CAVCO Public Notice 2014-01

NOTE: This public notice is for reference only. Please read the Canadian Film or Video Production Tax Credit (CPTC) application guidelines for the most current information on this topic.

Gatineau, August 29, 2014

Lead performer policy and clarification of the "documentary exception"

This public notice addresses comments received in response to CAVCO Public Notice 2013-02 and outlines the final policy for how the Canadian Audio-Visual Certification Office (CAVCO) will determine which performers are eligible for lead performer points for the Canadian Film or Video Production Tax Credit (CPTC), as of the stated coming-into-force date.

Section A: Preamble

Purpose

  1. The purpose of the Lead Performer Policy is to clearly outline how CAVCO determines whether a performer in a production is a "lead" performer for the purpose of the CPTC. This policy document will also discuss the "documentary exception" and how the requirement for a Canadian lead performer applies to documentaries. The final policy takes into account comments received in response to CAVCO Public Notice 2013-02 and provides a coming-into-force date after which all principles outlined in this policy will be rigorously applied.

Background

  1. The CPTC is a program administered pursuant to the rules of section 125.4 of the Income Tax Act ("Act") and section 1106 of the Income Tax Regulations ("Regulations"). All requirements related to the lead performer position are set out in the Regulations, the relevant sections of which can be found in the Appendix at the end of this document.
  2. To be eligible for certification under the CPTC, a production must obtain at least 6 out of a possible 10 Canadian content points for the Canadian key creative personnel that are involved in the production. There is an exception to this for documentaries, which is addressed in the policy starting at paragraph 32. There is also a requirement that at least one point be granted for the lead performer with the highest remuneration or for the lead performer with the second highest remuneration. Points are allotted to episodes in a series on a per-episode basis, and each episode in a series must meet the minimum points requirement.

CAVCO Public Notice 2013-02 - Considerations

  1. CAVCO received 15 submissions in reply to the call for comments. All comments were taken into consideration in drafting the final policy. Several sections of the policy have been re-written to clarify misunderstandings stemming from the original wording and to add more details where possible. It should be noted that there were suggestions made in some submissions that would require changes to the Income Tax Regulations. Given that CAVCO must work within the parameters of the existing Regulations and that potential changes to the Regulations were beyond the scope of this consultation, suggestions of this nature are not addressed in this document.
  2. Some of the issues raised are discussed below, while others have been addressed directly in the final policy statement.
  3. The Regulations use the words "actor" and "actress" in defining a lead performer, and some respondents commented that the fact that these specific words are used should preclude CAVCO from ever considering individuals that are not professional actors to be lead performers. CAVCO applies a broad reading of many expressions in the Act or the Regulations in the interest of furthering the objectives of the CPTC and to ensure the program remains relevant to the current state of the industry. This approach is consistent with modern rules of statutory interpretation and allows for the certification of a larger number of productions. It has been a longstanding practice for CAVCO to consider individuals that may not be actors as lead performers based on their remuneration, billing, and time on screen, as stipulated in the Regulations. This is outlined clearly in the current CPTC Guidelines and one of the key purposes of this policy is to further elaborate on and clarify CAVCO's position on this point.
  4. Respondents requested more specificity and certainty with respect to how remuneration, billing, and time on screen are assessed by CAVCO. As much detail as possible regarding CAVCO's assessment of these three elements has been included in the final policy, along with examples in Annex A. The examples are not meant to be additional criteria, but rather an illustration of how the policy applies in the context of specific situations. Consideration was given to establishing absolute thresholds (such as a minimum time on screen to qualify as a lead performer), but it would be inappropriate to reduce a creative endeavour to a mathematical formula, and equally inappropriate to remove CAVCO's ability to draw conclusions on a case-by-case basis based on all of the facts at hand.
  5. Some respondents felt that the distinction between documentaries and lifestyle/human interest productions, and the manner in which lead performers are assessed for each genre, is unclear. Differentiating whether a production is a documentary or a lifestyle/human interest production is not essential to the determination of whether there are any lead performers in the production, as there may be lead performers in productions of either genre. For instance, in either genre, if any individual acts as a host (in the sense of being on-screen and walking the viewer through the story) or a narrator, their performance will be evaluated to determine if it is a lead performance.
  6. A couple of respondents raised questions about "observational documentaries", however no definition or elaboration on exactly what was meant by this term was included in any submissions. Given that there is no industry standard definition for this term (it is not mentioned anywhere in CAVCO, Canadian Radio-television and Telecommunications Commission (CRTC) or Canada Media Fund (CMF) guidelines, in particular), CAVCO will continue to use its existing general definitions to determine whether any given productions should be categorized as documentary or as lifestyle/human interest.
  7. While the definition of a documentary or lifestyle/human interest production is not the subject of this public notice, it seems worth noting, based on comments received, that CAVCO has the same definition and takes the same approach to documentaries as the CRTC; for a production to be categorized as a documentary, there must be "in-depth critical analysis of a specific subject or point of view." The CRTC uses "Category 2(b) Long-form documentary" for productions that meet the documentary definition and "Category 11(b) Reality television" for other types of programming that, while factual, have minimal in-depth critical analysis. CAVCO uses the lifestyle/human interest genre to capture this latter type of programming. Both genres are eligible for the CPTC.
  8. The CMF also has the same basic documentary definition as CAVCO and the CRTC, while providing further elaboration of the term so as to include, for instance, productions commonly known as "docusoaps", which are typically categorized by CAVCO under the lifestyle/human interest genre. As CAVCO and the CMF work independently to determine the genre of productions submitted for consideration under their respective programs, this different interpretive approach does not affect funding from the CMF, as long as the production otherwise qualifies for the CPTC.
  9. Following is the final Lead Performer Policy.

