STAND. COM. REP. NO. 1381

Honolulu, Hawaii

RE:    H.B. No. 726

       H.D. 1

       S.D. 2

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2013

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred H.B. No. 726, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO FILM AND DIGITAL MEDIA INDUSTRY DEVELOPMENT,"

begs leave to report as follows:

     The purpose and intent of this measure is to encourage the growth of the State's film and creative media industries.

     The measure accomplishes this purpose by:

     (1)  Amending the motion picture, digital media, and film production income tax credit by:

          (A)  Extending the sunset date of the tax credit from January 1, 2016, to January 1, 2023;

          (B)  Increasing the cap amount to $12,000,000 per qualified production; and

          (C)  Changing the credit amount from fifteen per cent of qualified production costs to an unspecified amount in a county with a population over 700,000, and from twenty per cent of qualified production costs to an unspecified amount in a county with a population of 700,000 or less;

     (2)  Establishing a tax credit for media infrastructure projects in West Oahu or the most populous island in a county with a population between 100,000 and 175,000, from July 1, 2013, to January 1, 2016;

     (3)  Establishing the Hawaii film office special fund for management of media infrastructure project tax credits and related programs; and

     (4)  Requiring the Department of Taxation to conduct a cost-benefit analysis and submit an annual report to the Legislature on the effectiveness of the media infrastructure project tax credit.

     Your Committee received written comments in support of this measure from Island Film Group and a private individual.

     Your Committee received written comments on this measure from the Department of Business, Economic Development, and Tourism and the Tax Foundation of Hawaii.

     Your Committee finds that new media infrastructure development is necessary to increase the growth of Hawaii's film industry.  Your Committee believes that this measure provides an incentive for developing media infrastructure projects.

     Your Committee has amended this measure by:

     (1)  Extending the cutoff date to qualify for the media infrastructure project tax credit from January 1, 2016, to January 1, 2023;

     (2)  Providing a definition for the term "base investment";

     (3)  Providing that the Department of Taxation shall collaborate with the Department of Business, Economic Development, and Tourism in preparing its annual report on the effectiveness of the media infrastructure project tax credit; and

     (4)  Making technical nonsubstantive amendments for the purposes of consistency, clarity, and style.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 726, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 726, H.D. 1, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair