continues to work through creating an industry-recognized set of guidelines
with the Association of National Advertisers. However it seems that in
recent weeks there has been an uptick in documents circulated and practices put
forth that in the absence of practical guidelines causes great concern.
Please be aware that in many states, the producer (i.e. the production company)
is the only entity authorized by the state to file for a tax incentive
and therefore should be concerned about its legal responsibility for the
accuracy and truthfulness of information contained in the application
(including the identification of others presenting themselves as the actual
AICP has recently received several calls from members with questions and
concerns regarding the filing process for state tax incentives. In
several cases, it appeared that representatives in the name of the advertiser
have attempted to circumvent the producer’s status of production company, and
present themselves as the producer and the production company as its
subcontractor which may be a violation of the state’s law and the legislative
intent of the incentive.
As a fundamental principle, the respective roles of all parties, and the actual
production costs for which each is responsible, should be described accurately
and not in a manner that would distort or misrepresent the production process
or inflate the reported costs of qualified production expenditures.
Therefore, if an advertiser or any entity representing the client demands that
it be inserted as the producer and that the production company be inserted as
its subcontractor performing production services, a scenario that most likely
is completely artificial and inaccurate, it is highly recommended that the
production company immediately consult with its attorney about the legality of
such demand by the advertiser and the potential consequences to the production
company of complying with that demand, under applicable state civil and
In addition, it has been reported that in certain instances, the advertiser or
its consultant(s) have attempted to exercise control placing parameters over
certain facets of the production process, and the production company's normal
role of making decisions consistent with being the producer (i.e. how to staff
a job, where to purchase/rent items or with whom to coordinate and book
travel). This usurps the producer’s control of the project and its contractual
obligations to assume responsibility to manage and execute the budget. Loss of
control of these types of business decisions and ultimate responsibility for
such decisions is a fundamental breakdown in the production process.
Some caveats to keep in mind when engaging in a production which may qualify
for a tax incentive and having certain production decisions dictated by
advertisers, agencies, or consultants:
Part of the producer’s role is to obtain
the best crew and materials for the job and it is solely responsible for
the quality of the physical production. This means that the producer must
have the ability to decide the best source of all labor and
The producer is responsible for any
hiring, preference or obligations as the signatory employer under its
labor agreements, and employer of all other production related employees.
The advertiser or its consultants are not the labor contract signatory (in
most cases), nor the employer, and as such should not compel a producer to
hire particular individuals or take any controlling action under its labor
If you are required to use unknown
or un-vetted vendors or employees at the insistence of the advertiser or its
consultant(s), who have selected those sources with an eye on realizing the
most incentive benefit, then you should not be held responsible for their lack
of performance including any delays that may occur.
AICP further recommends that when cooperating with any consultant at the direction
of the advertiser in filing an incentive, you have the following documents in
Indemnification from the consultant and the advertiser.
Direct Confidentiality And Non-Disclosure Agreement with the advertiser
and its consultant.
We continue to monitor the incentive situation, and will keep you informed of