Section B: policy statement

  1. This policy does not apply to audio-visual treaty coproductions. If you are undertaking an audio-visual treaty coproduction, please refer to the applicable audio-visual coproduction treaty on Telefilm Canada’s website for requirements with respect to lead performers.

Determination of Lead Performers and Allotment of Points - Live Action

  1. As per subsection 1106(6) of the Regulations, at least one point must be allotted to either the lead performer with the highest remuneration or the lead performer with the second highest remunerationFootnote 1, for a production to qualify for the CPTC. These points are allotted to episodes in a series on a per-episode basis; the total number of allotted points may therefore vary by episode. Allotting a point to a lead performer is a two-step process.
  2. It is rare for a non-documentary production to not have a lead performer. In a case where CAVCO reviews a particular production and concludes that there are no lead performers, then there is no requirement to have a lead performer point to be eligible for certification (though the production must still have at least six points).

Step 1 - Are there lead performers?

  1. The first step is to determine who the lead performers are in a production. There may not be any lead performers, or there could be several. There is no ranking of performers at this step and their citizenship is not taken into account. There is only a determination of which individuals, if any, are giving lead performances. As per paragraph 1106(8)(a) of the Regulations,

    "a lead performer in respect of a production is an actor or actress who has a leading role in the production having regard to the performer's remuneration, billing and time on screen,"

