Bill Text: HI HB1308 | 2012 | Regular Session | Amended
Bill Title: Business Development in Hawaii; Motion Picture, Digital Media, and Film Production Tax Credits
Spectrum: Partisan Bill (Democrat 17-0)
Status: (Enrolled - Dead) 2012-04-13 - (H) Received notice of all Senate conferees being discharged (Sen. Com. No. 747). [HB1308 Detail]
Download: Hawaii-2012-HB1308-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1308 |
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TWENTY-SIXTH LEGISLATURE, 2011 |
H.D. 2 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO DIGITAL MEDIA.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. The purpose of this Act is to leverage the unique opportunities for digital media industry development in Hawaii resulting from the groundbreaking of the long-awaited University of Hawaii-West Oahu campus in Kapolei and recent high-profile film projects in Hawaii, including the "Pirates of the Caribbean" in 2010.
The University of Hawaii-West Oahu campus will house the academy for creative media's student digital media production facility that will provide global-standard student facilities to anchor the premiere media school of the Pacific Rim. The facility will also include a state-of-the-art motion picture and digital media studio complex to serve film and video production with four sound stages, two production support buildings, a mill/shop extension and extra stage, commissary/kitchen, festival pavilion and screening room to host events and conferences, back-lot retail/shopping/dining area and office buildings that may provide incubator space for new media companies. The University of Hawaii-West Oahu Campus will also house the Henry Ku‘ualoha Giugni Digital Archives, which is designed to preserve, digitize, and provide the moving image history of Hawaii on the Internet.
The digital media tax incentive in this Act is designed to align the strengths of the University of Hawaii system and its multiple campuses with the creativity of University of Hawaii academy for creative media graduates and the talented media workforce from leeward Oahu emerging from the Waianae Seariders' program since 1998, or from the schools and businesses that the Seariders have helped to incubate. By requiring that beneficiaries of the digital media infrastructure tax credit locate in enterprise zones in which some of the University of Hawaii campuses are located, the tax credit targets new media industry development, educational public-private facility and infrastructure development, and job creation with a focus on measurable economic benefits over time.
The current and proposed University of Hawaii-West Oahu campuses are located in an existing enterprise zone covering most of the Kapolei region. Leeward community college and Honolulu community college are also located within existing enterprise zones. Neighbor island community college campuses on Maui, Kauai, and Hawaii are in enterprise zones, as is the University of Hawaii at Hilo.
PART II
SECTION 2. Chapter 209E, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . DIGITAL MEDIA ENTERPRISE SUBZONES
§209E-A Definitions. As used in this part:
"Base investment" means the cost, including fabrication and installation, paid or accrued in the taxable year, of tangible assets of a type that are, or under the Internal Revenue Code will become, eligible for depreciation, amortization, or accelerated capital cost recovery for federal income tax purposes; provided that the assets are physically located in this State for use in a business activity in this State and are not mobile tangible assets expended by a person in the development of a qualified digital media infrastructure project. Base investment does not include a direct production expenditure or qualified personnel expenditure eligible for a tax credit under section 235-17.
"Department" means the department of business, economic development, and tourism.
"Digital media" has the same meaning as in section 235-17.
"Digital media enterprise subzone" means the geographic area located within a mile radius of a University of Hawaii campus, on or off campus, that is within an existing enterprise zone established pursuant to part II of this chapter or other delineated geographic area designated by the legislature pursuant to this part; provided that from July 1, 2011, to June 30, 2013, establishment of a subzone shall be limited to an area within a mile radius, on or off campus, of the University of Hawaii-West Oahu.
"Director" means the director of business, economic development, and tourism.
"Qualified digital media infrastructure project" means the development, construction, renovation, or operation of a digital media production facility, a postproduction facility, or both, that is located in this State within a digital media enterprise subzone; provided that the facility may include a movie theater or other commercial exhibition facility to assist in offsetting operating costs of the production or postproduction facility, but shall not include a facility used to produce pornographic matter or a pornographic performance.
