Production Incentive Diligence Under Texas SB 22 and Ireland's Section 481

By Hank FasthoffAugust 18, 2026

Production incentive diligence begins with three questions. Which company may apply, when may it claim, and what proof must it preserve? A budget can include projected incentive proceeds, but the production must model the timing and conditions before anyone treats those proceeds as available cash.

The Texas administering office and Irish Revenue follow different procedures, with the Texas office disbursing a grant after completion and compliance review. An Irish producer company may claim up to 90% of its expected Section 481 credit during production when it satisfies the funding, certification, and documentation conditions. Those differences affect the company structure, cash flow, contract terms, and diligence file.

Texas Grant Review and Payment

Senate Bill 22 took effect September 1, 2025 and established dedicated funding for the Texas Moving Image Industry Incentive Program. By the 30th day of each state fiscal biennium, the Comptroller must deposit $300 million of sales and use tax revenue into the Texas Moving Image Industry Incentive Fund. The Texas Treasury Safekeeping Trust Company holds and invests the fund, while the Music, Film, Television, and Multimedia Office administers the grants.

On August 31, 2035, the dedicated fund and enhanced SB 22 grant provisions expire. Beginning September 1, 2035, the underlying incentive program continues under a different statutory framework. For grants awarded from September 1, 2025 through August 31, 2035, the law in effect on the award date governs.

For a film or television project, the Texas Film Commission must receive the application package no earlier than 180 days and no later than 5 p.m. Central Time five business days before principal photography begins. The package includes an online application, a budget limited to estimated Texas expenditures, and the required content document. The commission disregards any application filed after principal photography begins.

Applicants incur and pay project expenses before receiving grant proceeds. Within 60 days after its final Texas expenditure, the applicant submits its final records. Current Film Commission instructions call for payroll and accounts payable schedules, invoices, cleared payment records, residency declarations, call sheets, production reports, cast and crew lists, and the completed project. After the Film Commission finishes its examination, the Governor's Office Division of Compliance and Monitoring performs a final compliance review. The administering office then disburses funds after the production has paid its obligations to the state.

Grant Percentages Depend on Eligible Spending

For film and television projects, the current rate schedule provides a 5% base grant for at least $250,000 and less than $1 million in eligible Texas spending. The rate increases to 10% for at least $1 million and less than $1.5 million, then to 25% at $1.5 million or more.

Additional grant awards range from 1% to 2.5% for qualifying activities. The available categories include postproduction, rural filming, Texas veterans, workforce development, historic sites, Texas heritage projects, and faith based projects. The applicant must select each requested addition in its application. Combined grants may reach 31% of eligible Texas spending, with the applicable rate and eligible expenditures determining the award without a separate project ceiling.

Current residency rules require Texas residents to make up at least 35% of paid crew and at least 35% of paid cast, including extras. When enough qualified Texas residents are unavailable as principal photography begins, the office may certify an exception in writing. For principal photography beginning from September 1, 2027 through August 31, 2029, the statutory threshold rises to 40%. It then rises to 45% for the following two years and 50% beginning September 1, 2031.

At least 60% of the production must occur in Texas. For film production, the office calculates that threshold from filming days under the administrative rules. It includes only the first $1 million paid to each qualifying Texas resident when calculating eligible labor. Current program materials also limit that labor to people with properly completed residency declarations and supporting identification that establishes the required 120 day Texas domicile period.

Applicants therefore must treat onboarding and cost coding as part of eligibility. Payroll records must distinguish qualifying residents from everyone else. Accounts payable records must connect each claimed payment to an eligible vendor, service, or item used in Texas. A later reconstruction increases the chance that the compliance reviewers will exclude a cost.

Content Review Creates Financing Risk

The administering office may deny an application based on inappropriate content or a negative portrayal of Texas or Texans, as the office determines. It must also consider general standards of decency and respect for the diverse beliefs and values of Texas citizens.

The office examines proposed content during the preliminary application process and reviews the completed project before payment. It also has broad statutory discretion to rescind preliminary approval at any point in the grant process. A material script or editorial change can therefore affect an approval obtained before production.

A lender or production partner underwriting projected grant proceeds should account for that discretion. Your financing documents should allocate the consequences of a denial, rescission, delayed payment, or reduction after compliance review. They should also identify who controls content changes that could affect the grant.

Texas Grant Proceeds Require Separate Production Financing

An applicant advances production expenses before the administering office disburses grant proceeds. Preliminary approval leaves payment contingent on final content, eligible spending, supporting records, state obligations, and compliance review. A lender evaluating projected proceeds will ordinarily discount the expected amount for timing and qualification risk.

The Comptroller deposits $300 million once each biennium during the enhanced program period, and applicant demand may exceed the uncommitted balance within a funding cycle. Before relying on projected proceeds, you should confirm current fund availability and application status with the Film Commission.

Irish Revenue Applies a Separate Claim Process

An eligible Irish producer company may claim the Section 481 film corporation tax credit. The standard credit equals 32% of the lowest of eligible expenditure, 80% of total qualifying production cost, or €125 million. A qualifying film must have at least €250,000 in total production cost and at least €125,000 in eligible expenditure. Revenue applies the credit against the producer company's corporation tax and pays any qualifying excess to the company.

Before the main Irish production begins, the producer company applies to the Minister for Culture, Communications and Sport for a cultural certificate. Current application guidance requires submission at least 21 working days before that production begins. A certificate may impose conditions addressing personnel, training, screen credits, and other project facts. As the project proceeds, the producer company must report material changes that arise after certification.