  2. It is important to note that in practice the three elements of remuneration, billing, and time on screen do not always run in parallel. For example, the performer with the highest remuneration could have the third longest screen time and receive the second highest billing.
  3. It is understood that non-fiction productions may not have an "actor or actress". However, this does not mean there are no performances being given or no leading roles. For example, hosts, narrators, dancers, singers, specialty act performers, featured experts, judges on a panel, and subjects in lifestyle/human interest productions will all be considered performers. The determination that needs to be made in these cases is whether they have a leading role and are, therefore, lead performers.
  4. Lead performers are the characters or individuals that carry the story in the production. As such, a performer who has only a minor or peripheral role will not be considered a lead performer by CAVCO. To be clear, it is not acceptable to insert a Canadian performer into a minor role and claim them as a lead performer for the purpose of meeting the requirement of subsection 1106(6) of the Regulations.
  5. For additional clarity, a minor role will not be considered a lead performance, even if the character/individual in question may be considered crucial to a pivotal plot point or is otherwise integral to the production. This approach is consistent with the fact that the importance of an individual's role is not listed in paragraph 1106(8)(a) of the Regulations as a factor to be considered in determining who the lead performers are in a production. While this does mean that a Canadian will not be allotted a key creative point for a minor role, it also means that a non-Canadian will not be considered a lead performer when they are in a minor role.
  6. The elements of remuneration, billing, and time on screen are not necessarily weighed equally in making a determination of lead performance. Following are some of the factors that CAVCO considers with respect to each element.
  7. Remuneration - For the purpose of the evaluation of lead performers, CAVCO considers direct or indirect financial compensation as well as additional benefits, residuals, contingent compensation, travel or living expenses and all similar expenses incurred in relation to an individual. The remuneration for a performance must not be allocated to other duties to make it appear lower (e.g. by entering into a second contract for consulting or other services). While there is no minimum threshold for remuneration for a lead performance and no requirement for lead performers to be paid equally or have similar remuneration, the relative remuneration of performers will be used as an indicator in determining whether an individual is a lead performer or not. There are many factors that come into play when determining remuneration for a performer and remuneration (either relative or absolute) will never be used in isolation to say that a given performer is or is not a lead performer. However, it can be looked at in combination with the other two elements to either support or refute the notion that a given performer is a lead performer.
  8. Billing - The primary consideration for this element is how the performers are billed in the screen credits. For non-fiction productions in particular, CAVCO will also consider how the claimed lead performers are featured in publicity for the production. For example, if the claimed first lead is promoted heavily in connection with the production and the claimed second lead is only promoted minimally or not at all, this will be used as an indicator that the claimed second lead may not truly be a lead performer. The same principle applies where a claimed first lead is not promoted at all while another individual or individuals are heavily promoted as the stars/featured performers in the production. While it is understood that producers are not always in control of the publicity surrounding a production, experience has shown that a review of the publicity for a non-fiction production will often support preliminary conclusions based on an evaluation of the time on screen element. Information found in publicity will never be used on its own to conclude that an individual is or is not a lead performer.
  9. Time on screen - While there is no set minimum time on screen for a performer to be considered a lead performer, CAVCO does consider the total time of the performance in determining whether the role should be considered a lead performance or a minor role. Time spent in the background of a scene will not be counted towards the total time on screen.
  10. Generally speaking, the "time on screen" element is a very important factor in the determination of whether a performance is a lead performance. It should be obvious when viewing the production who the lead performers are. Remuneration and billing are expected to be roughly in line with what is seen on screen.
  11. In considering all of the above, CAVCO examines the claims made by the applicant with respect to which performers are leads, while also considering performers not claimed as lead performers to determine if they should, in fact, be considered leads.

Step 2 - Who are the lead performers with the highest and second highest remuneration?

  1. Subparagraphs 1106(5)(a)(iii) and (iv) of the Regulations read as follows:
    1. for the lead performer for whose services the highest remuneration was payable, one point,
    2. for the lead performer for whose services the second highest remuneration was payable, one point,
  2. Therefore, once the lead performers in a production have been established as per Step 1, the remuneration of each individual is used to rank them in order of highest to lowest paid. A point is allotted for any Canadian determined to have the highest or second highest remuneration. At this step, the time on screen and billing are no longer considered; only remuneration is relevant.
  3. In cases where a Canadian and a non-Canadian lead performer are remunerated equally, the non-Canadian lead performer will be ranked above the Canadian. For example, if the total remuneration for Canadian lead performer A is $50,000 and the remuneration for Canadian lead performer B and non-Canadian lead performer C is $40,000 each, a point will go to Canadian A as the highest paid, and there will be no point allotted for the second highest paid since that position will be deemed to be occupied by the non-Canadian. Canadian B will be ranked third. As another example, if there are three lead performers all being remunerated equally at $50,000 each but two of them are non-Canadian and one is Canadian, the two non-Canadians will be ranked first and second in remuneration, with the Canadian third. Therefore no lead performer points will be allotted and the production will be ineligible. This position is in line with the objectives of the CPTC and consistent with the long-standing requirement that a Canadian lead performer receive higher remuneration than a non-Canadian to obtain a lead performer point.
  4. Important Note: Before the lead performers are ranked based on remuneration, it must first be established that the performances in question are lead performances, as per Step 1. If a performer receives higher remuneration than other performers but is determined to not have a leading role, they will not be allotted a lead performer point. Likewise, if there are only one or two performers in a production, they are not automatically considered lead performers and allotted points, as they must have initially been determined to be lead performers in Step 1. Billing and time on screen are not taken into consideration at Step 2 even when remuneration is equal because the Regulations specifically state that the allotment of points is based solely on the remuneration of the lead performers.

