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Fi14. Are per diem expenses,living allowances,and car and meal allowances eligible for the Film Production Credit?

Although a qualifying expenditure does not necessarily have to be taxable to the production company itself,the expenditure must nevertheless be "subject to taxation in this state" in order to comply with the statutory requirement. MCL 208.1455(12)(c). In general,per diems are not taxable as compensation at the federal level,therefore they do not get taxed at the state level in Michigan. Additionally,per diems and allowances themselves are not subject to sales,use or other Michigan taxes. As such,while per diem expenses and living,car and meal allowances all constitute payments from a production company directly to employees,in most cases such payments are not "subject to taxation in this state." Therefore,they will not qualify as "direct production expenditures" eligible for the film production credit.

It is important to note,however,that the federal exclusion from income tax of per diems is a preferential tax treatment with certain dollar thresholds on their non-taxability. When those thresholds are exceeded,the excess payment amount becomes taxable compensation at the federal level which will flow through to Michigan's income tax,also as taxable compensation. Because this excess per diem payment amount is "subject to taxation in this state" the excess payment amount would qualify for film production credit if it meets all other qualifying criteria.



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