The producer company may claim the full credit after completion. It may instead claim up to 90% of the expected credit during production based on budgeted expenditure. Under Irish Revenue's March 2026 guidance, a budgeted claim requires evidence of executed funding agreements whose conditions have been satisfied or evidence that at least 68% of the amount on which the credit is based has been lodged with a financial institution. The company must also have a detailed budget and signed production, financing, distribution, or sale agreements. It claims the balance within six months after completion.

Section 481 is available for projects certified through December 31, 2028. Productions with a long development period or several planned seasons must account for that deadline.

The Irish Company Structure Requires Separate Review

An Irish claim requires both a producer company and a qualifying company. The producer company claims the credit and must own every share of the qualifying company. It must be resident in Ireland or resident in another European Economic Area state while conducting business in Ireland through a branch or agency. It must also conduct the commercial trade of producing films for profit.

The qualifying company serves as the production company for one qualifying film. It must be incorporated and resident in Ireland or conduct a trade there through a branch or agency, and it must exist solely to produce that film. The producer company and qualifying company enter into the production contract, while the qualifying company incurs the eligible production expenditure.

Corporate existence alone establishes little. Before making a claim, the producer company must satisfy Revenue's return filing condition. Revenue describes that condition as filing the required Form CT1 for a 12 month accounting period whose return date has passed, which generally equates to 21 months of trading as a producer company. Revenue officers also test the tax compliance of the producer company, the qualifying company, controlled companies, and people who beneficially own or control more than 15% of either company's ordinary share capital.

Those obligations continue after completion. For 12 months, the producer company generally must continue its film production trade and retain its shares in the qualifying company. Both companies must keep the supporting books and records for six years. Breaching the certificate conditions or statutory requirements can invalidate the claim, produce interest and penalties, and permit Revenue to recover an overpayment from the company and, in specified circumstances, directors or owners with more than 15% control.

Current Irish Enhancements

The Scéal uplift raises the Section 481 rate from 32% to 40% for a qualifying feature film or animated feature with less than €20 million in qualifying expenditure. An Irish or EEA national or ordinary resident must perform at least one designated creative role. The film must also be intended for exhibition to paying audiences at an Irish cinema or theater for at least five days.

The enhanced rate becomes available on completion. During production, the producer company may claim up to 90% of the budgeted credit at the standard 32% rate and claim the enhancement after the completed film satisfies the additional conditions.

The separate Unscripted Production Corporation Tax Credit commenced in December 2025 after European Commission approval. It equals 20% of the lowest of eligible expenditure, 80% of total production cost, or €15 million. A qualifying production must satisfy the cultural certification process, have total production cost of at least €250,000, and have at least €125,000 in eligible expenditure. The credit is available through December 31, 2028.

The Revenue Commissioners made an enhanced visual effects credit available on July 16, 2026. For applications made on or after that date, an eligible production with at least €1 million in qualifying visual effects expenditure may receive a 40% rate on up to €10 million of that expenditure. The standard 32% rate applies above the €10 million ceiling. The implementing regulations require the producer company to seek the enhancement before Irish production begins, subject to a limited transition for applications already pending when the regulations took effect.

Projects Using Both Jurisdictions Require Separate Records

A production involving work in Texas and Ireland must support each application with a separate eligibility schedule. The Texas Film Commission reviews eligible wages and expenditures connected to Texas. Irish Revenue tests eligible expenditure incurred under Section 481 and the Irish regulations, including where goods, services, and facilities were used or consumed.

The global production budget may contain a cost that arises in both work streams, but each applicant must claim only the portion that satisfies its governing rules. Intercompany charges require the same support as third party costs, including the underlying services, allocation method, payment records, and treatment in each company's books. You should also test the combined support against applicable state aid limits and other financing restrictions.

Your contracts between the production entities should identify which company incurs each cost, which company claims each incentive, and which party receives the proceeds. They should allocate responsibility for certification, tax compliance, records, audits, content changes, overclaims, and repayment obligations. Irish tax counsel should confirm the Section 481 structure, while United States tax counsel should address the treatment of intercompany payments and credit proceeds for the domestic participants.

Independent Verification of Each Applicant

Your diligence file should establish more than an entity's existence. For the Texas applicant, your review should include formation and authority, franchise tax status, the filed incentive application, requested additional awards, preliminary correspondence, current fund availability, and the records supporting eligible spending.

For the Irish companies, your review should include the ownership between the producer company and qualifying company, Irish residence or branch status, the production agreement, cultural certificate, tax compliance, Form CT1 history, financing documents, budgeted claim support, and any conditions imposed by the Minister. A written representation from the producer can supplement those records, but it can't replace them.

You should include rights ownership in the same review. An incentive application concerns a project the applicant must have authority to produce. The related articles on film and television chain of title and talent migration between competing projects address the ownership and recruiting issues that often accompany the financing review. The article on Texas franchise tax and good standing explains the Texas status records relevant to the domestic applicant.

The Compliance File Begins Before Production

At onboarding, you should collect residency declarations and supporting identification for the Texas applicant. Every purchase should receive a jurisdiction code and supporting invoice. Payroll records should separate qualifying labor, while call sheets and production reports should preserve the evidence for the filming day calculation.

For the Irish producer company, you should preserve the certificate application, financing agreements, corporate ownership records, detailed budgets, expenditure support, tax filings, and notices of material changes. Before each credit claim or financing draw, you should reconcile those records against the governing certificate and current expenditure schedule.

Each incentive depends on proof assembled while the production proceeds. A disciplined file provides the Film Commission, Irish Revenue, lenders, and production partners with the same account of who spent the money, where the work occurred, and why the claimed amount qualifies.