Bill Text: HI SB401 | 2014 | Regular Session | Introduced

---

Bill Title: Motion Picture, Digital Media, and Film Production Income Tax Credit

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2013-12-18 - Carried over to 2014 Regular Session. [SB401 Detail]

Download: Hawaii-2014-SB401-Introduced.html

---

THE SENATE	S.B. NO.	401
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to taxation.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that there is a compelling state interest to:

     (1)  Establish a substantive jobs creation program to promote the training and advancement of local residents; and

     (2)  Increase the current motion picture, digital media, and film production income tax credit.

     SECTION 2.  Section 235-17, Hawaii Revised Statutes, is amended to read as follows:

     "§235‑17  Motion picture, digital media, and film production income tax credit[.]; work and infrastructure incentive income tax credit; qualified persons crew training and advancement program rebate.  (a)  Any law to the contrary notwithstanding, there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, an income tax credit which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.  The amount of the credit shall be:

     (1)  [Fifteen] Twenty per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of over seven hundred thousand; or

     (2)  [Twenty] Twenty-five per cent of the qualified production costs incurred by a qualified production in any county of the State with a population of seven hundred thousand or less.

     (b)  In addition to the credits described in subsection (a), beginning on or after July 1, 2013, and ending prior to January 1, 2018, the following credits shall apply:

     (1)  Work credit:  Five per cent of the qualified production costs incurred by a qualified production in any county of the State; provided that the qualified production films at least fifty per cent of principal photography in the State or films at least nine consecutive episodes of a television program in a calendar year in the State; and

     (2)  Infrastructure incentive credit:  Ten per cent of the qualified production costs incurred by a qualified production in any county of the State; provided that the production qualifies for a credit under paragraph (1) and:

         (A)  For a qualified production with a budget of $30,000,000 or less, the qualified production shall build a set and film for a minimum of one week at a qualified production facility; and

         (B)  For a qualified production with a budget of more than $30,000,000, the qualified production shall build a set and film for a minimum of two weeks at a qualified production facility.

     (c)  There shall be a qualified persons crew training and advancement program rebate that shall be equal to fifty per cent of the hourly wages of each resident participant in a qualified persons crew training and advancement program, and if incurred by a qualified production in any county of the State, a taxpayer claiming a rebate under this section shall be reimbursed up to the first nine hundred hours physically worked by the qualifying crew member in a specialized craft position.

     This program shall be supported by the application fee paid by a qualified production.  To qualify for a rebate under this subsection, a taxpayer shall hire a minimum of five qualified persons as trainees on each qualified production.

     A trainee that participates in this program shall be trained by a trainer on a qualified production, who is proficient at the specialized craft position.  Once a trainee successfully completes the program and any applicable union requirements, the trainee shall be added to the Hawaii qualified crew roster, the main source for hiring resident crew.

     (d)  A qualified production occurring in more than one county may prorate its expenditures based upon the amounts spent in each county, if the population bases differ enough to change the percentage of tax credit.

     In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified production costs incurred by the entity for the taxable year.  The cost upon which the tax credit is computed shall be determined at the entity level.  Distribution and share of credit shall be determined by rule.

     If a deduction is taken under section 179 (with respect to election to expense depreciable business assets) of the Internal Revenue Code of 1986, as amended, no tax credit shall be allowed for those costs for which the deduction is taken.

     The basis for eligible property for depreciation of accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed.

     [(b)] (e)  The [credit] credits allowed under [this section] subsection (a) shall be claimed against the net income tax liability for the taxable year[.] in which the credit is claimed.  For the purposes of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.

     [(c)] (f)  If the qualified production tax credit under [this section] subsection (a) exceeds the taxpayer's income tax liability, the excess of credits over liability shall be refunded to the taxpayer; provided that no refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1[.]; provided further that the State shall not be obligated to make payment earlier than eighteen months from the date of the end of principal photography of the qualified production.

     All claims, including any amended claims, for tax credits under [this section] subsection (a) shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     [(d)] (g)  To qualify for [this] a tax credit[,] under subsection (a), a production shall:

     (1)  Meet the definition of a qualified production specified in subsection [(l);] (o);

     (2)  Have qualified production costs totaling at least $200,000;

     (3)  Provide the State, at a minimum, a shared-card, end-title screen credit, where applicable;

     (4)  Provide evidence of reasonable efforts to hire local talent and crew; and

     (5)  Provide evidence of financial or in-kind contributions or educational or workforce development efforts, in partnership with related local industry labor organizations, educational institutions, or both, toward the furtherance of the local film and television and digital media industries.