Determination of Lead Performer/Lead Voice and Allotment of Point – Animation

  1. For animation productions there is only one point available for the lead voice, which can be allotted to the lead voice that was paid either the highest or second highest remuneration. As per paragraph 1106(7)(b) of the Regulations, one point must be allotted to either the lead or second lead voice for the production to qualify.
  2. If there is no lead voice in an animated production, then there is no requirement to have the lead voice point to be eligible for certification (though the production must still have at least six points).
  3. As with live action productions, allotting a point to a lead voice is a two-step process. Step 1 of determining who the lead voices are is the same as the determination of lead performances for live action productions, except that billing is not one of the considerations. As per paragraph 1106(8)(b) of the Regulations,

    "a lead voice in respect of an animation production is the voice of the individual who has a leading role in the production having regard to the length of time that the individual's voice is heard in the production and the individual's remuneration".

  4. As per subparagraph 1106(5)(b)(ii) of the Regulations, allotment of the point is based on remuneration of the lead voice(s), as with Step 2 for live action productions. Please note that there is only one point available for first or second highest remunerated lead voice; even if both the first and second highest remunerated lead voices are Canadian, only one point can be allotted. As outlined in paragraph 17 above for live action productions, in a case where a Canadian and a non-Canadian lead voice are remunerated equally, the non-Canadian will be ranked ahead of the Canadian.

Guest Appearances and Cameos

  1. A guest appearance is a substantial role in one or a few episodes of a series performed by an individual who is not a part of the regular cast. A guest performer will be evaluated using the same criteria as other performers outlined above to determine whether the performance in question is a lead performance. If the performance is a lead performance, then the remuneration of that performer will be compared to the remuneration of the other lead performers to determine if they are the first or second lead for the purpose of allotting key creative points. Points are allotted on a per-episode basis.
  2. A cameo is a brief appearance of a known person in a production, generally in a single scene. By definition this would be a minor role and the individual in question would not be considered a lead performer. If there is any uncertainty about whether a role is, in fact, a cameo, it will be evaluated using remuneration, billing, and time on screen.

Lead Performer Issues Related to Non-Fiction Genres

  1. In a non-fiction series, any distinct, recurring individual who carries the story or upon whom the story is based will generally be considered a lead performer. This is the case even if the production is unscripted and/or if the individual is being followed going about their regular life or doing their job (unless they are the subject of a biographical documentary).
  2. In a non-fiction series where different individuals are receiving help from a specialist in each episode (for example a home design show), they will not be considered lead performers.
  3. In a competitive lifestyle/human interest production that eliminates participants over the course of a series, the participants will not be considered lead performers.
  4. The lead performer(s) for live theatre, musicals, opera, dance, and other similar productions are determined in the same fashion as for other live action productions. Please also see paragraph 30 with respect to remuneration for live performances.
  5. In a performing arts production featuring a single solo artist, that artist will be a lead performer. For a performance by a single band, the band leader (as determined by contract) is the lead. For performances by an orchestra (with no featured solo artist) the lead is generally the concert master. Please also see paragraph 30 with respect to remuneration for live performances.
  6. If a production is a recording of a live performance that is taking place regardless of the fact that it is being recorded, the remuneration that can be claimed for the production and considered for the purpose of allotting lead performer points is the amount that the performer is receiving for being recorded, not for the actual live performance. For example, an actor will be paid a fee for their performance in a play over the course of a two-week run. If one of those performances is recorded, the actor will be paid a supplementary fee for the recording. It is only this supplementary fee for the recorded performance that can be counted as remuneration in the production budget and for the purpose of allotting lead performer points.

Lead Performer Points for Productions with different versions

  1. Where two or more versions of a production are produced concurrently (prior to the end of the post-production stage), the lead performers for all versions must be Canadian to receive the required lead performer point(s). For example, the narrators of a documentary with both French and English versions must both be Canadian.