§209E-B Digital media infrastructure tax credit. (a) There shall be allowed to each taxpayer qualifying for a tax credit under this part and subject to the taxes imposed under chapter 235, a digital media infrastructure tax credit that shall be deductible from the taxpayer's net state income tax liability for investment expenditures made by the taxpayer for all qualified digital media infrastructure projects within a digital media enterprise subzone. The tax credit shall be equal to per cent of the taxpayer's base investment. The tax credit under this section shall be reduced by any credit claimed by the taxpayer under chapter 235 for the same base investment.
(b) No more than $ in total tax credits under this section shall be authorized in any one taxable year.
(c) If all or a portion of a qualified digital media infrastructure project is a facility that may be used for purposes unrelated to production or postproduction activities, the project shall be eligible for the tax credit only if the department determines that the facility will support and be necessary to secure production or postproduction activity; provided that the taxpayer agrees to both of the following:
(1) The facility will be used as a state-of-the-art production or postproduction facility or as support and as a component of the facility for the useful life of the facility; and
(2) The tax credit will not be claimed under this section until the facility is complete.
(d) A taxpayer shall be eligible for certification by the department to qualify for a tax credit if the taxpayer:
(1) Receives from the department a written certification that the taxpayer has undertaken, or will undertake within one hundred eighty days of the issuance of the certification, the development, construction, renovation, or operation of a qualified digital media infrastructure project within a digital media enterprise subzone; provided that, upon request submitted by the taxpayer based on good cause, the department may extend the period for commencement of work for up to an additional ninety days;
(2) Before July 1, 2012, shall expend not less than $100,000 on the base investment for a qualified digital media infrastructure project within a digital media enterprise subzone, and the taxpayer, after July 1, 2012, shall expend not less than $250,000 on the base investment for a qualified digital media infrastructure project in a digital media enterprise subzone;
(3) Enters into an agreement as provided in this section;
(4) Receives an investment expenditure certificate from the department under subsection (i);
(5) Submits the investment expenditure certificate issued by the department under subsection (i) to the department of taxation; and
(6) Shall not be delinquent in a tax or other obligation owed to the State or be owned or under common control of an entity that is delinquent in a tax or other obligation owed to the State.
(e) To claim a tax credit under this section, a taxpayer shall submit an investment expenditure certificate issued under subsection (i) to the department.
If the tax credit allowed under this section exceeds the amount of taxes owed by the taxpayer, that portion of the tax credit that exceeds the tax liability of the taxpayer for the tax year shall not be refunded but may be carried forward to offset net income tax liability under chapter 235 in subsequent tax years for a period not to exceed ten tax years or until exhausted, whichever occurs first.
(f) The tax credit under this section shall be claimed after all other tax credits available to the taxpayer have been claimed. A taxpayer eligible to claim a tax credit under this section may assign all or a portion of a tax credit under this section to any assignee. An assignee may subsequently assign a tax credit or any portion of a tax credit assigned under this subsection to one or more assignees. A taxpayer may claim a portion of a tax credit and assign the remaining tax credit amount. A tax credit assignment under this subsection shall be irrevocable. The tax credit assignment under this subsection shall be made on a form prescribed by the department of taxation. A taxpayer claiming a tax credit under this section shall submit a copy of the completed assignment form to the department in the tax year in which the assignment is made and shall attach a copy of the form to the tax return on which the tax credit is claimed.
(g) To qualify for the tax credit established under this section, the taxpayer shall submit an application to enter into an agreement with the department. The application shall be submitted in a form prescribed by the department and shall be accompanied by a $100 application fee and all of the information and records requested by the department. The application fee received by the department under this subsection shall be deposited in the Hawaii film office special fund established pursuant to section 201-113. The department shall not process an application until it is complete. The agreement shall include:
(1) A unique number assigned to the qualified digital media infrastructure project;
(2) A detailed description of the qualified digital media infrastructure project;
(3) A detailed business plan and market analysis for the qualified digital media infrastructure project;
(4) A projected budget for the qualified digital media infrastructure project;
(5) An estimated start date and completion date for the qualified digital media infrastructure project;
(6) A requirement that the taxpayer not file a claim for the credit under this section until at least twenty-five per cent of the base investment in the qualified digital media infrastructure project identified in the agreement has been expended; and
(7) A requirement that the taxpayer provide the department with the information and independent certification the department deems necessary to verify investment expenditures and eligibility for the credit under this section.