     [(e)] (h)  On or after July 1, 2006, no qualified production cost that has been financed by investments for which a credit was claimed by any taxpayer pursuant to section 235-110.9 is eligible for credits under this section.

     [(f)] (i)  To receive [the] a tax credit[,] under subsection (a), the taxpayer shall first prequalify the production for the credit by registering with the department of business, economic development, and tourism during the development or preproduction stage.  Failure to comply with this provision may constitute a waiver of the right to claim the credit.

     [(g)] (j)  The director of taxation shall prepare forms as may be necessary to claim a credit under this section.  The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

     [(h)] (k)  Every taxpayer claiming a tax credit under [this section] subsection (a) for a qualified production shall, no later than ninety days following the end of each taxable year in which qualified production costs were expended[, submit]:

     (1)  Submit a written, sworn statement to the department of business, economic development, and tourism, identifying:

     [(1)] (A)  All qualified production costs as provided by subsection (a), if any, incurred in the previous taxable year;

     [(2)] (B)  The amount of tax credits claimed pursuant to this section, if any, in the previous taxable year; and

     [(3)] (C)  The number of total hires versus the number of local hires by category (i.e., department) and by county[.]; and

     (2)  Pay an application fee in the amount equal to:

         (A)  One-half of one per cent of the qualified production costs; or

          (B)  $75,000;

          whichever is less; provided that any deposited amount that is made pursuant to this subsection shall be returned if the production does not qualify for the tax credit.  These funds shall be administered by the department of business, economic development, and tourism for the purposes of supporting the qualified persons crew training and advancement program rebate and administration of the State's film commission.

     [(i)] (l)  The department of business, economic development, and tourism shall:

     (1)  Maintain records of the names of the taxpayers and qualified productions thereof claiming the tax credits under subsection (a);

     (2)  Obtain and total the aggregate amounts of all qualified production costs per qualified production and per qualified production per taxable year; and

     (3)  Provide a letter to the director of taxation specifying the amount of the tax credit per qualified production for each taxable year that a tax credit is claimed and the cumulative amount of the tax credit for all years claimed.

     Upon each determination required under this subsection, the department of business, economic development, and tourism shall issue a letter to the taxpayer, regarding the qualified production, specifying the qualified production costs and the tax credit amount qualified for in each taxable year a tax credit is claimed.  The taxpayer for each qualified production shall file the letter with the taxpayer's tax return for the qualified production to the department of taxation.  Notwithstanding the authority of the department of business, economic development, and tourism under this section, the director of taxation may audit and adjust the tax credit amount to conform to the information filed by the taxpayer.

     [(j)] (m)  Total tax credits claimed per qualified production shall not exceed [$8,000,000.] $25,000,000.

     [(k)] (n)  Qualified productions shall comply with subsections [(d), (e), (f), and (h).] (g), (h), (i), and (k).

     [(l)] (o)  For the purposes of this section:

     "Commercial":

     (1)  Means an advertising message that is filmed using film, videotape, or digital media, for dissemination via television broadcast or theatrical distribution;

     (2)  Includes a series of advertising messages if all parts are produced at the same time over the course of six consecutive weeks; and

     (3)  Does not include an advertising message with Internet‑only distribution.

     "Digital media" means production methods and platforms directly related to the creation of cinematic imagery and content, specifically using digital means, including but not limited to digital cameras, digital sound equipment, and computers, to be delivered via film, videotape, interactive game platform, or other digital distribution media (excluding Internet-only distribution).

     "Post production" means production activities and services conducted after principal photography is completed, including but not limited to editing, film and video transfers, duplication, transcoding, dubbing, subtitling, credits, closed captioning, audio production, special effects (visual and sound), graphics, and animation.

     "Production" means a series of activities that are directly related to the creation of visual and cinematic imagery to be delivered via film, videotape, or digital media and to be sold, distributed, or displayed as entertainment or the advertisement of products for mass public consumption, including but not limited to pre-production related activities, scripting, casting, set design and construction, transportation, videography, photography, sound recording, interactive game design, and post production.

     "Qualified person" means a person who has been domiciled and has filed a resident income tax return in the State for at least the preceding two years and resides in the State for at least six months per year.