Clarification of the "Documentary Exception"

  1. Subsection 1106(9) of the Regulations states that if a documentary production has less than six points due to the fact that certain key creative positions are unoccupied, then that production is still eligible for certification if all occupied key creative positions are occupied by Canadians.
  2. This provision of the Regulations applies only to documentary productions that have less than six points, and has no bearing on the requirement for a Canadian lead performer. Documentaries can, and often do, have lead performers. For example, a host, narrator, or other individual that is seen or heard throughout the production and advances the storyline is usually considered a lead performer. This assessment is carried out in the usual manner for determining lead performers in live-action productions outlined in Step 1, above. If there is a lead performer in a documentary, they must be Canadian. If there are two lead performers, one of them must be Canadian.
  3. While the subject of a biographical documentary would not be considered a performer, individuals featured in multiple episodes of a lifestyle/human interest series generally are, even if they are being followed as they go about their "real life".
  4. Voice-over by a subject or an interviewee in a documentary (i.e. content from an interview that is heard over other images rather than in sync) will not be considered narration or a performance. However, if an interviewee is also providing scripted narration for the production, the total time on screen (for on-screen interview, voice over, and narration) will be considered along with billing and remuneration in evaluating whether the individual should be considered a lead performer.
  5. As with all genres of production, if there is no lead performer then there is no requirement to have a lead performer point to be eligible for certification.

Provision of DVDs for a Part A CPTC Application

  1. While a DVD of a production is generally only required at the Part B stage, CAVCO does reserve the right to request a DVD at the Part A application stage should there be any questions that can only be resolved by viewing the actual production. With the release of this policy, it will become more common for tax credit officers to request a DVD copy of at least one episode (if that is all that is available at the time; a rough cut is acceptable) for any non-fiction series for which a Part A application is being reviewed. This is to ensure that the production is certified as the correct genre, and that there are no lead performer issues that could lead to the revocation of a certificate at the Part B stage.

Policy Review

  1. CAVCO will continuously monitor the effectiveness of this policy to ensure it is meeting the CPTC program objectives.

Coming Into Force

  1. This policy will be enforced for all productions that start principal photography on or after March 1, 2015.
  2. For a production where everyone involved is Canadian, adding, removing, or re-arranging leads will not make any difference to the eligibility of the production or to the ultimate points total (8/8 with no leads or 10/10 with two leads amounts to the same thing - they are both considered 10/10 productions). However, in the interest of consistency and avoiding confusion, effective immediately, tax credit officers will strive to ensure that the lead performers are always correctly identified in an application, even if all performers are Canadian and there is no material impact on certification or the key creative point total.
  3. Potential applicants are encouraged to contact CAVCO if they have any questions about this public notice or if they would like to discuss how it relates to their production. Send questions by email (PCH.bcpacsa-cavcosa.PCH@canada.ca) or call us toll-free at 1-888-433-2200 (Teletypewriter toll-free: 1-888-997-3123).

Lead Performer Policy - Annex A

Examples of Performances that are not Lead Performances

  1. Instances in which a co-host is actually an individual operating in a minor role of expertise, e.g. the carpenter in a home renovation show, the nutrition expert in a food show, a technical expert on a technology-oriented show, or a clothes/hair/makeup consultant on a fashion or make-over show. These will not be considered lead performances if the individual in question:
    • only appears on screen for a short period of time,
    • does not interact with the individuals being helped,
    • only appears in a short segment with or without the main host, or
    • does not make any significant contribution.
  2. A narrator in a minor role that adds little or no additional information or commentary and does not help advance the storyline, e.g. in a television production where the "narration" serves primarily to maintain continuity or to buffer commercial breaks. This type of voice-over does not provide anything in-depth, but rather serves only to situate or resituate the viewer within the context of the show. In such cases the individual is not truly a narrator, but is more like an announcer. Announcers are not lead performers.
  3. A host of a performing arts, variety, or stand-up comedy production who does nothing more than introduce the performer(s).
  4. A minor role in a fiction production, even if that character is crucial to the narrative. A minor role is still a minor role even if the character in question is responsible for a pivotal plot point.
  5. A participant in an elimination-style series.
  6. Background performers that serve only to add a visual element to a narrated storyline (often re-creations of actual events), particularly when they are not remunerated and billed as lead performers.
  7. Subjects of a biographical documentary and interviewees in a documentary.

