investment into Section 181 qualified productions can take a 100% deduction of their investment against their passive income in the year their investment was made.

The deduction can be made against active income should the investment be made by or through a widely held C corporation. The law is in effect until December 31, 2008, therefore investments must be made before that date and the money invested into qualifying productions must be spent by then by the productions.

Rutman stressed that “As an example, should an individual or corporation that is taxed at a 35% tax rate have passive income to take a deduction against, then should that individual make a $1 Million investment into a qualified production or film fund, the actual net investment will be $650,000 since they can take a deduction against that full $1 Million against their passive income, and 35% of $1M is $350,000, which is the value of the deduction they can make in the year they make their investment.

But since Section 181 also allows for all other recourse debt costs which are usually associated with film finance, a $10 million dollar film, where only $3.5 million is equity, an investor can deduct $3.5 million dollars against the $10 million, especially if the latter is mezzanine or gap finance.

Plus, an additional 20% in Illinois tax credits can be generated.

”I am surprised how many investors, tax planners, and public and private companies have no clue about these benefits”, Rutman adds. “Federal Preservation, and other real estate tax credits was the usual route for tax planning, but film production incentives offer a more liquid premium. Plus, it adds more value to job creation to people who really need it”.

Rutman adds that he wishes there was more of a film finance and distribution infrastructure in Chicago. “Without sounding pretentious, I am probably 1 of two or three other film producers in town that understand sophisticated film finance and international distribution. Aside from the major Hollywood studios that are flocking to Chicago, many local filmmakers aren’t conscious of the semantics and even politics involved in properly structuring film deals. I am pretty confident that once we are up and running, it will give a model to other local filmmakers on the right way to finance and produce a movie which film schools do not teach. And empower them to succeed for the long term”.

So You Wanna Be A Movie Investor Like The Hedge Funds, Dot Commers, Real Estate Developers, And Othe Private Equity And Other Accredited Investors

Alright, so you woke up one day, checked your Swiss Bank Account, called your family office planner, had breakfast with your private client service wealth manager, got your tax accountant on the phone, and between three of you, you decided to invest your proceeds from your latest company's Merger or Acquisition not into some dubious hedge fund or start-up biotech venture, but into financing Hollywood films because you figure you need the State tax Credits, the Federal tax write-offs, as well as a nice hedge of revenues from a few movies.

Now, this may not ring too well initially with your hedge fund manager neighbors in Connecticut or your oil and gas investor friends in Bahrain or Dubai, but aren't these the same guys who are financing Hollywood blockbusters? And the only question for you, how do you get in the game without feeling like the Uncle of the film school student who wrote his nephew a $1,000,000 check for a film that starred his theater department classmates and ended up as a free download on youtube.com?


So after doing your share of homework, here's what you discover may be the opportunity to spice up your wealthy but boring life:

*Sergey Brin And Larry Page Of Google, Fred Smith, the CEO of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, Jeff Skoll Of Ebay, Todd Wagner and Marc Cuban (formerly of broadcast.com), Max Levchin and David Grodnick Of PAYPAL, Marc Turtletaub of The Money Store, Roger Marino Of EMC Corp, former Chicago bulls co-owner Jim Stern, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Real Estate Developers Tom Rosenberg, Bob Yari; and, financiers Robert Sturm, Sheikh Waleed Al Ibrahim, Zeid Masri of SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly, Rafael Fogel, and Philip Anschutz are just a handful of high net worth entrepreneurs who entered the motion picture finance and production business with successful results.


*There are various tradable state, federal, and international tax credit incentives that would offer a premium based on an equity position. Assuming there is a 10 million dollar budget film, where 50% of it is in equity, and 50% is through international distribution guarantees prior to release. Now assume there is a 20-25% tax credit on the entire amount of $10 million dollars, which will immediately translate into $2-2.5 million tax credit to an investor.

*Numerous hedge funds such as Reed, Conner & Birdwell (DISNEY), Legendary Fund (Warner Brothers), Melrose Fund (Paramount Pictures), Ingenious Media’s 700 Million dollar Float on London’s AIM, Benjamin Waisbren Investments, and a host of other funds and fund managers are entering the film finance arena.


*The explosion of international DVD, pay-per-view, home video, cable, megaplex theaters, the future of multi-lingual Internet video on demand downloads, and cross-market digital distribution including low-cost theatrical digital projection, the movie industry is accelerating at an unprecedented growth rate.