     "Qualified person crew training and advancement program" means the development and operation of a training program for state job creation with a focus on film, video, television, and digital media production or post production, with a budget of $1,000,000 or greater.  Commercials or other short form formats that have a shooting schedule of less than eighteen days shall be exempt from the requirement to hire five qualified persons from this program.

     "Qualified production":

     (1)  Means a production, with expenditures in the State, for the total or partial production of a feature-length motion picture, short film, made-for-television movie, commercial, music video, interactive game, television series pilot, single season (up to twenty‑two episodes) of a television or reality television series regularly filmed in the State (if the number of episodes per single season exceeds twenty‑two, additional episodes for the same season shall constitute a separate qualified production), television special, single television episode that is not part of a television series regularly filmed or based in the State, national magazine show, or national talk show.  For the purposes of subsections (d) and (j), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and

     (2)  Does not include:  daily news; public affairs programs; non-national magazine or talk shows; televised sporting events or activities; productions that solicit funds; productions produced primarily for industrial, corporate, institutional, or other private purposes; and productions that include any material or performance prohibited by chapter 712.

     "Qualified production costs" means the costs incurred by a qualified production within the State that are subject to the general excise tax under chapter 237 or income tax under this chapter and that have not been financed by any investments for which a credit was or will be claimed pursuant to section 235‑110.9.  Qualified production costs include but are not limited to:

     (1)  Costs incurred during preproduction such as location scouting and related services;

     (2)  Costs of set construction and operations, purchases or rentals of wardrobe, props, accessories, food, office supplies, transportation, equipment, and related services[;] that are not available in the State; provided that the services shall be qualified only if they are obtained through an existing resident vendor that provides similar services, and a mark-up and general excise tax are paid upon the services;

     (3)  Wages or salaries of [cast, crew,]:

         (A)  Above-the-line crew (cast, directors, producers, and writers) and musicians;

         (B)  Below-the-line resident crew; and

         (C)  Below-the-line nonresident crew; provided that a waiver is granted by the applicable local union or guild and certified by the Hawaii film office; provided further that a waiver shall be issued when a resident crew from the Hawaii qualified crew roster prepared by the local unions, guilds, and the Hawaii film office is not available or proficient at a specialized craft position;

     (4)  Costs of photography, sound synchronization, lighting, and related services;

     (5)  Costs of editing, visual effects, music, other post-production, and related services;

     (6)  Rentals and fees for use of local facilities and locations;

     (7)  Rentals of vehicles and lodging for cast and crew;

     (8)  Airfare for flights to or from Hawaii, and interisland flights;

     (9)  Insurance and bonding;

    (10)  Shipping of equipment and supplies to or from Hawaii, and interisland shipments; and

    (11)  Other direct production costs specified by the department in consultation with the department of business, economic development, and tourism.

     "Qualified production facility" means:

     (1)  A sound stage, built after July 1, 2013, with development costs of at least $10,000,000; or

     (2)  An existing sound stage, warehouse, or other building structure that has been renovated after July 1, 2013, with capital improvement costs equal to at least $10,000,000;

for the purpose of renting production or filming space to qualified productions.  The taxpayer shall provide reasonable evidence to verify that the development or capital improvement costs incurred for the facility satisfy the threshold amounts set forth above."

     SECTION 3.  Act 88, Session Laws of Hawaii 2006, is amended by amending section 4 to read as follows:

     "SECTION 4.  This Act shall take effect on July 1, 2006; provided that:

     (1)  Section 2 of this Act shall apply to qualified production costs incurred on or after July 1, 2006, and before January 1, [2016;] 2018; and

     (2)  This Act shall be repealed on January 1, [2016,] 2018, and section 235-17, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2013; provided that:

     (1)  Section 2 shall apply to taxable years beginning after December 31, 2012; and

     (2)  This Act shall be repealed on January 1, 2018.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Motion Picture, Digital Media, and Film Production Income Tax Credit

 

Description:

Amends the motion picture, digital media, and film production income tax credit by (1) adding additional work and infrastructure incentive credits; (2) establishing a qualified persons crew training and advancement program rebate; (3) requiring the payment of a fee to apply for the tax credit; (4) increasing the cap amount of the tax credit; and (5) requiring that a waiver be granted to include the wages of nonresident crew in qualified production costs.  Sunset 01/01/2018.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.