Report Title:
Motion Picture, Digital Media, and Film Production Tax Credit
Description:
Temporarily replaces the motion picture and film production tax credit with the motion picture, digital media, and film production tax credit which provides an income tax credit amounting to 15% of qualified production costs incurred, in any county of Hawaii with a population over 700,000, and 20% in any county of Hawaii with a population under 700,000; establishes criteria to qualify for the tax credit; caps credit at $8,000,000 per production. (HB1590 HD1)
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1590 |
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TWENTY-THIRD LEGISLATURE, 2005 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO the Hawaii film and digital media industry.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 235-17, Hawaii Revised Statutes, is amended to read as follows:
"§235-17 Motion picture, digital media, and film production[;] income tax credit. (a) [There] Any law to the contrary notwithstanding, there shall be allowed to
In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for 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) 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 up to 7.25 per cent effective January 1, 1999, of the costs incurred in the State in the production of motion picture or television films for actual expenditures for transient accommodations. The director of taxation shall specify by rule a schedule of allowable tax credits based on the principle that greater tax credits shall be allowed for greater benefits to the state economy.
In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for 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.]
[(c)] (b) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year. For the purpose of this section, "net income tax liability" means net income tax liability reduced by all other credits allowed under this chapter.
[(d)] (c) If the tax credit under this section 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. All claims, including any amended claims, for tax credits under this section 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) To qualify for this tax credit, a production shall:
(1) Meet the definition of a qualified production specified in subsection (k);
(2) Have qualified production expenditures totaling at least $200,000;
(3) Provide the State, at a minimum, a shared-card, end-title screen credit; and
(4) Provide evidence of financial or in-kind contributions or educational or workforce development efforts, in partnership with related local industry labor organizations or educational institutions, toward the furtherance of the local film and television industry.
(e) In a given year, no production that has received financing for which a credit was claimed pursuant to section 235-110.9 is eligible for credits under this section in that same tax year.
(f) To receive the credit, productions shall first pre-qualify for the credit by registering with the Hawaii film office during the development or pre-production stage. Failure to comply with this provision may constitute a waiver of the right to claim the credit.
[(e)] (g) 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) Every qualified production, no later than ninety days following the end of each taxable year in which qualified production costs were expended, shall submit a written, sworn statement to the department of business, economic development, and tourism, identifying:
(1) All qualified production costs as provided by subsection (a), if any, incurred in the previous taxable year;
(2) The amount of tax credit claimed pursuant to this section, if any, in the previous taxable year; and
(3) The number of total hires versus the number of local hires by category, "production department" for example, and by county.
(i) The department of business, economic development, and tourism shall:
(1) Maintain records of the names of the qualified productions claiming the tax credits;
(2) Obtain and sum the aggregate amounts of all qualified productions costs and expenditures; and
(3) Provide a letter to the director of taxation specifying the amount of the tax credit for each taxable year and the cumulative amount of the tax credit for all years claimed.
Upon each determination, the department of business, economic development, and tourism shall issue a letter to the qualified production specifying the qualifying costs or expenditure amounts, and the credit amount qualified for each taxable year. The qualified production shall file the letter with its tax return to the department of taxation. Notwithstanding the department of business, economic development, and tourism's authority under this section, the director of taxation may audit and adjust the tax credit amount to conform to the facts.
(j) Total tax credits claimed per qualified production shall not exceed $8,000,000.
(k) For purposes of this section:
"Commercial" means an advertising message that is filmed or photographed using film, videotape, or digital media, for dissemination via television broadcast, theatrical distribution, or print media. An advertising message with Internet-only distribution shall not qualify as commercials. A series of advertising messages would qualify as a commercial if all parts are produced at the same time over the course of six weeks.
"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. These activities include but are not limited to editing, film and video transfers, duplication, transcoding, dubbing, subtitling, credits, close captioning, audio production, special effects (visual and sound), graphics, and animation.
"Production" means a series of activities directly related to the creation of visual and cinematic imagery and content to be delivered via film, videotape, digital media, or printed media, and to be sold, distributed, or displayed as entertainment or advertisement products for mass public consumption. Activities include but are not limited to scripting, casting, set design and construction, videography, photography, sound recording, interactive game design, and post production.
"Qualified production" 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, print advertisement, magazine photography shoot, interactive game, television series pilot, television series up to twenty-two episodes, television special, or a single television episode that is not part of a television series regularly filmed or based in the state. For the purposes of subsections (d) and (j), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions. Qualified productions shall comply with subsections (d), (e), (f), and (h). A qualified production shall not mean news, current affairs, or public affairs programs; 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 in the taxable year for which the credit is claimed and which are subject to State of Hawaii general excise tax or income tax. Qualified production costs include but are not limited to:
(1) Costs incurred during pre-production such as location scouting and related services;
(2) Costs of set construction and operations, purchases or rentals of wardrobe, props, accessories, and related services;
(3) Wages or salaries of cast and crew;
(4) Costs of photography, sound synchronization, lighting, and related services;
(5) Costs of editing, visual effects, other post-production, and related services;
(6) Rentals of local facilities, including location fees, and equipment;
(7) Leasing of vehicles, food, or lodging;
(8) Airfare for flights to or from Hawaii;
(9) Insurance and bonding;
(10) Shipping of equipment and supplies to or from Hawaii; and
(11) Other direct production costs specified by the department of taxation in consultation with the department of business, economic development, and tourism."
SECTION 2. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 3. This Act shall take effect on July 1, 2005; provided that:
(1) Section 1 of this Act shall apply to qualified production costs incurred after December 31, 2004, and before January 1, 2011; and
(2) The amendments made to section 235-17, Hawaii Revised Statutes, by this Act shall be repealed on January 1, 2011, 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.