Best Practices for Massachusetts Agreed Upon Procedures
A few tips film production companies should consider prior to having Agreed Upon Procedures performed on films produced in Massachusetts:
- Massachusetts has two different credits - one for Labor and one for Goods and Services – which are recorded and tracked separately by the state. Therefore, it is critical to code and segregate items correctly between categories. Two areas of particular importance: fringe benefits and employer paid taxes related to payroll. Taxable fringe benefits are allowable expenditures under the Labor category. Employer tax expenses related to qualified labor are allowable expenses under the Goods and Services credit category.
- Massachusetts pays a credit for the "use" of items in the state, even if these items were purchased outside of the state. However, the film production company must be able to provide proof of use of the item to the independent Certified Public Accountant performing the agreed upon procedures. Therefore, proper recordkeeping of wardrobe usage, raw stock usage, set dressing, etc. is very important.
- Travel qualifies for the Massachusetts production expense credit; however, travel must originate and conclude in Massachusetts (intrastate only). It is important for the film production company to be able to provide proof that a particular travel expense (or travel allowances provided to employees) originated and concluded in Massachusetts to qualify for the credit.