(h) In determining whether to enter into an agreement under this section, the department shall consider all of the following:
(1) The potential that in the absence of the tax credit allowed under this section, the qualified digital media infrastructure project will be constructed in a location other than this State;
(2) The extent to which the qualified digital media infrastructure project may have the effect of promoting economic development or job creation in this State;
(3) The extent to which the tax credit will attract private investment for the production of motion pictures, videos, television programs, and digital media in this State; and
(4) The extent to which the tax credit will encourage the development of film, video, television, and digital media production and postproduction facilities in this State.
(i) The taxpayer shall submit a request to the department for an investment expenditure certificate on a form prescribed by the department, along with any information or independent certification the department deems necessary. The department shall process each request within sixty days after the request is complete. However, the department may request additional information or independent certification before issuing an investment expenditure certificate and need not issue the investment expenditure certificate until satisfied that investment expenditures and eligibility are adequately established. The additional information requested may include a report of expenditures audited and certified by an independent certified public accountant. If the department determines that a taxpayer has complied with the terms of an agreement entered into under this section, the department shall issue an investment expenditure certificate to the taxpayer. Each investment expenditure certificate shall be signed by the director and shall include the following information:
(1) The name of the taxpayer;
(2) A description of the qualified digital media infrastructure project;
(3) The taxpayer's eligible base investment for the qualified digital media infrastructure project;
(4) The unique number assigned to the qualified digital media infrastructure project by the department under subsection (g)(1);
(5) The taxpayer's federal employer identification number or state taxpayer identification number; and
(6) Any independent certification required by the department.
(j) In addition to the $100 application fee established under subsection (g), the department may establish, assess, and collect a tax credit application and redemption fee to cover the costs of administering the tax credit certification program established under this part. The fee shall not exceed one-half of one per cent of the tax credit claimed, and shall be paid to the department by the taxpayer prior to filing for the tax credit. The department shall deposit any proceeds derived from the fee in the Hawaii film office special fund established under section 201-113.
(k) If at the close of any taxable year:
(1) The digital media infrastructure project no longer qualifies for the tax credit established under this section;
(2) The digital media infrastructure project or an interest in the digital media infrastructure project has been sold by the taxpayer making a base investment in the qualified digital media infrastructure project; or
(3) The taxpayer has withdrawn the taxpayer's base investment wholly or partially from the qualified digital media infrastructure project,
the tax credit claimed under this section shall be recaptured. The recapture shall be equal to ninety per cent of the amount of the total tax credit claimed under this section in the preceding two taxable years. The amount of the tax credit recaptured shall apply only to the investment in the particular digital media infrastructure project that meets the requirements of paragraph (1), (2), or (3). The amount of the recaptured tax credit determined under this subsection shall be added to the taxpayer's tax liability for the taxable year in which the recapture occurs under this subsection.
(l) Information, records, or other data received, prepared, used, or retained by the department under this section that are submitted by an eligible taxpayer and considered by the taxpayer and acknowledged by the department as confidential shall not be subject to public disclosure. Information, records, or other data shall only be considered confidential to the extent that the information or records describe the commercial and financial operations or intellectual property of the taxpayer, the information or records have not been publicly disseminated at any time, and disclosure of the information or records may put the taxpayer at a competitive disadvantage.
(m) A taxpayer who wilfully submits information under this section that the taxpayer knows to be fraudulent or false, in addition to any other penalties provided by law, shall be liable for a civil penalty equal to the amount of the taxpayer's credit under this section. A penalty collected under this section shall be deposited in the Hawaii film office special fund established under section 201-113."
