BILL ANALYSIS

C.S.H.B. 4419

By: Goldman

Culture, Recreation & Tourism

Committee Report (Substituted)

BACKGROUND AND PURPOSE

There is a lack of incentive for media production in Texas and workforce concerns in the state's media production industry. C.S.H.B. 4419 seeks to address this issue by extending the definition of "event" under the major events reimbursement program to include a film or television production, adding virtual production to the definition under a media production facility, creating virtual film production institutes with Texas A&M University at College Station and Texas State University, and providing additional funding opportunities for this dynamic industry.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Economic Development and Tourism Office in SECTION 6 of this bill and the Music, Film, Television, and Multimedia Office in SECTION 7 of this bill.

ANALYSIS

C.S.H.B. 4419 amends the Education Code to authorize Texas A&M University at College Station and Texas State University to each establish a virtual film production institute to provide educational opportunities for students interested in studying virtual film production and promote student engagement in the development of a virtual film production industry in Texas. The bill authorizes each institute, in addition to any amount appropriated by the legislature, to apply for and accept gifts, grants, and donations from the federal government or any other source.   

C.S.H.B. 4419 amends the Government Code to include a film or television production operated by a production organization in the events eligible to receive funding under the major events reimbursement program if the organization selects:

·         a site in Texas as the sole site for the event;

·         two or more predetermined locations as the sites in Texas for the event; or

·         a site in Texas as the sole site for the event in a region composed of this state and one or more adjoining states.

C.S.H.B. 4419 defines the following terms:

·         "film or television production" as the activities necessary to prepare, produce, perform, or present in this state a television program, movie, virtual film, or any combination of multimedia program; and

·         "film or television production organization" as an organization that produces a television program, movie, virtual film, or multimedia program, regardless of the manner in which the organization is formed or legally organized, including a production company, a studio, or a production team for a television program, movie, virtual film, or multimedia program.

C.S.H.B. 4419, in provisions relating to media production development zones, includes a virtual production in the definition of  "media production facility" and an institution of higher education in the definition of "nominating body." The bill removes the requirement for a metropolitan statistical area's principal municipality to have a population of more than 250,000 in order to be approved as a media production development zone. The bill authorizes an institution of higher education by resolution to recognize an area as a media production development zone and clarifies that a governing body is the entity that recognizes a media production development zone for a municipality. The bill removes provisions regarding caps on the number of media production development zones in the state and in each applicable region at any one time.

C.S.H.B. 4419 lengthens the maximum duration that a location may remain designated as a qualified media location from two to four years and extends the effective duration of the Music, Film, Television, and Multimedia Office's certification of a person as a qualified person from until the second anniversary of the date the designation is made to until the fourth anniversary of that date. The bill entitles a media production facility or any qualified person to the benefits established by bill's provisions for construction of a media production facility only if the construction begins on or before December 31, 2023.

Film Events Trust Fund

C.S.H.B. 4419 establishes the film events trust fund as a fund outside the state treasury held in trust by the comptroller of public accounts for the administration of the program and to maximize the preparation, production, performance, or presentation of television programs, movies, virtual films, and multimedia productions in Texas and to successfully compete with other states for those programs, movies, films, and productions. The bill's provisions regarding the fund may not be construed as creating or requiring a state guarantee of an obligation imposed on an endorsing municipality, an endorsing county, or the state under an event support contract or another agreement relating to hosting a film event in Texas. Provisions regarding the trust fund must be construed and applied to effectuate the purpose of the fund. The bill authorizes the Texas Economic Development and Tourism Office to adopt rules as necessary to implement the trust fund and its purposes.

C.S.H.B. 4419 makes a film event eligible for funding under the trust fund if:

·         a site selection organization, after conducting a highly competitive selection process of one or more sites not in this state, selects a site in Texas for the film event to be held:

o   one time; or

o   if the film event is scheduled under an event contract or event support contract to be held each year for a period of years, one time in each year; and

·         a site selection organization selects:

o   a site in Texas as the sole site for the film event;

o   two or more predetermined locations as the sites in Texas for the film event; or

o   a site in Texas as the sole site for the film event in a region composed of Texas and one or more adjoining states.

The provisions relating to eligibility under the film events trust fund apply only to a film event for which the office determines that the total incremental increase in tax receipts is less than $5 million.

