Bill Text: MI HB5878 | 2013-2014 | 97th Legislature | Introduced
Bill Title: State financing and management; funds; qualified film production tax credit; modify. Amends sec. 29h of 1984 PA 270 (MCL 125.2029h).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2014-10-02 - Printed Bill Filed 10/02/2014 [HB5878 Detail]
Download: Michigan-2013-HB5878-Introduced.html
HOUSE BILL No. 5878
October 1, 2014, Introduced by Rep. Walsh and referred to the Committee on Commerce.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending section 29h (MCL 125.2029h), as added by 2011 PA 291.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 29h. (1) The Michigan film office shall create and
operate the film and digital media production assistance program.
The film and digital media production assistance program may
provide funds to eligible production companies for direct
production
expenditures , Michigan personnel expenditures, crew
personnel
expenditures, or qualified
personnel expenditures for
state certified qualified productions.
(2) If the office receives applications that would exceed what
the office can award in any year, the office may prioritize that
application for funding in the subsequent year.
(3) The film and digital media production assistance program
shall provide for all of the following:
(a) Funding shall be provided only to reimburse direct
production
expenditures , Michigan personnel expenditures, crew
personnel
expenditures, or qualified
personnel expenditures.
(b) To be eligible to apply for funding, the eligible
production
company shall have direct production expenditures ,
Michigan
or qualified personnel expenditures, or a combination of
direct
production expenditures and Michigan qualified personnel
expenditures, of $100,000.00 or more.
(c) To be eligible to apply for funding, the eligible
production company shall not be delinquent in a tax or other
obligation owed to this state or be owned or under common control
of an entity that is delinquent in a tax or other obligation owed
to this state.
(d) For state certified qualified production expenditures
after
September 30, 2011, December
31, 2014, an agreement under
this section shall provide for funding equal to the sum of the
following:
(i) 27% 25% of direct production
expenditures and qualified
personnel expenditures.
(ii) Michigan personnel expenditures as follows:
(A)
32% after September 30, 2011 and before January 1, 2015.
(B)
27% after December 31, 2014.
(iii) Crew personnel expenditures as follows:
(A)
25% after September 30, 2011 and before January 1, 2013.
(B)
20% after December 31, 2012 and before January 1, 2014.
(C)
15% after December 31, 2013 and before January 1, 2015.
(D)
10% after December 31, 2014.
(iv) Qualified personnel expenditures as follows:
(A)
27% after September 30, 2011 and before January 1, 2015.
(B)
12% after December 31, 2014.
(ii)
(v) In
addition to the expenditures described in
subparagraphs
(i), (ii), (iii), and (iv), subparagraph
(i), 3%
of direct
production
expenditures and Michigan qualified
personnel
expenditures at a qualified facility or postproduction facility for
a qualified production produced at the facility.
(e)
Payments and compensation for all producers of a qualified
production
residing in this state shall not exceed 10% of the
direct
production expenditures and Michigan personnel expenditures
for
the qualified production.
(f)
Payments and compensation for all producers of a qualified
production
who are not residents of this state shall not exceed 5%
of
the direct production expenditures and Michigan personnel
expenditures
for the qualified production.
(e) (g)
A television show may submit an
application for no
more than 2 successive seasons, notwithstanding the fact that the
successive seasons have not been ordered. The successive season's
direct
production expenditure, Michigan qualified personnel
expenditure,
and nonresident above the line personnel expenditure ,
and
nonresident below the line crew expenditure amounts shall be
based on the current season's estimated expenditures. Upon the
completion of production of each season, a television show may
submit an application for no more than 1 additional season.
(f) (h)
As a separate and distinct part of
the film and
digital media production assistance program, the office may create
a program to directly support and promote qualified facilities and
other infrastructure throughout this state.
(g) (i)
That not less than 5% of the
funding awarded under
this section is awarded for postproduction expenditures for
qualified productions.
(4) An eligible production company intending to produce a
qualified production in this state may submit an application for
funding under this section to the Michigan film office. The request
shall be submitted in a form prescribed by the office and shall be
accompanied by an application fee equal to 0.2% of the funding
requested but not less than $200.00 and not more than $5,000.00 and
all of the information and records requested by the office. An
application fee received by the office under this subsection shall
be deposited in the Michigan film promotion fund. The office shall
not process the application until it is complete. The office shall
process each application within 21 days after the application is
complete as determined by the office. As part of the application,
the
company shall estimate direct production expenditures ,
Michigan
personnel expenditures, crew personnel expenditures, and
qualified personnel expenditures for an identified qualified
production. If the office determines to award funding under this
section to an eligible production company, the office with the
concurrence of the fund president shall enter into an agreement
under this section. The agreement shall include, but is not limited
to, all of the following:
(a) A requirement that the eligible production company
commence work in this state on the identified qualified production
within 90 days of the date of the agreement or else the agreement
shall expire. However, upon request submitted by the company based
on good cause, the office may extend the period for commencement of
work in this state for up to an additional 90 days.
