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 .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