Bill Text: HI SB1610 | 2023 | Regular Session | Introduced

Hawaii Senate Bill 1610 (Prior Session Legislation)

Introduced

Bill Title: Relating To Taxation.

Spectrum: Slight Partisan Bill (Democrat 3-1)

Status: (Introduced - Dead) 2023-01-30 - Referred to EET, WAM. [SB1610 Detail]

Download: Hawaii-2023-SB1610-Introduced.html

THE SENATE	S.B. NO.	1610
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Media facilities and infrastructure tax credit. (a) In addition to the credits described in section 235-17, beginning on or after July 1, , and ending prior to January 1, , there shall be allowed to each taxpayer subject to the taxes imposed by this chapter, a media facilities and infrastructure 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 twenty per cent of the qualified media facilities and infrastructure costs incurred in any county of the State.

In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified 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 or 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 (m);

(2) Have qualified media facilities and infrastructure costs totaling at least $ ;

(3) Provide to the State a qualified Hawaii promotion, which shall be at a minimum, a shared-card, end-title screen credit, where applicable;

(4) Provide evidence of the hiring of local labor and construction crews;

(5) Provide evidence that ancillary expenses, such as car rentals, hotel rentals, and food, were used in the construction of pre-production, shooting period, and post-production facilities located in the State;

(6) Provide evidence of financial or in-kind contributions for workforce development efforts in partnership with related local industry labor organizations, educational institutions, or both, toward the furtherance of the local film and digital media industries; and

(7) Provide complete responses to the department of taxation's inquiries and document requests, in the form prescribed by the department, no later than ninety days from the inquiry or request.

(e) 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.

(f) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and

(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.

(g) Every taxpayer claiming a tax credit under this section for a 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 that identifies:

(1) All qualified media facilities and infrastructure 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 pursuant to subsection (h)(4).

(h) 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 media facilities and infrastructure 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 media facilities and infrastructure costs that form the basis of the tax credit claims and expenditures, itemized by taxpayer, in a redacted format to preserve the confidentiality and that shall include the dollar amount claimed, name of company, and name of the qualified production of the taxpayers claiming the credit.

(i) Upon each determination required under subsection (h), the department of business, economic development, and tourism shall issue a letter to the taxpayer, regarding the qualified production, specifying the qualified media facilities and infrastructure costs and the tax credit amount qualified for in each taxable year a tax credit is claimed; provided that the department of business, economic development, and tourism shall issue the letter to the taxpayer no later than seven months after receipt of the taxpayer's statement under subsection (g). 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) Each taxpayer claiming a tax credit under this section shall submit to the department of business, economic development, and tourism a fee for the media facilities and infrastructure tax credit in an amount equal to 0.2 per cent of the tax credit claimed by the qualified production no later than the deadline stated in subsection (c). The department of business, economic development, and tourism may prescribe the form and method by which this fee is remitted, including through electronic means. The fees collected under this subsection shall be deposited into the Hawaii film and creative industries development special fund under section 201-113.

(k) Any taxpayer eligible to claim a qualified media facilities and infrastructure tax credit under subsection (a) shall file with the department of business, economic development, and tourism an annual report no later than March 1 following each taxable year for which the credit is claimed. The report shall include the following information:

(1) The amount of general excise tax paid under chapter 237;

(2) The amount of transient accommodations tax paid under chapter 237D;

(3) The amount of tax credits claimed under this section;

(4) Gross proceeds of each project;

(5) Number of construction, hotel and car rental services, and ancillary labor contractors employed on each qualified media facilities and infrastructure project;

(6) Number of independent contractors contracted to work on each qualified media facilities and infrastructure project;

(7) Amount disbursed as payroll in the State on each qualified media facilities and infrastructure project; and

(8) List of job classifications with average wage level.

(l) The department of taxation shall report the data collected under this section along with a cumulative total of tax credits granted for each qualified media facilities and infrastructure project.

The department of taxation shall submit an annual report to the legislature twenty days prior to each regular session beginning with the 2024 regular session. The report shall contain a cost-benefit analysis of the tax credit established in this section.

(m) For the purposes of this section:

"Production" and "post-production" shall have the same meaning as in section 235-17.

"Qualified media facilities and infrastructure costs" means the costs incurred by a qualified production within the State that are subject to the general excise tax under chapter 237 at the highest rate of tax or income tax under this chapter if the costs are not subject to general excise tax 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 media facilities and infrastructure costs include but are not limited to:

(1) Construction labor and construction materials for the construction of pre-production, shooting period, and post-production facilities and infrastructure; and

(2) Ancillary expenses, such as car rentals, hotel rentals, and food, used in the construction of pre‑production, shooting period, and post-production facilities, such as sound stages and production offices, and infrastructure.

"Qualified media facilities and infrastructure project" means the development, construction, renovation, or operation of a film, video, television, or media production or post‑production facility and the immovable property and equipment related thereto, or any other pre-production facility that supports and is a necessary component of the media facilities and infrastructure needed for a specific film or media 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 subsection (d), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and

(2) Does not include:

(A) News;

(B) Public affairs programs;

(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."

PART II

SECTION 2. Section 235-17, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(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[:] equal to the sum of the following:

(1) Either:

(A) Twenty-two 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)~~] (B) Twenty-seven 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[.]; and

(2) An additional three per cent of the qualified production costs incurred by a qualified production; provided that the entire production is produced on locations and qualified production facilities in the State.

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.

The basis for eligible property for depreciation [of] or accelerated cost recovery system purposes for state income taxes shall be reduced by the amount of credit allowable and claimed."

2. By amending subsection (l) to read:

"(l) Total tax credits claimed per qualified production shall not exceed [~~$17,000,000.~~] $ ."

3. By amending subsections (n) and (o) to read:

"(n) The total amount of tax credits allowed under this section in any particular year shall be [~~$50,000,000;~~] $ ; however, if the total amount of credits applied for in any particular year exceeds the aggregate amount of credits allowed for that year under this section, the excess shall be treated as having been applied for in the subsequent year and shall be claimed in the subsequent year; provided that no excess shall be allowed to be claimed after December 31, 2032.

(o) 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.

"Production facility" means a facility that handles aspects or specialized aspects of production work, including a studio stage, set building mill, or production office, which may be a stand-alone location, a complex of buildings, or located on the site of a film studio.

"Qualified production facility" means a production facility engaged in the production of a qualified production; provided that the production facility is:

(1) Located in the State; and

(2) Constructed after December 31, 2022.

"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 (l), each of the aforementioned qualified production categories shall constitute separate, individual qualified productions; and

(2) Does not include:

(A) News;

(B) Public affairs programs;

(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 at the highest rate of tax or income tax under this chapter if the costs are not subject to general excise tax 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". "Qualified production costs" does not include any costs funded by any grant, forgivable loan, or other amounts not included in gross income for purposes of this chapter."

PART III

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval and shall:

(1) Apply to taxable years beginning after December 31, 2022; and

(2) Be repealed on January 1, 2033.

INTRODUCED BY:

_____________________________

Report Title:

Media Facilities and Infrastructure Tax Credit; Motion Picture, Digital Media, and Film Production Income Tax Credit

Description:

Establishes an income tax credit for qualified media facilities and infrastructure projects. Requires annual reports to the Legislature. Increases the motion picture, digital media, and film production income tax credit for qualified productions that are entirely produced in the State. Changes the cap amount and aggregate cap amount of the motion picture, digital media, and film production income tax credit to unspecified amounts.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.