(b) A statement identifying the company and the qualified
production that the company intends to produce in whole or in part
in this state.
(c) A unique number assigned to the qualified production by
the office.
(d) A requirement that the qualified production not depict
obscene matter or an obscene performance.
(e) If the qualified production is a long-form narrative film
production, a requirement that the qualified production include
within its presentation worldwide for the life of the qualified
production an acknowledgment as provided by the office that
promotes the pure Michigan tourism campaign or any successor
campaign. If the qualified production is a television show, a
requirement that the qualified production include within each
broadcast of 30 minutes or longer an acknowledgment as provided by
the office that promotes the pure Michigan tourism campaign or any
successor campaign. If the qualified production is a music video, a
requirement that the music video include an acknowledgment as
provided by the office that promotes the pure Michigan tourism
campaign or any successor campaign. If the qualified production is
an interactive game, a requirement that the qualified production
include with each unit distributed and online promotions an
acknowledgment as provided by the office that promotes the pure
Michigan tourism campaign or any successor campaign. If the
qualified production is a long-form narrative film production, the
office also may require that, if the qualified production is
distributed by digital video disc or other digital media for the
secondary market, the qualified production include a video between
30 and 60 seconds long in a form approved by the office that
promotes the pure Michigan tourism campaign or any successor
campaign.
(f) A requirement that the company provide the office with the
information and independent certification the office deems
necessary
to verify direct production expenditures , Michigan
personnel
expenditures, crew personnel expenditures, and qualified
personnel expenditures, and eligibility for funding under this
section, which may include a report of direct production
expenditures ,
Michigan personnel expenditures, crew personnel
expenditures,
and qualified personnel
expenditures for the
qualified production audited and certified by an independent
certified public accountant.
(g) If determined to be necessary by the office, a provision
for addressing expenditures in excess of those identified in the
agreement.
(5) In determining whether to award funding under this
section, the Michigan film office shall consider all of the
following:
(a) The potential that, in the absence of funding, the
qualified production will be produced in a location other than this
state.
(b) The extent to which the qualified production may have the
effect of promoting this state as a tourist destination.
(c) The extent to which the qualified production may have the
effect of promoting economic development or job creation in this
state.
(d) The extent to which state funding will attract private
investment for the production of qualified productions in this
state.
(e) The record of the eligible production company in
completing commitments to engage in a qualified production.
(f) The extent to which the qualified production will employ
Michigan residents.
(6) If the Michigan film office determines that an eligible
production company has complied with the terms of an agreement
entered into under this section, the office shall award funding as
provided in this section. A person that willfully submits
information under this section that the person knows to be
fraudulent or false shall, in addition to any other penalties
provided by law, be liable for a civil penalty equal to the amount
of funding provided to the person under this section. A penalty
collected under this section shall be deposited in the Michigan
film promotion fund.
(7) Information, records, or other data received, prepared,
used, or retained by the Michigan film office under this section
that are submitted by an eligible production company and considered
by the applicant and acknowledged by the office as confidential
shall not be subject to the disclosure requirements of the freedom
of information act, 1976 PA 442, MCL 15.231 to 15.246. Information,
records, or other data shall only be considered confidential to the
extent that the information or records describe the commercial and
financial operations or intellectual property of the company, the
information or records have not been publicly disseminated at any
time, and disclosure of the information or records may put the
company at a competitive disadvantage. For purposes of this
subsection, information or records that describe commercial and
financial operations do not include that portion of information or
records that include any expenses that qualify under this section
as direct production expenditures or qualified personnel
expenditures.
(8)
Not later than March 1, 2012, the The office shall produce
a performance dashboard for the assistance authorized by this
section. The performance dashboard shall be made available by the
office on the fund's website and shall be updated at least
annually. The performance dashboard shall include the following
measures:
(a) Direct and indirect economic impacts in this state of the
assistance authorized by this section.
(b) Direct and indirect job creation attributable to the
assistance authorized by this section.