*The American Jobs Creation Act of 2004, which amends the Internal Revenue Code of 1986, was signed into law . The Act creates three tax incentives expressly applicable to motion pictures, one of which – § 181 of the Internal Revenue Code – is especially significant to independent film producers and their passive investors on qualifying films with budgets under $20 million dollars.


*The filmed and other entertainment sectors are constantly outperforming and beating analyst expectations with regards to growth, and are the only industries resistant to untimely global events and adverse economic conditions.


*Movie Investor returns may be more favorable and more liquid than holding direct equity positions in most public entertainment and other public companies, real estate investments, and other alternative investments.


*There is a huge demand, audience, and growing distribution structure for specialty independent, ,crime, horror, and other low budget films as exemplified by the success of such films as “Brokeback Mountain”, “Sideways”, “Capote”, “Garden State”, “Napolean Dynamite”, “Y Tu Mama Tambien”, “My Big Fat Greek Wedding”, “Memento”, “Crash” , “Saw 1 &2”, Friday The 13th”, “Halloween”, “Texas Chain Saw Massacre”, “Hostel” and “WOLF CREEK”, which was made for $800,000, bought for nearly 4 million dollars prior to its release by Dimension, as well as “Hustle and Flow” which was made for $2 million dollars and bought for $16 million by Paramount Pictures.

*Apart from large blockbusters such as “King Kong”, “Harry Potter”, and other large scale studio films, the majority of studio-produced films have been under performing at the box office. The films that have been successful for studios were all externally financed and or co-financed with studios, sold for 2-3 x their costs, and a majority of them retained foreign sales rights to maximize revenues.

So after looking at all the great benefits, how do you actually go about finding a deal or movie project where you are certain that half your money isn't going to be used by a Hollywood producer as a down payment on a new mansion in Pacific Palisades?

The key that separates the successful film financiers vs. the newbie Oil magnates who come to Los Angeles with a pocketful of money and end up leaving with half a pocketful of money is called several things: structured finance, leverage, risk minimization, multiple exit strategies, tax credits, and the ethical consciousness of the filmmaker/producer.

What does that translate to you in a real world scenario. Lets say you want to finance 100% of a $1.5 million dollar low budget genre film whose worst case scenario is a DVD release and profits from international sales and perhaps some other equity sweeteners in the conversion of the securities that you subscribe for as part of the deal. Well, if you write a check for $1.5 million, and the film is shot in a state that has 30% in tax credits, you get back $450,000 in tax credits + under Section 181, you are able to write off that amount under Federal. So you are already making a nice return before the profits kick in. Then you figure you sell the film to 50 countries, and if you are really lucky, you sell the film for 3-4 times it cost to a studio at a swanky festival like Sundance, Toronto, Cannes, etc. Do this over 5-10 films and you can make a very profitable name for yourself among the Hollywood elite.

But lets really take this a step further and see how the bigger boys leverage film investing because they can get a bigger star which can translate in larger overseas sales. Lets say a filmmaker/producer has a $10 million film and you want in on the action. You would park $5 million in equity, receive an 20-30% tax credit on $10 million which will be $2-$3 million, the producer will get the biggest star he can, get a studio to kick in the other $5 million dollars, you wont worry about ever seeing a penny from the theatrical release because you know your DVD profits and international sales will cover your equity position. Make sense?

Now leverage this with different budgets, genres, stars, distribution, places where you can get high tax credits (Ie Puerto Rico is 40%), other exit strategies where you can find your shares on the London AIM, and you are on your new career path as a sophisticated and educated film financier. Off course, if you want to go even further and guarantee 100% of your capital, there are tricks to that as well.

If you have any further questions on your quest to a movie premiere on the French Riviera at the Cannes Film Festival, and its a burning a hole inside your heart and soul, contact yours truly at filmhedge@aol.com or yuri@noci.com.

CFO with capital markets, investment banking,capital raising with institutional and high net worth clients, family office

Chief Financial Officer

*Structures and coordinates international film finance transactions utilizing various risk minimization and hedging strategies including private equity and debt placements, structured finance, tax credit monetization, studio-co finance, reverse mergers and/or IPO exits
*Must have 7-20 years of proven experience in international film finance, investment banking, capital markets at global financial institution.
*Must have proven hands on deal making in structuring large global private placements (100 million dollars +) from international institutional investors and extremely high net worth investors.

*Must have stand alone relationships with global institutional capital and family offices.


Please email your resume and interest to careers@noci.com