Examples of Performances that generally are Lead Performances

  1. In a non-fiction series, individuals that are being followed throughout the course of the series while doing their job or going about their daily lives are likely to be considered lead performers.
  2. Hosts and judges on elimination-style series will often be considered lead performers.
  3. Hosts, narrators, or other individuals with a similarly significant on-screen presence in a documentary. For example, Michael Moore in "Sicko", Morgan Spurlock in "Supersize Me", and Morgan Freeman in "March of the Penguins."

Appendix- Relevant sections of the Income Tax Regulations

1106

Canadian Film or Video Production

  1. Subject to subsections (6) to (9), for the purposes of section 125.4 of the Act, this Part and Schedule II, “Canadian film or video production” means a film or video production, other than an excluded production, of a prescribed taxable Canadian corporation in respect of which the Minister of Canadian Heritage has issued a certificate (other than a certificate that has been revoked under subsection 125.4(6) of the Act) and that is
    1. a treaty co-production; or
    2. a film or video production
      1. whose producer is a Canadian at all times during its production,
      2. in respect of which the Minister of Canadian Heritage has allotted not less than six points in accordance with subsection (5),
  2. For the purposes of this Division, the Minister of Canadian Heritage shall allot, in respect of a film or video production
    1. that is not an animation production, in respect of each of the following persons if that person is an individual who is a Canadian,
      1. for the director, two points,
      2. for the screenwriter, two points,
      3. for the lead performer for whose services the highest remuneration was payable, one point,
      4. for the lead performer for whose services the second highest remuneration was payable, one point,
      5. for the art director, one point,
      6. for the director of photography, one point,
      7. for the music composer, one point, and
      8. for the picture editor, one point;
    2. that is an animation production, in respect of each of the following persons if that person is an individual who is a Canadian,
      1. for the director, one point,
      2. for the lead voice for which the highest or second highest remuneration was payable, one point,
      3. for the design supervisor, one point,
      4. for the camera operator where the camera operation is done in Canada, one point,
      5. for the music composer, one point, and
      6. for the picture editor, one point;
    3. that is an animation production, one point if both the principal screenwriter and the storyboard supervisor are individuals who are Canadians; and
    4. that is an animation production, in respect of each of the following places if that place is in Canada,
      1. for the place where the layout and background work is done, one point,
      2. for the place where the key animation is done, one point, and
      3. for the place where the assistant animation and in-betweening is done, one point.
  3. A production (other than a production that is an animation production or a treaty co-production) is a Canadian film or video production only if there is allotted in respect of the production two points under subparagraph (5)(a)(i) or (ii) and one point under subparagraph (5)(a)(iii) or (iv).
  4. An animation production (other than a production that is a treaty co-production) is a Canadian film or video production only if there is allotted, in respect of the production,
    1. one point under subparagraph (5)(b)(i) or paragraph (5)(c);
    2. one point under subparagraph (5)(b)(ii); and
    3. one point under subparagraph (5)(d)(ii).

Lead performer/screenwriter

  1. For the purposes of this Division,
    1. a lead performer in respect of a production is an actor or actress who has a leading role in the production having regard to the performer’s remuneration, billing and time on screen;
    2. a lead voice in respect of an animation production is the voice of the individual who has a leading role in the production having regard to the length of time that the individual’s voice is heard in the production and the individual’s remuneration; and
    3. where a person who is not a Canadian participates in the writing and preparation of the screenplay for a production, the screenwriter is not a Canadian unless the principal screenwriter is an individual who is otherwise a Canadian, the screenplay for the production is based upon a work authored by a Canadian, and the work is published in Canada.

Documentary Production

  1. A documentary production that is not an excluded production, and that is allotted less than six points because one or more of the positions referred to in paragraph (5)(a) is unoccupied, is a Canadian film or video production if all of the positions described in that paragraph that are occupied in respect of the production are occupied by individuals who are Canadians.

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