(c) Direct and indirect private investment in this state
attributable to the assistance authorized by this section.
(d) Any other measures considered relevant by the office or
the Michigan film advisory council.
(e) The name of each eligible production company and the
amount of each incentive dispersed for each state certified
qualified production.
(9)
The Michigan film office shall not award funding after
September
30, 2017.
(9) Expenditures for above the line personnel shall not exceed
25% of the total of direct expenditures and qualified personnel
expenditures. Expenditures for below the line personnel shall not
exceed 50% of the total of direct expenditures and qualified
personnel expenditures. Direct expenditures shall not exceed 25% of
the total of direct expenditures and qualified personnel
expenditures.
(10) The legislature finds and declares that funding
authorized under this section to encourage diversification of the
economy, to encourage film production, to encourage investment, and
to encourage the creation of jobs in this state is a public purpose
and of paramount concern in the interest of the health, safety, and
general welfare of the citizens of this state. It is the intent of
the legislature that the economic benefits, film production,
investment, and the creation of jobs resulting from this section
shall accrue substantially within this state.
(11) The fund board may authorize the use of money
appropriated for the program authorized by this section for
administration of the program. However, the fund board shall not
use more than 4% of the annual appropriation for administering the
program authorized under this section.
(12)
Beginning on September 30, 2011 and at At the end of each
fiscal
year, thereafter, the commissioner shall certify
the total
amount of unclaimed certificates of completion, agreements where
work has not commenced as required in subsection (4), and
agreements for qualified productions the commissioner reasonably
believes will not be completed. Funding allocated for qualified
productions described in the preceding sentence may be reallocated.
(13) Personal services corporations or professional employer
organizations for the services of above the line personnel
receiving payments qualifying for funding under this section shall
be organized under Michigan law.
(14) (13)
As used in this section:
(a) "Above the line personnel" means a producer, director,
writer, actor, other than extras, or other similar personnel whose
compensation is negotiated prior to the start of the production.
(b) "Below the line crew" means persons employed by an
eligible production company for state certified qualified
production expenditures made after production begins and before
production is completed, including, but not limited to, a best boy,
boom operator, camera loader, camera operator, assistant camera
operator, compositor, dialogue editor, film editor, assistant film
editor, focus puller, Foley operator, Foley editor, gaffer, grip,
key grip, lighting crew, lighting board operator, lighting
technician, music editor, sound editor, sound effects editor, sound
mixer, steadicam operator, first assistant camera operator, second
assistant camera operator, digital imaging technician, camera
operator working with a director of photography, electric best boy,
grip best boy, dolly grip, rigging grip, assistant key for makeup,
assistant key for hair, assistant script supervisor, set
construction foreperson, lead set dresser, assistant key for
wardrobe, scenic foreperson, assistant propmaster, assistant audio
mixer, assistant boom person, assistant key for special effects,
stunt people, and other similar personnel. Below the line crew does
not include a producer, director, writer, actor, or other similar
personnel.
(c)
"Crew personnel expenditure" means an expenditure made in
this
state directly attributable to the production or development
of
a qualified production that is a transaction subject to taxation
in
this state and is a payment or compensation for nonresident
below
the line crew, talent, management, or labor, not to exceed
$2,000,000.00
for any 1 employee or contractual or salaried
employee
of a qualified production, including both of the
following:
(i) Payment of wages, benefits, or fees for talent,
management,
or
labor.
(ii) Payment to a personal services corporation or
professional
employer
organization for the services of a performing artist or
crew
member if the personal services corporation or professional
employer
organization is subject to taxation in this state on the
portion
of the payment qualifying for funding under this section
and
the payments received by the performing artist or crew member
that
are subject to taxation under the income tax act of 1967, 1967
PA
281, MCL 206.1 to 206.713, and are withheld and paid to this
state
in the amount provided under section 351 or 703 of the income
tax
act of 1967, 1967 PA 281, MCL 206.351 and 206.703.
(c) (d)
"Direct production
expenditure" means a development,
preproduction, production, or postproduction expenditure made in
this state directly attributable to the production or development
of a qualified production that is a transaction subject to taxation
in this state. Direct production expenditure does not include out-
of-state production costs that are made in this state even if the
costs are passed through a third-party company in this state or
payments made by an eligible production company to its parent
company, affiliate, subsidiary, or joint venture partner except
where the payments are for transactions entered into pursuant to
arm's-length negotiations and which reflect a commercially
reasonable price for the goods and services purchased. A direct
production expenditure must have true economic substance within the
state. Direct production expenditure does not include a prize
payable to participants in a game show; an expenditure for
entertainment, amusement, or recreation; or an expenditure of more
than $2,500.00 for the purchase of artwork or jewelry used in a
production. Direct production expenditure does not include a
Michigan
personnel expenditure, a qualified
personnel expenditure.
,
or a crew personnel expenditure. Direct
production expenditure
includes payments to vendors doing business in this state to
purchase or use tangible personal property in producing the
qualified production or to purchase services relating to the
production or development of the qualified production, including
all of the following:
(i) Production work, production equipment, production software,
development work, postproduction work, postproduction equipment,
postproduction software, set design, set construction, set
operations, props, lighting, wardrobe, makeup, makeup accessories,
photography, sound synchronization, special effects, visual
effects, audio effects, digital effects, film processing, music,
sound mixing, editing, interactive game development and
programming, and related services and materials.
(ii) Use of facilities or equipment, use of soundstages or
studios, location fees, and related services and materials.
(iii) Catering, food, lodging, and related services and
materials.
(iv) Use of vehicles, which may include chartered aircraft
based in this state used for transportation in this state directly
attributable to production of a qualified production, but may not
include the chartering of aircraft for transportation outside of
this state.
(v) Commercial airfare if purchased through a travel agency or
travel company based in this state for travel to this state or
within this state directly attributable to production or
development of a qualified production.
(vi) Insurance coverage or bonding if purchased from an
insurance agent based in this state.
(vii) Interest on a loan, if the entity from which the
financing is obtained is a public, private, or institutional entity
with the requisite level of physical presence in this state that is
not related to or affiliated with the eligible production company
or any above the line personnel or cast members, and whose
principal business activity is the lending of money to individuals
and businesses. In addition, the financing shall be a good faith
loan, payable by the eligible production company, evidenced by an
enforceable promissory note or other debt instrument with clear
repayment obligations and bearing a market-related rate of
interest.
(viii) Other expenditures for production of a qualified
production in accordance with generally accepted entertainment
industry practices.
(d) (e)
"Eligible production
company" or "company" means an
entity in the business of producing qualified productions or for
interactive games in the business of developing interactive games,
but does not include an entity that is more than 30% owned,
affiliated, or controlled by an entity or individual who is in
default on a loan made by this state, a loan guaranteed by this
state, or a loan made or guaranteed by any other state. For an
interactive game, an eligible production company need not possess
ownership of or legal control over all of the intellectual property
rights or other rights necessary to complete the qualified
production in its entirety nor be the same entity that distributes
or publishes the interactive game.
(e) (f)
"Made in this state"
means , for purposes of
subdivision
(c) only, all of the following:
(i) Tangible personal property and services acquired by the
eligible production company from a source within this state. If an
item of tangible personal property is not available from a source
within this state and a vendor with the requisite physical presence
in this state that regularly sells or leases property of that kind
obtains the property from an out-of-state vendor and sells or
leases it to an eligible production company, that expenditure is
considered made in this state and is a direct production
expenditure and not an out-of-state production cost.
(ii) Services wholly performed within this state.
(g)
"Michigan personnel expenditure" means an expenditure made
in
this state directly attributable to the production or
development
of a qualified production that is a transaction subject
to
taxation in this state and is a payment or compensation payable
to
below the line crew for below the line crew members who are
residents
of this state and above the line personnel for above the
line
personnel who are residents of this state, not to exceed
$2,000,000.00
for any 1 employee or contractual or salaried
employee
who performs service in this state for the production of a
qualified
production, including both of the following:
(i) Payment of wages, benefits, or fees.
(ii) Payment to a personal services corporation or
professional
employer
organization for the services of a performing artist or
crew
member if the personal services corporation or professional
employer
organization is subject to taxation in this state on the
portion
of the payment qualifying for funding under this section
and
the payments received by the performing artist or crew member
that
are subject to taxation under the income tax act of 1967, 1967
PA
281, MCL 206.1 to 206.713, are withheld and paid to this state
in
the amount provided under section 351 or 703 of the income tax
act
of 1967, 1967 PA 281, MCL 206.351 and 206.703.
(f) (h)
"Obscene matter or an obscene
performance" means
matter described in 1984 PA 343, MCL 752.361 to 752.374.
