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Yuri Rutman Launches "Conscious Investment" For Hedge Fund Investors, Private Equity,
CFO's Of Co's
By noci pictures
Dated: Jan 02, 2008
Structure offers 1. 100% passive income deductions under the IRS Section 181 "American Jobs Creation
Act" for both individuals and corporate tax payers 2. 20%-30% in State Tax Credits (depending on state) 3.
Economic Development 4. Job Creation
Yuri Rutman, President of Chicago based Noci Pictures Entertainment has just launched a new hybrid tax
credit film fund for institutional and high net worth investors.
"The tax credit aspect is a comparison to other tradable State and Federal Tax Programs that are in demand
by tax credit buyers and their representatives", Rutman states.
Rutman gives a primer on the differences and offers an innovative structured finance model that is
applicable to film investments
THE NEW MARKETS TAX CREDIT
The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against Federal
income taxes for making qualified equity investments in designated Community Development Entities
(CDEs). Substantially all of the qualified equity investment must in turn be used by the CDE to provide
investments in low-income communities. The credit provided to the investor totals 39 percent of the cost of
the investment and is claimed over a seven-year credit allowance period. In each of the first three years, the
investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the
time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not
redeem their investments in CDEs prior to the conclusion of the seven-year period.
The FEDERAL HISTORIC PRESERVATION TAX INCENTIVES PROGRAM
The 20% tax credit Preservation Tax Incentives reward private investment in rehabilitating historic
properties such as offices, rental housing, and retail stores. Abandoned or under-used schools, warehouses,
factories, churches, retail stores, apartments, hotels, houses, and offices in many cities have been restored to
life in a manner that retains their historic character. The Preservation Tax Incentives have also helped to
create moderate and low-income housing in historic buildings.
Under the provisions of the Tax Reform Act of 1986, a 20% tax credit is available for the substantial
rehabilitation of commercial, agricultural, industrial, or rental residential buildings that are certified as
historic. The credit may be subtracted directly from federal income taxes owed by the owner.
American Jobs Creation Act Of 2004 100% Federal Deductions + 20-30% State Tax Credits!
In the United States, the 2004 enactment of Section 181 of the Internal Revenue Code of 1986 (the
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“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.
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. Therefore, 1M minus $350,000 is $650,000 which is the
net amount of their investment into the qualified production.
However, an investor or Company can also receive an additional 15-30% in state tax credits on the entire
budget of a film BEFORE profits and other exit strategies that Noci Pictures Entertainment has in place.
This clearly shows a premium in tax credit and tax liability deduction compared with the other Federal Tax
Credit Programs available.
Further, The Section 181 and State Programs benefit the tax credit investor, the producers, and the
community by offering:
In the Short Term:
1. 100% passive income deductions under the IRS Section 181 "American Jobs Creation Act" for both
individuals and corporate tax payers
2. 20%-30% in State Tax Credits (depending on state)
3. Economic Development
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4. Job Creation, Including For Minorities And Women
5. Leverage of an additional 50-100 million in mezzanine/senior debt if needed to finance/co-finance
5-10 movies
In Medium-Long Term it would offer
1. hedge of revenues back to investors from 5-10 A -level films
2. Discount of future taxation from income under Section 199 for a Section 181 investment
3. Conversion Option in LLC to Common Stock for additional liquidity if I do a reverse merger in U.S
or exit IPO on London AIM
SECTION 199
Section 199 is the income section; it is called the manufacturing section of The American Jobs Creation
Act, 2004. Film Production has been defined as a manufacturer but television is not. Section 199 does not
apply to television.
This section says that any manufacturer (Film Production) can have some tax relief on money returned
to the investor.
o from 2005 till 2007 the taxpayer is entitled to a 3% deduction
o from 2007 to 2010 they get a 6% reduction
o And from 2010 on the get a 9 % reduction.
For example, if an investor get $1.00 back on a investment in a movie after he has already written off
100%, then he will only be taxed on .94 cents if I he is given it back between 2007 to 2010. From 2010 on
then an investor gets to pay taxes only on .91 cents and it stays at this 9% rate.
Rutman adds "In the Short Term our structure would offer:
1. 100% passive income deductions under the IRS Section 181 "American Jobs Creation Act" for both
individuals and corporate tax payers
2. 20%-30% in State Tax Credits (depending on state)
3. Economic Development
4. Job Creation, Including For Minorities And Women
5. Leverage of an additional 50-100 million in mezzanine/senior debt if needed to finance/co-finance 5-10
movies
In Medium-Long Term it would offer
1. Hedge of revenues back to investors from 5-10 A -level films
2. Discount of future taxation from income under Section 199 for a Section 181 investment
3. Conversion Option in LLC to Common Stock for additional liquidity if we do a reverse merger in U.S or
exit IPO on London AIM"
"I cant think of too many other alternative investments that use this kind of leverage and exit structures",
Rutman stated. "Our deal redefines 'Conscious Investing'"
Category Finance, Real Estate, Technology
Tags Emerging Markets, hedge fund launches, yuri rutman, structured finance, absolute return funds, pipe
investors
Email Click to email author
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Website http://www.noci.com
Phone 310-651-0799
Country United States
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