C.S.H.B. 4419 sets out the following prerequisites for the office to take action:

·         an endorsing municipality or endorsing county has not during a 12-month period submitted requests for funding under this chapter for more than 30 film events;

·         the municipality or county in which a film event will be located submits a request for funding; and

·         the request is accompanied by documentation from a site selection organization selecting the site for the film event.

The bill requires the office, after an organization selects a site for a film event in Texas, to determine the incremental increases in the following tax receipts that the office determines are directly attributable to the film event for the 30-day period that ends at the end of the day after the date on which the film event activities in the state are completed or, if the film event will be presented on more than one day, after the last date on which the film event will be presented for a certain period:

·         the receipts to this state from sales and use tax, motor vehicle taxes, hotel occupancy tax, mixed beverage tax, and taxes imposed under the Alcoholic Beverage Code in designated market areas;

·         the receipts collected by this state for each endorsing municipality and county in the market area from the sales and use tax imposed by each endorsing municipality and the mixed beverage tax revenue to be received by each endorsing municipality; and

·         the receipts collected by each endorsing municipality and county in the market area from the hotel occupancy tax imposed.

The office must make its determination in accordance with developed procedures and must base that determination on information submitted by an endorsing entity. When determining the amount of state revenue available, the office may consider whether the particular film event has been previously prepared, produced, performed, or presented in the state and changes to the character of the film event could affect the incremental increase in tax receipts collected and remitted to the state. The bill requires the office to make the determination within a specified time period.

C.S.H.B. 4419 requires the office to designate as a market area for a film event each area in which the office determines there is a reasonable likelihood of measurable economic impact. The bill requires the office to determine the geographic boundaries of each market area, which must include the endorsing municipality or county selected as the site for the film event. The bill requires the office to provide an estimate of the total amount of tax revenue that would be transferred or deposited to the film events trust fund in connection with that film event if the film event were prepared, produced, performed, or presented in Texas at a site selected in accordance with an application by an endorsing entity. The office must provide the estimate on request to an endorsing entity, and the entity may submit the office's estimate to the organization. The bill authorizes the office to adopt a model film event support contract and make the contract available on the office's website, the adoption of which does not require the use of that contract for purposes of the trust fund.

C.S.H.B. 4419 requires each endorsing entity to remit to the comptroller of public accounts and the comptroller to deposit into a trust fund created by the comptroller, at the direction of the office, and designated as the film events trust fund the amount of the entity's hotel occupancy tax revenue less any amount of the revenue that the entity determines is necessary to meet the obligations of the entity. The bill requires the comptroller, at the direction of the office, to retain the amount of sales and use tax revenue and mixed beverage tax revenue from the amounts otherwise required to be sent to the entity less any amount of the revenue that the entity determines is necessary to meet the obligations of the entity, and must deposit the retained tax revenue to the film events trust fund. The bill requires the comptroller to begin retaining and depositing the municipal and county tax revenue with the first distribution of that tax revenue that occurs after the first day of the applicable period or at a time the office otherwise determines to be practicable. The comptroller must discontinue retaining the municipal and county tax revenue when the amount of the applicable tax revenue has been retained. The bill authorizes an endorsing entity, in lieu of the municipal and county tax revenues remitted or retained, to remit to the office for deposit to the trust fund other local money in an amount equal to the total amount of municipal and county tax revenue. The bill requires the entity to remit the other local money not later than the 90th day after the last day of the period scheduled for the film event. The bill requires the comptroller at the direction of the office to transfer to the trust fund a portion of the state tax revenue in an amount equal to 6.25 multiplied by the amount of the municipal and county tax revenue retained or remitted. The amount transferred may not exceed the incremental increase in tax receipts.

C.S.H.B. 4419 authorizes the money in the trust fund to be disbursed by the office without appropriation and authorizes the money to be used to pay the principal of and interest on certain issued notes and fulfill certain obligations to an organization under an event support contract. After approval of each contributing endorsing entity, if any, the office may make a disbursement from the trust fund for specified purposes and considerations. The bill requires the office, after the conclusion of the performance or presentation of a film event, to compare information on any applicable actual attendance figures with any estimated attendance numbers used to determine the incremental increase in tax receipts. If the actual attendance figures are significantly lower than the estimated attendance numbers, the office may reduce the amount of a disbursement from the film events trust fund for an endorsing entity. The bill requires the office by rule to define "significantly lower" and provides the manner in which the office may proportionately reduce a disbursement. The bill sets out certain limits to disbursements related to percentage costs of structural improvements and prohibits the fund to be used to construct an arena, stadium, or convention center or conduct usual and customary maintenance of a facility. The bill requires the office, on payment of all obligations under an event support contract related to the location of a film event in Texas, to remit to each endorsing entity, in proportion to the amount contributed by the entity, any money remaining in the trust fund.

