The credit was designed to discourage runaway productions that film outside the US. “In effect, the IRS decision means there is less money for other production costs because participations and residuals must be included in the total. The decision could also potentially hurt low-budget films that become hits as participations and residuals are paid on revenue the film earns. A big hit could cause the film to rise above the tax credit limit, triggering a fine or other retaliation by the IRS.”