STAND. COM. REP. 3055
Honolulu, Hawaii
, 2004
RE: H.B. No. 2611
H.D. 2
S.D. 1
Honorable Robert Bunda
President of the Senate
Twenty-Second State Legislature
Regular Session of 2004
State of Hawaii
Sir:
Your Committees on Economic Development and Science, Arts, and Technology, to which was referred H.B. No. 2611, H.D. 2, entitled:
"A BILL FOR AN ACT RELATING TO THE ENTERTAINMENT INDUSTRY,"
beg leave to report as follows:
The purpose of this measure is to provide incentives to attract film, video, and sound recording production companies to the State by:
(1) Expanding the provisions for the motion picture and film production income tax credit (production tax credit) to include digital media and sound recording productions;
(2) Increasing the current production tax credit from four per cent to an unspecified percentage of costs incurred;
(3) Clarifying the requirements a production must have to qualify for the production tax credit, such as a minimum amount of expenditure and a minimum percentage of labor hired from within the State of Hawaii;
(4) Requiring qualifying taxpayers to submit to the Department of Business, Economic Development, and Tourism a report detailing the costs incurred and tax credit claimed, after which the Department will issue a certificate of verification; and
(5) Establishing requirements that must be met by businesses producing performing arts products that are claiming the high technology business investment tax credit.
Testimony in support of the measure was received from the Department of Business, Economic Development, and Tourism, the Department of Taxation, the City and County of Honolulu Film Office, the County of Kauai Film Office, the County of Hawaii Film Office, the Hawaii Film Authority, and four private citizens. The Screen Actors Guild, Hawaii Branch, the International Alliance of Theatrical and Stage Employees, Local 665, and the American Federation of Musicians, Local 667, and a private citizen testified in support of the measure with amendments. The Office of Information Practices and the Tax Foundation of Hawaii submitted comments.
During its deliberations on the measure, your Committees received valuable input from a variety of sources and acknowledge with gratitude the assistance of the entertainment industry, the affected unions, the Department of Business, Economic Development, and Tourism, and the Department of Taxation. Each participant, although in general support of the measure's intent, was concerned over various aspects of the measure and it is your Committees' intention to continue working to craft a solution that more closely resembles a product to which all can agree.
Your Committees have amended the measure by separating the measure into two parts and designating the sections of the measure that affect non-tax credit-related laws as part I and the sections that affect tax credit-related laws as part II. Your Committees have done this based on the Department of Business, Economic Development, and Tourism's recommendation that if the television and film development program is to be expanded to encompass digital media industry as well, then it would be prudent to bolster the program's existing statutes to ensure success.
Part I of the amended measure:
(1) Expands the findings and purpose section and inserting it within the Hawaii Revised Statutes as a new section under part IX of Chapter 201, relating to Hawaii television and film development; and
(2) Adds four new sections that:
(A) Expand the title and various sections of part IX of Chapter 201, relating to Hawaii television and film development, to include the digital media industry;
(B) Delete the venture capital investment program established under the Hawaii television and film development law as a source of revenue;
(C) Rename the Hawaii Television and Film Development Board the Hawaii Digital Media Development Board, increase the membership on the board to an unspecified number, and ensure that the digital media industry is represented on the board; and
(D) Rename the Hawaii television and film development special fund to the Hawaii digital media development special fund, delete venture capital investments as a source of revenue to the fund, and establish a new option by which performing arts production investors may qualify for the high technology business investment tax credit (proposed as section 235-110.9(e)(2)(C), Hawaii Revised Statutes, in this measure, as amended).
Part II of the amended measure amends sections 235-17, and 235-110.9, Hawaii Revised Statutes (the motion picture and film production income tax credit and the high technology business investment tax credit, respectively). The motion picture and film production income tax credit is amended by:
(1) Renaming it as the "performing arts productions income tax credit";
(2) Replacing the existing four per cent (blank amount in the House Draft 2 version) tax credit with fifteen per cent as the amount to be used when qualified performing arts productions are conducted in a county with a population of over 700,000, and twenty per cent as the tax credit percentage amount to be used when qualified performing arts productions are conducted in a county with a population of 700,000 or less;
(3) Deleting the $2,000,000 maximum in tax credits claimable by a single production provision as contained in the House Draft 2 version and inserting therefor an unspecified maximum aggregate amount available under the tax credit for all productions in a taxable year and setting a cap on the total amount available for the tax credit in all years at $60,000,000;
(4) Deleting the House Draft 2 requirement that the Department of Business, Economic Development, and Tourism pro rate tax credits if the total amount of tax credits claimed in a taxable year exceed $10,000,000, and replacing it with an unspecified total amount of tax credits issuable and claimable in a given taxable year;
(5) Making the tax credit certificates issued by the Department of Business, Economic Development, and Tourism public documents; and
(6) Adding definitions for the terms "performing arts products", "qualified performing arts production costs", and "qualified taxpayer".
Your Committees find that, according to testimony provided by industry representatives, the House Draft 2 proposal of imposing a $2,000,000 cap per production would actually have a regressive effect on the existing tax credit and therefore would be counterproductive to the program's intent. Also, the Department of Business, Economic Development, and Tourism pointed out that, under the House Draft 2 model, not all productions would be able to utilize the tax credit.
The high technology business investment tax credit is amended by:
(1) Deleting the proposed language that was added to the definition of "qualified high technology business" by the House Draft 2 version and establishing that language as a separate subsection within the same section of law;
(2) Designating the Department of Business, Economic Development, and Tourism as the lead state agency in negotiating with performing arts production companies;
(3) Allowing performing arts production companies that are unable to meet the employment requirements to qualify for the tax credit by meeting one of the following requirements:
(A) At least twenty-five per cent of the performing arts product's post production shall be conducted in the State as measured by the total post production budget;
(B) At least twenty-five per cent of the performing arts product's digital effects shall be conducted in the State as measured by the project's total digital effects budget; or
(C) The performing arts production company shall deposit an unspecified amount in the Hawaii digital media industry development special fund as an alternative; and
(4) Placing a sunset date of December 31, 2010, on the tax credit.
Your Committees have also:
(1) Amended the effective date provision to cause the amendments made to the tax credits to sunset as of January 1, 2011; and
(2) Made numerous technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.
Your Committees believe that the amended measure provides a simplified and streamlined approach to providing incentives for the ever-expanding and constantly evolving high technology/entertainment industry. Your Committees also believe that the amended measure possesses the inherent flexibility necessary to adapt to the changing needs and desires of the State and the performing arts industry so that each may be equal and willing partners in nurturing and maintaining a vibrant, creative, and productive performing arts industry within the State.
As affirmed by the records of votes of the members of your Committees on Economic Development and Science, Arts, and Technology that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2611, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2611, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.
Respectfully submitted on behalf of the members of the Committees on Economic Development and Science, Arts, and Technology,
|
____________________________ DAVID Y. IGE, Chair |
____________________________ CAROL FUKUNAGA, Chair |
|