C.S.H.B. 4419 requires an endorsing entity to provide certain required information to the office to fulfill the office's duties regarding the trust fund. The bill requires the endorsing entity to provide any annual audited financial statement required by the office not later than the end of the fourth month after the last day of the period covered by the financial statement. The bill authorizes an endorsing entity by ordinance to authorize the issuance of notes in order to meet its obligations under an event support contract. The bill provides for the payment of the notes, set out by an endorsing entity. The note issued must mature not later than the seventh anniversary of the date of issuance. The bill authorizes an endorsing entity to guarantee its obligations under an event support contract by pledging, in addition to tax revenue, surcharges from user fees charged in connection with the film event, including parking or ticket fees, if the film event is premiered, performed, or otherwise presented exclusively at a venue in Texas for which parking or ticket fees may be collected.

Film Production Tax Rebate Trust Fund

C.S.H.B. 4419 establishes the film production tax rebate trust fund as a fund outside the state treasury to be held in trust by the comptroller for administration. The bill establishes that the music, film, television, and multimedia office within the office of the governor is responsible for administering the program, establishes the office's discretion, and requires the office to adopt rules necessary to implement the trust fund and encourage and incentivize organizations to select a site in the state to conduct film or television productions. The bill makes a film or television production eligible for funding under the trust fund if, after consideration through a competitive selection process, a film or television production organization selects one or more sites in Texas for all or part of the production.

C.S.H.B. 4419 requires a production organization to file an application, after the organization selects a site or sites for the production, with the office and to supply information the office considers necessary to determine the incremental increases in the receipts to this state from certain taxes in the designated market area that the office determines are directly attributable to the preparation, production, performance, and presentation of the film or television production. The bill requires the office to calculate the incremental increase in tax receipts not later than the 60th day after the date the necessary documentation is submitted to the office to determine the rebate amount. During the process of determining incremental increases, the office must designate for the production a market area where there is a reasonable likelihood of measurable economic impact directly attributable to the production. The market areas must be likely to provide venues, accommodations, and services in connection with the production, based on the application provided to the office.

C.S.H.B. 4419 requires the comptroller, at the direction of the office, to transfer to the trust fund a portion of the state tax revenue in an amount equal to 25 percent of the amount of incremental increases in tax receipts not later than the 30th day after notice from the office. The bill requires any interest accumulated over time to remain in the trust fund for use by the office in paying the costs of administering the trust fund. The bill authorizes money in the fund to be disbursed by the office without appropriation. The bill requires the office to make a disbursement from the trust fund to a production organization in an amount equal to 25 percent of the incremental increase in the tax receipts for the applicable film or television production. The bill establishes that the provisions related to the trust fund are cumulative of all other existing incentive programs or any program created in the future. The bill prohibits a person from receiving a reimbursement, disbursement, or rebate that exceeds the highest incremental increase in receipts to this state from certain taxes determined by the office, in the market area designated by the office.

C.S.H.B. 4419 repeals Section 485A.103, Government Code.

EFFECTIVE DATE

September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 4419 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Both the introduced and the substitute set out provisions relating to the promotion of film and television production in the state, including the eligibility of film or television productions for funding under the major events reimbursement program, the designation of media production development zones, and the establishment of virtual film production institutes. However, the substitute sets out provisions that were not in the introduced providing for the creation of a film events trust fund and a film production tax rebate trust fund. The substitute also includes provisions that were not in the introduced that do the following:

·         define "film or television production" and "film or television production organization";

·         lengthen the maximum duration that a location may remain designated as a qualified media location from two to four years;

·         extend the effective duration of the office's certification of a person as a qualified person from until the second anniversary of the date the designation is made to until the fourth anniversary of that date; and

·         entitle a media production facility or any qualified person to the benefits established by the bill's provisions for construction of a media production facility only if the construction begins on or before December 31, 2023.

The substitute omits a provision present in the introduced revising the limitations on certain requests for funding from the events trust fund.

The substitute omits the language from the introduced that provided for the bill's immediate effect if it receives the requisite constitutional vote and instead provides for the bill to take effect on September 1, 2023, with no possibility for immediate effect.