§235‑17  Motion picture, digital

media, and film production income tax credit.  [Repeal and reenactment

on January 1, 2019.  L 2013, c 89, §3.]  (a)  Any law to the contrary

notwithstanding, there shall be allowed to each taxpayer subject to the taxes

imposed by this chapter, an income tax credit that 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:

     (1)  Twenty per cent of the qualified production costs

incurred by a qualified production in any county of the State with a population

of over seven hundred thousand; or

     (2)  Twenty-five per cent of the qualified production

costs incurred by a qualified production in any county of the State with a

population of seven hundred thousand or less.

A qualified production occurring in more than one

county may prorate its expenditures based upon the amounts spent in each

county, if the population bases differ enough to change the percentage of tax

credit.

     In the case of a partnership, S corporation,

estate, or trust, the tax credit allowable is for qualified 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)  The credit allowed under this section

shall be claimed against the net income tax liability for the taxable year. 

For the purposes of this section, "net income tax liability" means

net income tax liability reduced by all other credits allowed under this

chapter.

     (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 (l);

     (2)  Have qualified production costs totaling at least

$200,000;

     (3)  Provide the State, at a minimum, a shared-card,

end-title screen credit, where applicable;

     (4)  Provide evidence of reasonable efforts to hire

local talent and crew; and

     (5)  Provide evidence of financial or in-kind

contributions or educational or workforce development efforts, in partnership

with related local industry labor organizations, educational institutions, or

both, toward the furtherance of the local film and television and digital media

industries.

     (e)  On or after July 1, 2006, no qualified

production cost that has been financed by investments for which a credit was

claimed by any taxpayer pursuant to section 235-110.9 is eligible for credits

under this section.

     (f)  To receive the tax credit, the taxpayer

shall first prequalify the production for the credit by registering with the

department of business, economic development, and tourism during the

development or preproduction stage.  Failure to comply with this provision may

constitute a waiver of the right to claim the credit.

     (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 taxpayer claiming a tax credit under

this section for a qualified production shall, no later than ninety days

following the end of each taxable year in which qualified production costs were

expended, 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 credits 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 and by county.

This information may be reported from the department

of business, economic development, and tourism to the legislature in redacted

form pursuant to subsection (i)(4).

     (i)  The department of business, economic

development, and tourism shall:

     (1)  Maintain records of the names of the taxpayers

and qualified productions thereof claiming the tax credits under subsection

(a);

     (2)  Obtain and total the aggregate amounts of all

qualified production costs per qualified production and per qualified production

per taxable year;

     (3)  Provide a letter to the director of taxation

specifying the amount of the tax credit per qualified production for each

taxable year that a tax credit is claimed and the cumulative amount of the tax

credit for all years claimed; and

     (4)  Submit a report to the legislature no later than

twenty days prior to the convening of each regular session detailing the

non-aggregated qualified production costs that form the basis of the tax credit

claims and expenditures, itemized by taxpayer, in a redacted format to preserve

the confidentiality of the taxpayers claiming the credit.

     Upon each determination required under this

subsection, the department of business, economic development, and tourism shall

issue a letter to the taxpayer, regarding the qualified production, specifying

the qualified production costs and the tax credit amount qualified for in each

taxable year a tax credit is claimed.  The taxpayer for each qualified

production shall file the letter with the taxpayer's tax return for the

qualified production to the department of taxation.  Notwithstanding the

authority of the department of business, economic development, and tourism

under this section, the director of taxation may audit and adjust the tax

credit amount to conform to the information filed by the taxpayer.

     (j)  Total tax credits claimed per qualified

production shall not exceed $15,000,000.

     (k)  Qualified productions shall comply with

subsections (d), (e), (f), and (h).

     (l)  For the purposes of this section:

     "Commercial":

     (1)  Means an advertising message that is filmed using

film, videotape, or digital media, for dissemination via television broadcast

or theatrical distribution;

     (2)  Includes a series of advertising messages if all

parts are produced at the same time over the course of six consecutive weeks;

and

     (3)  Does not include an advertising message with

Internet‑only distribution.

     "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.

     "Post-production" means production activities

and services conducted after principal photography is completed, including but

not limited to editing, film and video transfers, duplication, transcoding,

dubbing, subtitling, credits, closed captioning, audio production, special

effects (visual and sound), graphics, and animation.

     "Production" means a series of

activities that are directly related to the creation of visual and cinematic

imagery to be delivered via film, videotape, or digital media and to be sold,

distributed, or displayed as entertainment or the advertisement of products for

mass public consumption, including but not limited to scripting, casting, set

design and construction, transportation, videography, photography, sound

recording, interactive game design, and post-production.

     "Qualified production":

     (1)  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, interactive

game, television series pilot, single season (up to twenty‑two episodes)

of a television series regularly filmed in the State (if the number of episodes

per single season exceeds twenty‑two, additional episodes for the same

season shall constitute a separate qualified production), television special,

single television episode that is not part of a television series regularly

filmed or based in the State, national magazine show, or national talk show. 

For the purposes of subsections (d) and (j), each of the aforementioned

qualified production categories shall constitute separate, individual qualified

productions; and

     (2)  Does not include:

         (A)  News;

         (B)  Public affairs programs;

         (C)  Non-national magazine or talk shows;

         (D)  Televised sporting events or activities;

         (E)  Productions that solicit funds;

         (F)  Productions produced primarily for

industrial, corporate, institutional, or other private purposes; and

         (G)  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 that are subject

to the general excise tax under chapter 237 or income tax under this chapter

and that have not been financed by any investments for which a credit was or

will be claimed pursuant to section 235‑110.9.  Qualified production

costs include but are not limited to:

     (1)  Costs incurred during preproduction such as

location scouting and related services;

     (2)  Costs of set construction and operations,

purchases or rentals of wardrobe, props, accessories, food, office supplies,

transportation, equipment, and related services;

     (3)  Wages or salaries of cast, crew, and musicians;

     (4)  Costs of photography, sound synchronization,

lighting, and related services;

     (5)  Costs of editing, visual effects, music, other

post-production, and related services;

     (6)  Rentals and fees for use of local facilities and

locations, including rentals and fees for use of state and county facilities

and locations that are not subject to general excise tax under chapter 237 or

income tax under this chapter;

     (7)  Rentals of vehicles and lodging for cast and

crew;

     (8)  Airfare for flights to or from Hawaii, and

interisland flights;

     (9)  Insurance and bonding;

    (10)  Shipping of equipment and supplies to or from

Hawaii, and interisland shipments; and

    (11)  Other direct production costs specified by the

department in consultation with the department of business, economic

development, and tourism;

provided that any government-imposed fines,

penalties, or interest that are incurred by a qualified production within the

State shall not be "qualified production costs". [L 1997, c 107, §1;

am L 1998, c 156, §11; am L 2006, c 88, §§2, 4(2); am L 2013, c 89, §2]

 

Note

 

  Annual report on tax credit to legislature.  L 2013, c 89, §4.

  Applicability of L 2006, c 88 amendment.  L 2006, c 88,

§4(1); L 2013, c 89, §3.

  The 2013 amendment applies to taxable years beginning after

December 31, 2012.  L 2013, c 89, §6.