SECTION 3. Chapter 209E, Hawaii Revised Statutes, is amended by designating sections 209E-1 through 209E-14 as follows:
"PART I. ENTERPRISE ZONES"
SECTION 4. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to part II of article 7 to be appropriately designated and to read as follows:
"§431:7- Digital media infrastructure tax credit. The digital media tax infrastructure tax credit provided under section 209E-B shall apply to this article on July 1, 2011."
PART III
SECTION 5. Section 201-111, Hawaii Revised Statutes, is amended by amending the definitions of "board" and "fund" to read as follows:
""Board" means the Hawaii [television
and film development] film office board.
"Fund" means the Hawaii [television
and film development] film office special fund."
SECTION 6. Section 201-112, Hawaii Revised Statutes, is amended by amending the title and subsection (a) to read as follows:
"[[]§201-112[]] Hawaii [television
and film development] film office board. (a) There is
established the Hawaii [television and film development] film office
board. The board shall be attached to the department of business, economic
development, and tourism for administrative purposes only. The board shall
administer the grant and venture capital investment programs and the Hawaii [television
and film development] film office special fund established under
this part. The board shall also assess and consider the overall viability and
development of the television and film industries and make recommendations to
appropriate state or county agencies."
SECTION 7. Section 201-113, Hawaii Revised Statutes, is amended to read as follows:
"[[]§201-113[]] Hawaii [television
and film development] film office special fund. (a) There is
established in the state treasury the Hawaii [television and film
development] film office special fund into which shall be deposited:
(1) Appropriations by the legislature;
(2) Rent from usage of the Hawaii film studio operated by the film office branch;
(3) Fees collected by the department for processing taxpayer letters pursuant to section 235-17 and the tax credit certification program pursuant to section 209E-B;
[(2)] (4) Donations and contributions
made by private individuals or organizations for deposit into the fund; and
[(3)] (5) Grants provided by
governmental agencies or any other source[; and
(4) Any profits or other amounts received
from venture capital investments.
(b) The fund shall be used by the board to
assist in, and provide incentives for, the production of eligible Hawaii
projects that are in compliance with criteria and standards established by the
board in accordance with rules adopted by the board pursuant to chapter 91. In
particular, the board shall adopt rules to provide for the implementation of
the following programs:
(1) A grant program. The board shall adopt
rules pursuant to chapter 91 to provide conditions and qualifications for
grants. Applications for grants shall be made to the board and shall contain
such information as the board shall require by rules adopted pursuant to
chapter 91. At a minimum, the applicant shall agree to the following
conditions:
(A) The grant shall be used
exclusively for eligible Hawaii projects;
(B) The applicant shall have applied
for or received all applicable licenses and permits;
(C) The applicant shall comply with
applicable federal and state laws prohibiting discrimination against any person
on the basis of race, color, national origin, religion, creed, sex, age, or
physical handicap;
(D) The applicant shall comply with
other requirements as the board may prescribe;
(E) All activities undertaken with
funds received shall comply with all applicable federal, state, and county
statutes and ordinances;
(F) The applicant shall indemnify
and save harmless the State of Hawaii and its officers, agents, and employees
from and against any and all claims arising out of or resulting from activities
carried out or projects undertaken with funds provided hereunder, and procure
sufficient insurance to provide this indemnification if requested to do so by
the department;
(G) The applicant shall make
available to the board all records the applicant may have relating to the
project, to allow the board to monitor the applicant's compliance with the
purpose of this chapter; and
(H) The applicant, to the
satisfaction of the board, shall establish that sufficient funds are available
for the completion of the project for the purpose for which the grant is
awarded; and
(2) A venture capital program. The board
shall adopt rules pursuant to chapter 91 to provide conditions and
qualifications for venture capital investments in eligible Hawaii projects.
