Tennessee Film & TV Tax Incentives: Grant, Credit, and Exemption

Tennessee film tax incentives come in three separate programs that a single production can stack: a 25% cash grant on qualified in-state spending, a franchise and excise tax credit worth 40% to 50% of Tennessee payroll, and a point-of-purchase sales and use tax exemption that eliminates roughly 9.25% to 9.75% on taxable goods and services. All three are administered by the Tennessee Entertainment Commission, a division of the Department of Economic and Community Development, and each has its own rules on eligibility, minimum spend, and timing.¹

What Each Program Pays

The 25% Cash Grant

The flagship incentive pays 25% of Qualified Tennessee Expenditures in cash after the project wraps. It covers a broad slice of production spending: equipment rentals, location fees, set construction materials, lodging, catering, resident and nonresident payroll, and post-production services performed in the state. There is no per-project cap, but the program is subject to available funds and the commission’s approval.¹

The Franchise and Excise Tax Credit

The second program is a credit against Tennessee’s franchise and excise tax, calculated on qualified payroll only. The standard rate is 40% of payroll paid to cast and crew working on the production in the state. For payroll paid to people whose primary residence is in a tier 2, 3, or 4 enhancement county, the rate climbs to 50%. The credit can offset up to 50% of the production company’s combined franchise and excise tax liability on any given return, is not refundable and not transferable, and any unused amount carries forward for up to 15 years.²

Because the credit cannot be sold, it is most useful to companies that already owe Tennessee franchise and excise tax. A production entity formed temporarily for one project, with no ongoing Tennessee tax liability, often cannot put the credit to work before it expires.³

The Sales and Use Tax Exemption

Qualified productions can also apply for a point-of-purchase exemption from Tennessee’s sales and use tax on taxable goods and services used in the production. Combined state and local rates run between 9.25% and 9.75%, and the savings come off the top at purchase rather than months later through a rebate.⁴

Who Qualifies, and How Much You Have to Spend

A “qualified production” under Tennessee law is defined broadly. It includes feature films, television pilots, scripted and non-scripted series, episodic content, esports events, video games, computer-generated imagery, interactive digital media, and stand-alone audio or visual post-production work such as scoring and editing.²

Minimum in-state spending to qualify for the F&E credit depends on project type:

Scripted film and TV: $500,000
Non-scripted, video games, animation, and commercials: $100,000
Post-production only: $50,000

Scripted television series, feature films, and television pilots also need at least $500,000 in Qualified Tennessee Expenditures to access the grant. These thresholds are measured strictly by in-state spending, not total budget. A film with a $10 million budget that spends only $400,000 in Tennessee does not clear the scripted bar.³

Hitting the number is necessary but not sufficient. Both the grant and the tax credit require a “best interests of the state” determination by the commissioners of revenue and economic and community development, who weigh expected investment, jobs, and community impact before approving a project. Approval is discretionary, not automatic.²

What Spending Counts

For the 25% grant, Qualified Tennessee Expenditures must be paid to Tennessee-based vendors or cover services performed in the state. The main categories:

Resident cast and crew wages, salaries, fees, per diem, and fringes, capped at $500,000 per person on feature films and TV pilots
Nonresident labor, capped at $250,000 per person and requiring pre-approval from the commission and the Grants Committee before filming begins
Production services: art direction, wardrobe, makeup, hair, special effects, and scoring
Rental of production space, equipment, and locations
In-state lodging, living allowances, per diems, and travel to, from, and within Tennessee when purchased through a Tennessee vendor (private and charter flights excluded)
Insurance purchased through a Tennessee vendor specifically for the production
Post-production costs including editing, scoring, and CGI

⁵

The gap between the $500,000 resident cap and the $250,000 nonresident cap is a real planning point. Hiring Tennessee residents stretches your qualified payroll further and avoids the pre-approval step for out-of-state hires.

The F&E tax credit is narrower than the grant. It applies only to qualified payroll, both above-the-line talent (directors, writers, lead cast) and below-the-line crew (grips, electricians, PAs), as long as the services are performed in Tennessee.⁴

The 50% Enhancement-County Bump

Tennessee classifies its counties into four enhancement tiers each year based on unemployment, per capita income, and poverty, with the Department of Economic and Community Development publishing the updated list by July 1. Payroll paid to crew whose primary residence is in a tier 2, 3, or 4 county earns the 50% F&E credit rather than the standard 40%.⁶

Tier 1 counties are the most economically healthy; tiers 2 through 4 reflect increasing economic distress. On a production with heavy local hiring, the 10-percentage-point difference compounds quickly. Check the current tier list before locking in locations and crew sourcing.

How to Apply, and the Timing Trap That Costs Productions Money

The process starts with Form A, the Registration for Certification of Conditional Eligibility, submitted electronically to the Tennessee Entertainment Commission along with Annex I, the Due Diligence Questionnaire. The commission recommends filing at least 30 business days before pre-production begins so the Grants Committee has time to review.⁷

If the project is approved, the commission issues a Certification of Conditional Eligibility, and the production company then signs a Grant Contract with the department, typically within two to four weeks of the CCE.⁸

Here is the trap. No expenses qualify until the Grant Contract has an assigned effective date. Any money spent before that date, however legitimate, is excluded from Qualified Tennessee Expenditures. If pre-production spending starts before the contract activates, those dollars never count toward your 25%.⁷

Deadlines Once You Are In

Once the Grant Contract is effective, principal photography must begin in Tennessee within 120 days. Written extension requests with a revised start date are allowed. All qualified expenses must be incurred within 12 months of the effective date, and the commission can extend that qualification period on request.⁵

If spending runs higher than what was originally approved, file Form D, the Request for Additional Reservation of Incentive Funds, before incurring the extra cost. The Grants Committee must approve any increase in advance; without pre-approval, the overage will not qualify for the rebate.⁷

Getting Paid After the Wrap

When Tennessee spending is complete, the production company hires an independent certified public accountant to review qualified expenditures and issue an Accountant’s Report. The CPA does not need to be based in Tennessee but must be licensed and have completed a successful AICPA peer review in the most recent reporting cycle.⁹

The production then submits Form C, the Incentive Application, with the CPA’s report. The Department of Economic and Community Development’s Internal Audit Division performs its own review and may adjust the reported figures. After everything clears, payment is issued by direct deposit.⁸

The state can also run its own independent audit using a CPA it employs or retains. If discrepancies turn up, qualified expenditures can be adjusted down and the grant reduced. Clean, contemporaneous records drive the final payment amount.

Limits to Plan Around

Two features of Tennessee’s program shape how producers should think about it. First, the F&E credit is not transferable and not refundable. A production company with little or no Tennessee tax liability cannot sell the credit for cash; it carries forward for up to 15 years or expires. For most single-project productions, the 25% grant is the real money.

Second, approval is discretionary. The commissioners decide project by project based on the state’s best interests, so hitting the minimum spend does not guarantee an award. An application that documents local hiring, vendor relationships, and community impact gives the Grants Committee more to work with.

1
Tennessee Entertainment Commission. Tennessee Film and Television Incentives
2
Justia. Tennessee Code 67-4-2109
3
Tennessee Entertainment Commission. F&E Tax Credit
4
Tennessee Department of Economic and Community Development. Tennessee Entertainment Commission Launches New Incentive Program
5
Tennessee Entertainment Commission. TEC Production Incentive Guidelines
6
Justia. Tennessee Code 67-4-2109
7
Tennessee Entertainment Commission. Grant Rebate
8
Tennessee Entertainment Commission. Get Started
9
Tennessee Secretary of State. Tennessee Film, Entertainment, and Music Commission Production Incentive Rules