(g) (i)
"Postproduction
expenditure" means a direct
expenditure for editing, Foley recording, automatic dialogue
replacement, sound editing, special or visual effects including
computer-generated imagery or other effects, scoring and music
editing, beginning and end credits, negative cutting, soundtrack
production, dubbing, subtitling, or addition of sound or visual
effects. Postproduction expenditure includes direct expenditures
for advertising, marketing, or related expenses.
(h) (j)
"Postproduction facility"
means a permanent facility
within this state equipped for the postproduction of motion
pictures, television shows, or digital media production that meets
all of the following requirements:
(i) Includes at least 3,000 square feet of contiguous space.
(ii) Includes at least 8 work stations.
(iii) Has been a qualified film and digital media infrastructure
project from which an investment expenditure certificate was issued
under section 457 of the Michigan business tax act, 2007 PA 36, MCL
208.1457, or has been the location of a state certified qualified
production for which a postproduction certificate of completion was
issued under section 455 of the Michigan business tax act, 2007 PA
36, MCL 208.1455, or both.
(i) (k)
"Producer" means an
individual without regard to his
or her actual title or screen credit involved in or responsible for
any of the following:
(i) Funding for financing in whole or in part, or arranging for
the funding, or financing, of the qualified production.
(ii) Obtaining the creative rights to or the intellectual
property for development or production of the qualified production.
(iii) Hiring above the line personnel.
(iv) Supervising the overall production of the qualified
production.
(v) Arranging for the exhibition of the qualified production.
(j) (l) "Qualified
facility" means a permanent facility within
this state equipped for the production of motion pictures,
television shows, or digital media production that meets all of the
following requirements:
(i) Includes more than 1 soundstage.
(ii) Includes not less than 3,000 square feet of contiguous,
column-free space for production activities with a height of at
least 12 feet.
(iii) Includes any grid and sufficient built-in electric service
for shooting without the need of portable electric generators.
(iv) Has been a qualified film and digital media infrastructure
project for which an investment expenditure certificate was issued
under section 457 of the Michigan business tax act, 2007 PA 36, MCL
208.1457, or has been the location of a state certified qualified
production for which a postproduction certificate of completion was
issued under section 455 of the Michigan business tax act, 2007 PA
36, MCL 208.1455, or both.
(k) (m)
"Qualified personnel
expenditure" means an expenditure
made in this state directly attributable to the production or
development of a qualified production that is a transaction,
including per diem and lodging, subject to taxation in this state
and
is a payment or compensation for nonresident above the line
personnel,
talent, management, or labor, not to exceed
$2,000,000.00
for any 1 employee or contractual or salaried
employee
of a qualified production, including
both of the
following:
(i) Payment of wages, benefits, or fees for talent, management,
or labor.
(ii) Payment to a personal services corporation or professional
employer organization for the services of a performing artist or
crew member if the personal services corporation or professional
employer organization is subject to taxation in this state on the
portion of the payment qualifying for funding under this section
and the payments received by the performing artist or crew member
that are subject to taxation under the income tax act of 1967, 1967
PA 281, MCL 206.1 to 206.713, and are withheld and paid to this
state
in the amount provided under section 351 or 703 of the income
tax
act of 1967, 1967 PA 281, MCL 206.351 and 206.703.
(l) (n)
"State certified qualified
production" or "qualified
production" means single media or multimedia entertainment content
created in whole or in part in this state for distribution or
exhibition to the general public in 2 or more states by any means
and media in any digital media format, film, or video tape,
including, but not limited to, a motion picture, a documentary, a
television series, a television miniseries, a television special,
interstitial television programming, long-form television,
interactive television, music videos, interactive games such as
video games or wireless games, including console, computer, mobile,
and online games, internet programming, an internet video, a sound
recording, a video, digital animation, or an interactive website.
Qualified production also includes any trailer, pilot, video
teaser, or demo created primarily to stimulate the sale, marketing,
promotion, or exploitation of future investment in a production.
Qualified production does not include any of the following:
(i) A production for which records are required to be
maintained with respect to any performer in the production under 18
USC 2257.
(ii) A production that includes obscene matter or an obscene
performance.
(iii) A production that primarily consists of televised news or
current events.
(iv) A production that primarily consists of a live sporting
event.
(v) A production that primarily consists of political
advertising.
(vi) A radio program.
(vii) A weather show.
(viii) A financial market report.
(ix) An awards show or other gala event production.
(x) A production with the primary purpose of fund-raising.
(xi) A production that primarily is for employee training or
in-house corporate advertising or other similar production.
(xii) A commercial.