The program may include a written agreement between the borrower and the board,
as the representative of the State, that as consideration for the venture
capital investment made under this part, the borrower shall share any
royalties, licenses, titles, rights, or any other monetary benefits that may
accrue to the borrower pursuant to terms and conditions established by the
board by rule pursuant to chapter 91. Venture capital investments may be made
on such terms and conditions as the board shall determine to be reasonable,
appropriate, and consistent with the purposes and objectives of this part].
(b) Moneys in the fund shall be used for the operations of the Hawaii film office, including personnel costs of staff positions existing on November 1, 2010; provided that the use of the fund for personnel costs shall be limited to those employees performing specialized duties who are assigned solely to the Hawaii film office."
SECTION 8. Section 201-113, Hawaii Revised Statutes, is amended to read as follows:
"§201-113 Hawaii film office special fund. (a) There is established in the state treasury the Hawaii film office special fund into which shall be deposited:
(1) Appropriations by the legislature;
[(2) Rent from usage of the Hawaii film
studio operated by the film office branch;
(3) Fees collected by the department for
processing taxpayer letters pursuant to section 235-17 and the tax credit
certification program pursuant to section 209E-B;
(4)] (2) Donations and contributions
made by private individuals or organizations for deposit into the fund; [and]
[(5)] (3) Grants provided by
governmental agencies or any other source[.]; and
(4) Any profits or other amounts received from venture capital investments.
[(b) Moneys in the fund shall be used for
the operations of the Hawaii film office, including personnel costs of staff
positions existing on November 1, 2010; provided that the use of the fund for
personnel costs shall be limited to those employees performing specialized
duties who are assigned solely to the Hawaii film office.]
(b) The fund shall be used by the board to assist in, and provide incentives for, the production of eligible Hawaii projects that are in compliance with criteria and standards established by the board in accordance with rules adopted by the board pursuant to chapter 91. In particular, the board shall adopt rules to provide for the implementation of the following programs:
(1) A grant program. The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for grants. Applications for grants shall be made to the board and shall contain information as the board shall require by rules adopted pursuant to chapter 91. At a minimum, the applicant shall agree to the following conditions:
(A) The grant shall be used exclusively for eligible Hawaii projects;
(B) The applicant shall have applied for or received all applicable licenses and permits;
(C) The applicant shall comply with applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, or physical handicap;
(D) The applicant shall comply with other requirements as the board may prescribe;
(E) All activities undertaken with funds received shall comply with all applicable federal, state, and county statutes and ordinances;
(F) The applicant shall indemnify and save harmless the State of Hawaii and its officers, agents, and employees from and against any and all claims arising out of or resulting from activities carried out or projects undertaken with funds provided hereunder, and procure sufficient insurance to provide this indemnification if requested to do so by the department;
(G) The applicant shall make available to the board all records the applicant may have relating to the project, to allow the board to monitor the applicant's compliance with the purpose of this chapter; and
(H) The applicant, to the satisfaction of the board, shall establish that sufficient funds are available for the completion of the project for the purpose for which the grant is awarded; and
(2) A venture capital program. The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for venture capital investments in eligible Hawaii projects. The program may include a written agreement between the borrower and the board, as the representative of the State, that as consideration for the venture capital investment made under this part, the borrower shall share any royalties, licenses, titles, rights, or any other monetary benefits that may accrue to the borrower pursuant to terms and conditions established by the board by rule pursuant to chapter 91. Venture capital investments may be made on terms and conditions as the board shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part."
PART IV
SECTION 9. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 10. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 12. This Act shall take effect on July 1, 2112; provided that:
(1) Sections 2, 3, and 4 shall be repealed on June 30, 2021;
(2) Section 7 shall be effective until June 30, 2021; and
(3) Section 8 shall take effect on July 1, 2021.
Report Title:
Digital Media Enterprise Subzones; Tax Incentives; Investments
Description:
Establishes digital media enterprise subzones as unspecified geographic areas surrounding University of Hawaii campuses that are also designated as enterprise zones. Establishes tax benefits for digital media infrastructure development and operation. Effective July 1, 2112. (HB1308 HD2)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
