§235‑17  Motion picture, digitalmedia, and film production income tax credit.  [Repeal and reenactmenton January 1, 2016.  L 2006, c 88, §4(2).]  (a)  Any law to the contrarynotwithstanding, there shall be allowed to each taxpayer subject to the taxes imposedby this chapter, an income tax credit which shall be deductible from thetaxpayer's net income tax liability, if any, imposed by this chapter for thetaxable year in which the credit is properly claimed.  The amount of the creditshall be:

(1)  Fifteen per cent of the qualified productioncosts incurred by a qualified production in any county of the State with apopulation of over seven hundred thousand; or

(2)  Twenty per cent of the qualified production costsincurred by a qualified production in any county of the State with a populationof seven hundred thousand or less.

A qualified production occurring in more than onecounty may prorate its expenditures based upon the amounts spent in eachcounty, if the population bases differ enough to change the percentage of taxcredit.

In the case of a partnership, S corporation,estate, or trust, the tax credit allowable is for qualified production costsincurred by the entity for the taxable year.  The cost upon which the taxcredit is computed shall be determined at the entity level.  Distribution andshare of credit shall be determined by rule.

If a deduction is taken under section 179 (withrespect to election to expense depreciable business assets) of the InternalRevenue Code of 1986, as amended, no tax credit shall be allowed for thosecosts for which the deduction is taken.

The basis for eligible property fordepreciation of accelerated cost recovery system purposes for state incometaxes shall be reduced by the amount of credit allowable and claimed.

(b)  The credit allowed under this sectionshall be claimed against the net income tax liability for the taxable year. For the purposes of this section, "net income tax liability" meansnet income tax liability reduced by all other credits allowed under thischapter.

(c)  If the tax credit under this sectionexceeds the taxpayer's income tax liability, the excess of credits overliability shall be refunded to the taxpayer; provided that no refunds orpayment on account of the tax credits allowed by this section shall be made foramounts less than $1.  All claims, including any amended claims, for taxcredits under this section shall be filed on or before the end of the twelfthmonth 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 theright to claim the credit.

(d)  To qualify for this tax credit, aproduction shall:

(1)  Meet the definition of a qualified productionspecified 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 hirelocal talent and crew; and

(5)  Provide evidence of financial or in-kindcontributions or educational or workforce development efforts, in partnershipwith related local industry labor organizations, educational institutions, orboth, toward the furtherance of the local film and television and digital mediaindustries.

(e)  On or after July 1, 2006, no qualifiedproduction cost that has been financed by investments for which a credit wasclaimed by any taxpayer pursuant to section 235-110.9 is eligible for creditsunder this section.

(f)  To receive the tax credit, the taxpayershall first prequalify the production for the credit by registering with thedepartment of business, economic development, and tourism during thedevelopment or preproduction stage.  Failure to comply with this provision mayconstitute a waiver of the right to claim the credit.

(g)  The director of taxation shall prepareforms as may be necessary to claim a credit under this section.  The directormay also require the taxpayer to furnish information to ascertain the validityof the claim for credit made under this section and may adopt rules necessaryto effectuate the purposes of this section pursuant to chapter 91.

(h)  Every taxpayer claiming a tax credit underthis section for a qualified production shall, no later than ninety daysfollowing the end of each taxable year in which qualified production costs wereexpended, submit a written, sworn statement to the department of business,economic development, and tourism, identifying:

(1)  All qualified production costs as provided bysubsection (a), if any, incurred in the previous taxable year;

(2)  The amount of tax credits claimed pursuant tothis section, if any, in the previous taxable year; and

(3)  The number of total hires versus the number oflocal hires by category (i.e., department) and by county.

(i)  The department of business, economicdevelopment, and tourism shall:

(1)  Maintain records of the names of the taxpayersand qualified productions thereof claiming the tax credits under subsection(a);

(2)  Obtain and total the aggregate amounts of allqualified production costs per qualified production and per qualifiedproduction per taxable year; and

(3)  Provide a letter to the director of taxationspecifying the amount of the tax credit per qualified production for eachtaxable year that a tax credit is claimed and the cumulative amount of the taxcredit for all years claimed.

Upon each determination required under thissubsection, the department of business, economic development, and tourism shallissue a letter to the taxpayer, regarding the qualified production, specifyingthe qualified production costs and the tax credit amount qualified for in eachtaxable year a tax credit is claimed.  The taxpayer for each qualifiedproduction shall file the letter with the taxpayer's tax return for thequalified production to the department of taxation.  Notwithstanding theauthority of the department of business, economic development, and tourismunder this section, the director of taxation may audit and adjust the tax creditamount to conform to the information filed by the taxpayer.

(j)  Total tax credits claimed per qualifiedproduction shall not exceed $8,000,000.

(k)  Qualified productions shall comply withsubsections (d), (e), (f), and (h).

(l)  For the purposes of this section:

"Commercial":

(1)  Means an advertising message that is filmed usingfilm, videotape, or digital media, for dissemination via television broadcastor theatrical distribution;

(2)  Includes a series of advertising messages if allparts are produced at the same time over the course of six consecutive weeks;and

(3)  Does not include an advertising message withInternet‑only distribution.

"Digital media" means productionmethods and platforms directly related to the creation of cinematic imagery andcontent, specifically using digital means, including but not limited to digitalcameras, 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 productionactivities 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 ofactivities that are directly related to the creation of visual and cinematicimagery to be delivered via film, videotape, or digital media and to be sold,distributed, or displayed as entertainment or the advertisement of products formass public consumption, including but not limited to scripting, casting, setdesign 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, shortfilm, made-for-television movie, commercial, music video, interactive game,television series pilot, single season (up to twenty‑two episodes) of atelevision series regularly filmed in the State (if the number of episodes persingle season exceeds twenty‑two, additional episodes for the same seasonshall constitute a separate qualified production), television special, singletelevision episode that is not part of a television series regularly filmed orbased in the State, national magazine show, or national talk show.  For thepurposes of subsections (d) and (j), each of the aforementioned qualifiedproduction categories shall constitute separate, individual qualifiedproductions; and

(2)  Does not include: daily news; public affairsprograms; non-national magazine or talk shows; televised sporting events oractivities; productions that solicit funds; productions produced primarily forindustrial, corporate, institutional, or other private purposes; andproductions that include any material or performance prohibited by chapter 712.

"Qualified production costs" meansthe costs incurred by a qualified production within the State that are subjectto the general excise tax under chapter 237 or income tax under this chapterand that have not been financed by any investments for which a credit was or willbe claimed pursuant to section 235‑110.9.  Qualified production costsinclude but are not limited to:

(1)  Costs incurred during preproduction such aslocation 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, otherpost-production, and related services;

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

(7)  Rentals of vehicles and lodging for cast andcrew;

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

(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 thedepartment in consultation with the department of business, economic development,and tourism. [L 1997, c 107, §1; am L 1998, c 156, §11; am L 2006, c 88, §2]

 

Note

 

  The 2006 amendment applies to qualified production costsincurred on or after July 1, 2006, and before January 1, 2016.  L 2006, c 88,§4(1).